Democratic Senators Push FCC to Scrutinize Verizon’s Tracfone Acquisition & Secure Commitments to Prioritize Consumers

“History has shown that positive pledges and good
intentions without binding commitments has been insufficient to protect
consumers and workers.”

 

Washington
(July 21, 2021) –  U.S. Senators Edward
J. Markey (D-Mass.), Richard Blumenthal (D-Conn.), Sheldon Whitehouse (D-R.I.),
Dianne Feinstein (D-Calif.), and Ron Wyden (D-Ore) pressed the Federal
Communications Commission (FCC) today to probe Verizon’s proposed acquisition
of TracFone and secure specific commitments from the company to ensure that
this acquisition will not harm consumers. In the $6.9 billion transaction,
Verizon would acquire one of the largest operators of the Lifeline program
which provides free or discounted internet and affordable prepaid mobile phone
services to low-income Americans. TracFone’s SafeLink Wireless Brand supports
1.7 million Lifeline subscribers in 43 states and approximately 21 million
customers overall.

 

“We are concerned that Verizon does not have a sufficient record
on supporting Lifeline for its current wireless services and has provided few
enforceable commitments to the FCC within the proposed TracFone transaction,”
wrote the senators
to FCC Acting Chairwoman Jessica Rosenworcel.
“While we note Verizon’s stated goal of maintaining these services, Verizon
would have significant incentives and opportunities to push subscribers from
Lifeline and inexpensive prepaid services to higher revenue plans.”

 

The
senators expressed the need for Verizon to maintain services and affordability
of offerings for current TracFone subscribers, writing: “We urge the Commission
to carefully and cautiously consider the impact of the proposed transaction on
the tens of millions of TracFone subscribers, who all depend on a competitive
wireless market. In particular, we encourage the FCC to consider long-term,
binding commitments to protect Lifeline subscribers and ensure affordable
services.”

 

The
lawmakers cited concerns from public interest organizations about the
transitions between generations of networks being used by operators as
opportunities to move consumers off plans and cut Lifeline services, and the
insufficient advertising of Lifeline services compared to plans more lucrative
for the operators “resulting in consumers not
being aware of subsidized or budget-friendly alternatives.”

 

“During this time of rising inequality and hardship, it is
important that the FCC secures long-term and enforceable commitments to ensure
that Lifeline and budget plans remain accessible, competitive, and responsive
to the needs of consumers,”
the senators continued.

 

The
lawmakers pressed the FCC to secure binding commitments from Verizon prior to
the acquisition, including requiring participation in the Lifeline program and
making 5G offerings available to Lifeline and prepaid consumers at the same
rate as other Verizon customers.

 

 

July 21, 2021

 

 

 

The Honorable Jessica Rosenworcel

Acting Chairwoman

Federal Communications Commission

45 L Street NE

Washington, D.C.  20554

 

 

Dear Acting Chairwoman Rosenworcel,

 

           
We write to urge the Federal Communications Commission (FCC) to thoroughly
review Verizon’s proposed acquisition of TracFone and take steps to ensure that
the transaction would not raise prices for consumers, harm the Commission’s
universal services programs, or undermine workers.

 

           
Under the proposed $6.9 billion transaction, one of the largest
facilities-based carriers, Verizon, would acquire the largest independent
mobile virtual network operator (MVNO), TracFone.[1]
We share the concerns of states Attorneys General,
public interest organizations, and other carriers that the proposed transaction
could result in increases in costs, reductions in competition, or diminished
service offerings for consumers.[2] We are
particularly concerned about the risk that the proposed transaction could pose to
the FCC’s Lifeline program and the tens of millions of low-income households
that depend on affordable prepaid mobile phones.

 

           
Currently, Lifeline provides 9.1 million Americans with essential connections
by providing free or discounted broadband and voice services. The COVID-19
pandemic – which has led to unprecedented telework, distance education, online
employment, telehealth, and hardship – has vividly demonstrated the importance
of Lifeline as broadband became essential to social and economic life.
Recognizing this urgent need as schools and workplaces closed, the FCC took
steps to keep Lifeline subscribers connected and Congress built on the Lifeline
program to provide further relief to families.[3]

 

           
TracFone has become synonymous with Lifeline and affordable phones for many
vulnerable Americans, supporting 1.7 million Lifeline subscribers in 43 states
and approximately 21 million customers overall.[4]
TracFone offers Lifeline services at no cost to eligible subscribers under its
SafeLink Wireless brand, a business plan that other operators often avoid
because it is not as lucrative as higher cost plans. As the largest Lifeline
operator, TracFone’s importance to the program cannot be overstated: when
larger carriers scaled back their Lifeline offerings, TracFone became all the
more essential as a reliable Lifeline partner.

