How Budget Mobile Phones Work

Budget Cell Phones and Service

While nearly 90 percent of Americans have at least one cell phone, millions of low-income residents cannot afford wireless service. To bridge that gap, the Universal Service Fund gives carriers -- through its Lifeline Assistance Program -- up to $10 a month per subscriber to provide free cell phone service for the underprivileged.

The number of minutes users get depends on the phone company providing the service. Some wireless carriers take that $10 and supply subscribers with as many as 250 free minutes, while others provide just 68. If customers want additional minutes, rollover minutes, texting or international calling, they can buy those services for an additional monthly fee. Some carriers provide text messaging, with each text equal to one minute [sources: Richtel; Free Government Cell Phones].

The government does not pay for the phones themselves; some companies give them away. The phones are basic, with ringtones, caller ID and call waiting. Most are brand names made by Samsung, Nokia and Motorola, and they don't have cameras, Web browsing or data services. Some carriers provide the discounted service, but not the phones, which customers have to purchase [sources: Richtel; Free Government Cell Phones; Segan].

For years, participation in the program dragged until TracFone, a company based in Miami, started using the subsidies to provide subscribers with a free phone and 60 minutes of free monthly service called Safelink. Within a short time, Safelink, which advertises on TV, grew to 2 million customers in 31 states, and the District of Columbia and Puerto Rico. In addition to Safelink, Assurance Wireless (a brand of Sprint/Nextel), AT&T and many regional carriers also participate in the program [sources: Lajeunesse; Free Government Cell Phones; Segan].

Today, roughly 8 million people take part in the Lifeline program [source: Free Government Cell Phones]. One of those subscribers is Leon Simmons of the Bronx, N.Y. Simmons, a Navy veteran, worked at the Post Office and as a security guard before becoming ill with emphysema, which left him disabled. His wife works a minimum wage job at a local Laundromat. When the couple heard of Lifeline, they signed up. The free cell phone provides Simmons with security. He can stay in touch with his wife and daughter, especially when he's at the doctor [source: Richtel].

Still, Lifeline is no stranger to controversy. Some see it as social welfare run amuck and think the government shouldn't be subsidizing for the poor [source: Richtel]. Others argue there's no way to verify that those who participate in the program actually qualify for the service [source: Lajeunesse].

Despite the debate, the program has been a boon for many wireless carriers. Although most Americans have a cell phone, Lifeline allows wireless companies to use the government subsidies to service a small, but untapped market -- the poor. Residents of Alaska, Oklahoma, Alabama, Georgia, North Carolina and Virginia use the free cell phone service the most, while those living in Hawaii and Indiana use it the least [source: Segan].

Go to the next page to see if you qualify.