Biden FCC Green Lights Yet More Telecom Consolidation With Verizon Tracfone Merger

from the meet-the-new-boss dept

For literally 30 years telecom regulators have, with the occasional rare exception, rubber stamped a steady parade of mergers, resulting in a consolidated, less competitive overall market. The end result of these decisions are everywhere, from terrible customer service and high prices, to routine apathy to consumer privacy and spotty overall telecom coverage. And while regulators occasionally affix merger conditions designed to limit these harms, these conditions are usually either pathetic (often because they're volunteered by the companies themselves) or they're just not enforced in any meaningful capacity (outside of the rare and laughable fine).

While there's a bit more awareness and opposition to mindless mergermania coming from the left, when it comes to regulators and politicians, this obsession with embracing mergers and consolidation is bipartisan. This week, the Biden FCC announced it would be greenlighting Verizon's $6 billion merger with Tracfone. Tracfone, currently owned by América Móvil, largely caters to low-income Americans. Consumer groups initially balked at the deal, arguing that Verizon's long history of nickel-and-diming made it likely the company would inevitably nickel-and-dime those financially precarious users as well.

But Verizon, a company with a long history of not living up to merger promises, made some promises... and now the Biden FCC says it's approving the deal. Verizon has promised to try and keep prices the same for a while, make 5G devices available to these users, continue participation in the FCC's low-income Lifeline program for a while, and generally not be a predatory ass. All overseen by what the FCC calls "strong, independent, enforcement mechanisms":

"The Commission also adopted strong, independent mechanisms for enforcing these conditions and ensuring that the transaction does not harm low-income or other consumers. These enforcement mechanisms include both an internal and an independent compliance officer who are empowered to proactively monitor conditions, ensure that low-income consumers are not being harmed, and facilitate consumer complaints about potential violations."

I'm sure the FCC thinks they've fixed the deal by extracting conditions. The problem is we've been through this rodeo before, and there are 40 years of history showing that these pinky swears are frequently meaningless. Verizon has a long, rich history of nickel and diming consumers and tap dancing around obligations, usually with minimal to no penalty. They're simply responding to pressure to maximize shareholder value within the framework of limited competition and regulatory capture. Claiming they're not going to nickel and dime consumers this time because you hired compliance officer or extracted a few pinky swears is like claiming water won't flow downhill.

The vast majority of the time the FCC lacks the resources, interest, or attention span to follow up after deals like this to ensure meaningful compliance. And if there is a failure to adhere to conditions, the worst that happens is a few million in fines, which is piddly couch change to a giant like Verizon. And as the FCC shifts leadership during elections and falls under Republican control, there's even less incentive to hold Verizon accountable for failures than there is under the historically inconsistent and feckless Democratic party.

It's extremely rare that regulators just... shoot down mergers like this. In large part because companies like Verizon are trusted, patriotic participants in our domestic surveillance efforts. Between that and their deep campaign contributions and political pull, upsetting them by simply blocking more consolidation is frequently just not even considered. So policymakers approve the deal, convince themselves that they've extracted meaningful conditions, and fool themselves into thinking that this time will surely be different. Until it isn't, and the regulators who approved the deal are nowhere to be found.

The same regulators that approve greater telecom consolidation will, with their very next breath, often complain about things like the "digital divide," as if the former isn't directly causing the latter. It's a big dumb loop, and any time there's an effort to appoint the kind of regulators that might break the cycle, these massive, consolidated telecom giants just throw more cash and influence around to block reform and perpetuate the profitable dysfunction.

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Filed Under: broadband, competition, consolidation, fcc, telcos
Companies: tracfone, verizon