Verizon Settles With Most Opponents of Proposed Tracfone Buy

Verizon’s proposed buy of Tracfone got a major boost Thursday with Public Knowledge, Communications Workers of America and other groups dropping their opposition (see 2108110018). That means most of the groups now say their concerns have been addressed. Verizon filed a letter at the FCC formalizing its commitments. The groups retained the right to object in state proceedings, including before the California Public Utilities Commission. California consumer groups said the federal concessions don't ameliorate their concerns.

“While the Public Interest Groups are conditionally withdrawing their objections” they “may remain active in any relevant state proceedings,” said a filing posted Thursday by PK, CWA, Access Humboldt, the Benton Institute for Broadband and Society, and the California Center for Rural Policy at the FCC, in docket 21-112. “Verizon’s commitments merely meet the federal floor of regulatory requirements, but more searching review may be required under the law and policy of each state where the Transaction is under review,” the filing said: “In those proceedings, the Public Interest Groups will remain vigilant to help ensure that the Transaction serves the public interest.” The FCC declined comment.

Verizon will offer Tracfone’s current Lifeline-supported services “for a minimum of 3 years following the close of the transaction,” the letter said. It committed to no new co-pays on Tracfone’s existing Lifeline plans “for at least 3 years after the transaction closes, provided that the terms of the Lifeline program do not change in a way that materially increases costs or decreases the subsidy.”

Verizon committed to offer Tracfone customers a service plan that includes 5G within six months of the deal closing, to maintain the same advertising budget Tracfone has now, and to file quarterly reports at the FCC. The reports will include “the current number of Lifeline subscribers within the service area Verizon will acquire from TracFone, data regarding its migration of customers from TracFone’s other underlying networks to Verizon’s including the number of devices that have successfully transferred, and the availability of 5G for Lifeline customers, including which geographic service areas have access to Verizon’s 5G network and how many Lifeline customers are receiving 5G service,” the letter said.

“Verizon is committed to ensuring that those who struggle to make ends meet have access to wireless service,” said Will Johnson, Verizon senior vice president-federal regulatory and legal affairs: “Verizon is eager to serve Lifeline customers, help close the digital divide and increase connectivity for all Americans when we need it most.”

Senate Consumer Protection Subcommittee Chairman Richard Blumenthal of Connecticut and four other Democratic senators said Thursday they’re “pleased” Verizon “at our urging … has made new public commitments” for the Tracfone deal.” The other senators backing the move are Finance Committee Chairman Ron Wyden of Oregon, Dianne Feinstein of California, Ed Markey of Massachusetts and Sheldon Whitehouse of Rhode Island. The five lawmakers pressed the FCC last month to “thoroughly review” the transaction (see 2107210054). Verizon’s commitments “should now be a floor and a starting place for the FCC’s review of the acquisition,” the Democrats said in a statement. “As important as the terms of these commitments are, the conditions must be made legally binding, vigilantly monitored, and vigorously enforced to ensure the company makes good on these promises.”

“As we enter the 5G world with rapidly changing technology and pricing, the world gets a lot harder for [mobile virtual network operators] as their pricing agreements with carriers usually can’t keep up with the market,” Summit Ridge Group’s Armand Musey told us. “Public Knowledge and the CWA are acknowledging that in the future, it will be harder for Tracfone to remain viable on its own.”

"Acquiring prepaid mobile services has been a relatively common trend in the mobile market already, and thus far we haven't really seen any anticompetitive conduct from previous mergers similar to the Verizon/Tracfone deal,” said R Street Technology and Innovation Policy Fellow Jeffrey Westling. “Providers can generate efficiencies and offer different plans to consumers, meaning that ultimately there will be more choices at lower costs,” he said.

Verizon now has “all its ducks in a row for FCC approval, and there's no good reason for the commission to delay its decision on the deal,” emailed Seth Cooper, Free State Foundation director-policy studies: “A timely and straightforward FCC decision on Verizon/Tracfone likely would make any state PUC reviews go more smoothly, given that state regulatory assertions of authority over wireless mergers already are on thin legal ground in light of Section 332 of the Communications Act.”

Federal commitments failed to satisfy consumer advocates urging the California Public Utilities Commission to deny the transaction. California is the last state regulatory OK needed by Verizon/Tracfone. “It should not affect how the CPUC examines the deal,” said Center for Accessible Technology Legal Counsel Paul Goodman Thursday.

“We continue to have concerns about how the FCC would enforce any conditions,” said Joshua Stager, New America's Open Technology Institute deputy director-broadband and competition policy: “The FCC has historically struggled to monitor compliance with these sorts of deals. The conditions suggested by Verizon are a decent starting point, but they should be the floor for any negotiations with the FCC, not the ceiling.”

PK and others secured “some minimal protections for existing Lifeline customers, but it would be very easy for Verizon to neglect their Lifeline offerings or make it too expensive (particularly through handset costs) so that while Verizon was technically offering Lifeline, they would be effectively shutting the program down,” Goodman emailed. “There are no guarantees that folks who are low-income but make too much money to qualify for Lifeline will be able to afford Verizon’s services.” The CPUC may take a different path from the FCC, said Goodman: “The FCC could find a merger that has serious harms in California has enough benefits in the rest of the country to make the merger in the public interest. Verizon hasn’t proved that, in California, the purported benefits of the merger outweigh the potential harms.”

The CPUC can require conditions exceeding those of the FCC, said Ashley Salas, telecommunications staff attorney for The Utility Reform Network. California has one of the highest Lifeline subscribership rates among states and territories, and Lifeline providers invest and market more in California than other states, she said. "The calculus is different at the federal level and at the state level.”