 

           
As importantly, during this time of economic hardship, TracFone has built a
successful business catering to subscribers who are particularly focused on
their budget, unable to register for postpaid plans, or face other hurdles to
getting a phone. Verizon’s proposed acquisition could impact whether those
households continue to have the opportunity and security provided by a
telephone and internet access. As it reviews this transaction, the FCC must be
especially vigilant to protecting these consumers from rising costs or
declining services.

 

           
We are concerned that Verizon does not have a sufficient record on supporting
Lifeline for its current wireless services and has provided few enforceable
commitments to the FCC within the proposed TracFone transaction. While we note
Verizon’s stated goal of maintaining these services, Verizon would have
significant incentives and opportunities to push subscribers from Lifeline and
inexpensive prepaid services to higher revenue plans. History has shown that
positive pledges and good intentions without binding commitments has been
insufficient to protect consumers and workers.[5]

 

           
As Public Knowledge and others have noted, wireless providers are in the middle
of an important transition between generations of networks, enabling 5G as they
disable 3G services. In the past, such transitions have been used by operators
to squeeze consumers and move them off plans, including cutting Lifeline
services.[6] Moreover, public interest
organizations have routinely raised concerns that operators do not sufficiently
advertise Lifeline services compared to more profitable plans, resulting in
consumers not being aware of subsidized or budget-friendly alternatives. If
Verizon failed to advertise and promote its Lifeline product as aggressively as
TracFone has as a standalone company, the transaction could add to the
unfortunate decline in Lifeline adoption. The need for the FCC to rigorously
scrutinize this transaction is further heightened by the declining competition
in the wireless market and the stagnating set of options for Lifeline eligible
households created by recent mergers and acquisitions.

 

           
During this time of rising inequality and hardship,
it is important that the FCC secures long-term and enforceable commitments to
ensure that Lifeline and budget plans remain accessible, competitive, and
responsive to the needs of consumers. The FCC was tasked by Congress to protect
the public interest and needs of consumers in its consideration of
communications transactions.[7] We
urge the Commission to carefully and cautiously consider the impact of the
proposed transaction on the tens of millions of TracFone subscribers, who all
depend on a competitive wireless market. In particular, we encourage the FCC to
consider long-term, binding commitments to protect Lifeline subscribers and
ensure affordable services, including:

 

1.)  
Requiring
participation in the Lifeline program with at least the same level of
geographic and service offerings as TracFone currently provides.

2.)  
Making
5G networks and equipment available to Lifeline and prepaid customers on the
same basis and same timetable as made available to Verizon’s post-paid
customers.

3.)  
Maintaining
the existing packages of TracFone subscribers, including Lifeline products.

4.)  
Marketing
to, and providing customer services for, Lifeline and prepaid customers,
including non-English speaking customers, at least at the same level as
TracFone provides today.

5.)  
Ensuring
that Verizon and TracFone employees are not harmed as a result of cost-cutting
measures as the companies consolidate operations.

           
Thank you for your consideration of this matter.


[1]
Verizon, “Verizon to acquire TracFone Wireless, Inc.,” press release, September
14, 2020, https://www.verizon.com/about/news/verizon-to-acquire-tracfone;
market share as noted in Federal Communications Commission, “2020
Communications Marketplace Report,”
https://docs.fcc.gov/public/attachments/FCC-20-188A1.pdf (accessed July 19,
2021).
[2]
Mark Herring to Federal Communications Commission, February 4, 2021,
https://portal.ct.gov/-/media/AG/Press_Releases/2019/AG-Ltr—File-No-ITC-T-C-20200930-00173.pdf
(accessed July 19, 2021).
[3]
Federal Communications Commission, “Lifeline and Link Up Reform and
Modernization,”
https://www.fcc.gov/document/wcb-extends-covid-related-lifeline-program-waivers-through-feb-2021 (accessed July 19, 2021); “Emergency Broadband Benefit,” Federal
Communications Commission
(Washington, D.C.),
https://www.fcc.gov/broadbandbenefit (accessed July 19, 2021).
[4]
Verizon, “Verizon to acquire TracFone Wireless.”
[5]
Iain Morris, “Despite pledge, T-Mobile has cut 5K jobs since Spring Merger,” LightReading,
March 1, 2021,
https://www.lightreading.com/aiautomation/despite-pledge-t-mobile-has-cut-5k-jobs-since-sprint-merger/d/d-id/767735.
[6]
Mike Dano, “AT&T’s Cricket to discontinue Lifeline support,” FierceWireless,
June 4, 2021,
https://www.fiercewireless.com/wireless/at-t-s-cricket-to-discontinue-lifeline-support.
[7]
Jon Sallet, “FCC Transaction Review: Competition and the Public Interest,”
Federal Communications Commission (Washington, D.C.), August 12, 2014,
https://www.fcc.gov/news-events/blog/2014/08/12/fcc-transaction-review-competition-and-public-interest.

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