Verizon/TracFone Raises State Questions; 2021 OK Possible
Verizon’s proposed TracFone buy is likely to be one of the first such transactions before the FCC that's now under Democratic control. The deal has raised some competitive concerns. Friday, 16 state attorneys general led by Virginia’s Mark Herring (D) asked the FCC to further investigate implications for Lifeline before approving the deal.
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FCC officials said the transaction appears on track for 2021 OK. At least two bureaus or offices at the agency are believed to be involved in the deal, as would be standard in such instances. Acting Chairwoman Jessica Rosenworcel has been quiet on the multibillion-dollar combination. One official said Verizon ownership of TracFone is viewed as potentially a positive for TracFone subscribers. An FCC spokesperson declined to comment.
The acquirer "will continue to offer Lifeline service through TracFone and further develop its core brands, products and distribution channels,” a Verizon spokesperson said Friday: “Strengthening and growing TracFone will benefit value-conscious consumers." Verizon officials expect the deal to close later this year (see 2101260054).
“The potential for Verizon to pursue additional profits by reducing the access and/or quality of Lifeline services could shut out millions of low-income Americans from adequate communications services,” state AGs wrote: “Considering the fundamental role that cellular telephones play in accessing modern society and the modern economy, it is imperative that Lifeline services be protected and maintained if this transaction is approved.” AGs from Colorado, Connecticut, Delaware, Iowa, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington and the District of Columbia also signed. Verizon didn’t comment on this.
“The AG letter will be read with interest because it represents that there are more stakeholders concerned about this than just CWA,” said Brian Thorn, Communications Workers of America senior researcher. “CWA has been calling not for a denial of the merger, but there are enough concerns here that warrant a closer look,” he said: “One of our main concerns is the damage it could do to Lifeline customers.”
CWA, Public Knowledge and others raised concerns in ITCT/C2020093000173, the docket at the International Bureau. T-Mobile opposed making a decision on an expedited basis. The National Federation of the Blind asked that Verizon be required to make handsets accessible for the blind. “We fear that” the “current trend of diminishing accessibility will continue, and that blind consumers will be forgotten,” said NFB President Mark Riccobono. The American Council of the Blind raised similar concerns. Neither group commented now.
PK also is concerned about Lifeline because TracFone is the single largest provider and Verizon has traditionally avoided the program, Public Knowledge Senior Vice President Harold Feld told us. The International Bureau doesn’t focus on USF issues, but the FCC needs to in this case, he said. “Although Verizon says it is changing its business strategy and is now interested in Lifeline, as well as TracFone's prepaid business generally, it would be prudent for the FCC to impose conditions to protect Lifeline participants,” he said. The question isn’t “sincerity,” he said: “Verizon was sincere about getting into video. It didn't work out. Normally, a company deciding to abandon a line of business is not an issue, but Lifeline is different. Thirteen million people rely on TracFone for basic connectivity.”
“We are expecting that the Biden administration will be tough on mergers and pursue an aggressive antitrust enforcement and competition policy agenda more generally,” said American Antitrust Institute President Diana Moss: “Biden enforcers have a lot of damage control to do in the wake of the Trump administration’s weak record” on antitrust.
Who Biden appoints to top jobs at the DOJ Antitrust Division and the FTC “will likely tell us something about merger enforcement attitudes, but the proof is in the pudding,” said John Lopatka, professor at the Pennsylvania State University law school. “If new appointees want to signal an aggressive approach to merger enforcement, they’ll look for cases they can bring,” he said: “They’ll want to identify mergers that observers believe would have gone unchallenged under the prior administration.”
University of Wisconsin Law School professor of law emeritus Peter Carstensen said the Biden administration is centrist and he fears a “return to the weak merger policies” of President Barack Obama. “There is more bipartisan support to ramping up antitrust enforcement generally including merger enforcement than I have seen in a long time,” he said.