Unions, Consumer Groups Wimp Out On Verizon Tracfone Merger

from the surely-THIS-time-will-be-different dept

Last September Verizon announced it would be spending $6.2 billion to buy Tracfone, a prepaid wireless phone provider heavily used by lower income families. Given Verizon's reputation and the US telecom industry's long history of empty pre-merger promises, unions and consumer groups rightfully balked.

They warned Verizon's track record indicated this would likely end in the consolidation harming the sector, and many low-income customers inevitably paying more money than ever for wireless service. They also pointed to the fact that Verizon just got busted exploiting a Covid broadband relief program to upsell users to more expensive plans. In short, they warned that a company like Verizon probably wouldn't be a particularly good steward of a service that catered predominately to low-income Americans. They were correct.

Apparently that was then, and this is now. Unions and several consumer groups appear to now have done a complete 180, announcing they now support the deal after Verizon pinky swore it would behave responsibly:

"The CWA, Public Knowledge, and the Benton Institute for Broadband and Society had initially criticized Verizon’s proposed purchase of Tracfone, suggesting that the deal could harm Tracfone’s low-income customer base. But the groups announced Thursday that they would be withdrawing their opposition in response to the new concessions."

Note that only Benton and Public Knowledge were willing to bend on this. Other consumer groups, like the Open Technology Institute and others, tell me they continue to oppose the deal as currently structured.

Verizon lays out the promises in a press release. In short, they promise to continue offering the FCC's "Lifeline" program to Tracfone subscribers (a measly $9.25 per month subsidy for low-income Americans Verizon has previously attempted to undermine) for at least three years. The company pinky swears it will ensure these users have access to discounted 5G service, and that they'll actively market discounted broadband options (instead of hiding them and making them hard to find and sign up for, something really common in telecom merger promises of this type).

The problem, of course, is that this is....Verizon. And this is the United States, where "feckless" doesn't even begin to describe the country's state and federal regulatory attitude when it comes to holding telecom giants accountable.

Verizon has a long, long, long parade of promises it hasn't lived up to. The company took billions from Pennsylvania taxpayers in the 90s for fiber networks it then failed to deploy. You can also ask New York City, New Jersey, and much of the eastern seaboard what Verizon promises are worth. And that's before you get to the U.S. telecom industry's 30 year history of merger promises that, time after time after time, wind up being worth absolutely nothing. That this endless wave of mergers has been harmful isn't some errant opinion, it's documented history.

The impact of mindless telecom consolidation is everywhere, hugely negative, and generally obvious to the majority of US wireless, broadband, and cable TV subscribers. It has consistently and inevitably resulted in higher prices, worse products, and terrible customer service. And the Verizon Tracfone deal promises to usher forth a whole lot more of it:

"The potential windfall for Verizon is staggering. If this deal were to be approved, the FCC would anoint Verizon as the largest wireless prepaid service operator in the United States and the company would obtain an additional 21 million customers. The merger would also allow Verizon to acquire the fourth-largest wireless company by subscribership in the U.S. The acquisition of TracFone by Verizon will also add $8.1 billion in revenue for Verizon and an additional 90,000 retail locations. Such a position will only continue the wave of consolidation in the cellular service sector and fortify Verizon’s market power as one of the largest wireless communications providers in the country."

The other assumption here is that Verizon will make a promise, then the FCC will follow up consistently to ensure the company is keeping it. But history isn't kind on that subject, either. Telecom companies generally fail to adhere to promises even if they're the ones creating the merger conditions. And years later, assuming underfunded and understaffed U.S. regulators even act in the first place, any penalty for missing deadlines (or outright lying) is usually little more than a light wrist slap. The idea that this deal will somehow be any different is just silly.

Verizon's promises aren't actually worth anything, and I'm surprised some consumer groups and unions folded so easily here. Buckling seems to make Biden FCC approval more likely, leading to even greater consolidation. Verizon will either ignore the restrictions and face few real FCC penalties under future industry-cozy administrations (President Scott Baio!) or will simply wait for the three-year limits to expire before finding creative ways to nickel and dime low-income consumers. You can set your watch by it, and this bipartisan sport we play where we pretend otherwise is just wholly bizarre.

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Filed Under: competition, lifeline, mergers, mobile phones, mvno, prepaid wireless
Companies: tracfone, verizon