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.

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

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.

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

After Exploiting Covid Broadband Program, Verizon Faces Unsurprising Opposition To Tracfone Merger

from the surely-they'll-behave-THIS-time dept

When last we checked in with Verizon, the company had just been caught exploiting the government's Covid broadband relief program to upsell struggling Americans to more expensive plans. Now, as Verizon tries to gain regulatory approval for its $6.2 billion acquisition of Tracfone, consumer groups and a small cadre of Senators are wondering if a company that thinks nothing of exploiting struggling Americans in need is a good steward for a discount phone company whose client base is predominantly comprised of low-income Americans.

Five U.S. Senators recently wrote the FCC, rather timidly wondering if Verizon would use the acquisition to simply upsell these lower-income Americans to more expensive plans (spoiler: yes):

"Senators Richard Blumenthal, Sheldon Whitehouse, Dianne Feinstein, Ron Wyden and Ed Markey said in a letter "Verizon would have significant incentives and opportunities to push subscribers from Lifeline and inexpensive prepaid services to higher revenue plans."

The amusing part here is that there's 40 years of documented history showing how Verizon and AT&T's overall strategy is to acquire everyone, then use that consolidation and reduced competition to relentlessly nickel and dime their subscribers. This is just a factual reality and the way publicly-traded companies are structured to take full tactical advantage of the market and weak regulatory environments to the benefit of investors. It's not some errant opinion that this will happen again in the wake of yet another industry merger, it's the likely outcome based on decades of history.

Yet the concern that they'd do so again here (spoiler: they will) is framed as some kind of radical theoretical or -- as is the preference of the DC Beltway "he said, she said" reporting set -- purely a partisan concern expressed only by Democrats. But the fact Congress could only cobble together five Democratic Senators interested in giving a shit shows you pretty clearly that apathy to this kind of mindless consolidation is very much a bipartisan sport.

1.7 million of Tracfone's customers currently enroll in the FCC's Lifeline program. Started under Reagan and expanded by Bush, the program doles out a measly $9.25 monthly credit that struggling Americans can use to get a discount off of their phone, wireless, or broadband bill (they have to choose one). It's literally the very least the government can do to help poor people afford telecom services, but it's been endlessly demonized by folks like Trump FCC boss Ajit Pai, who think even this half-assed effort is a bridge too far.

If this telecom merger follows the pattern of other U.S. telecom mergers, a bipartisan coagulation of lawmakers will trip over themselves to ignore warnings and approve the deal. They'll then sign off on a bunch of flimsy conditions -- most likely crafted by Verizon -- that not only won't really do all that much, but won't be enforced or adhered to. Meanwhile, Verizon gets way with rather nebulous claims that this deal creates amazing synergies and benefits that you just can't get without greater industry consolidation:

"The company said the proposed deal "will bring value and benefits to value-conscious consumers in a myriad of ways."

Then in two to three years, when policymakers and the press have forgotten all about the deal, Verizon will exploit the consolidation to steadily raise rates. The very same policymakers who signed off on yet more consolidation in the space will then stand around with their hands on their hips and a dumb look on their face wondering how we got here. Right before signing off on yet another "growth for growth's sake" telecom megamerger that benefits absolutely nobody outside of the Hamptons set. Rinse, wash, and repeat, with absolutely nobody learning anything from the experience.

Filed Under: acquisitions, consolidation, fcc, lifeline, mergers, raising rates
Companies: tracfone, verizon

Worried About Tracfone Merger Approval, Verizon Pretends It Didn't Exploit COVID Emergency Program

from the with-friends-like-these dept

Prodded by Congress, a few months back the FCC launched the Emergency Broadband Benefit, a $3.2 billion program designed to provide folks struggling economically during COVID a little extra help affording broadband. Under the program, users get a $50 discount off their broadband bill, a total that jumps to $75 for those living on tribal areas. As we've well covered, regional telecom monopolization and corruption results in Americans paying some of the highest prices in the world for broadband, a problem that hits low income consumers and marginalized communities the hardest.

While the program does little to fix US broadband's bigger competition issue, it's certainly helping folks; roughly a million folks signed up the first week. And while the majority of the 825 participating ISPs are engaging in the program in good faith, it's not particularly surprising that some ISPs decided to try and game the system to make an additional buck. Charter, for example rejected users from signing up if they didn't agree to pay for a more expensive broadband tier once the program ends, which appears to violate the program rules.

More problematic is Verizon, which got caught forcing users to sign up for even more expensive tiers if they wanted to apply to the program, resulting in some users being forced to pay more for broadband than if they'd never signed up for government help in the first place:

"Annie Styles from Arlington, Va., who pays $79 per month for her Internet, says Verizon told her she would have to switch to a plan that would cost her closer to $95. “I stopped pursuing it with them after the math didn’t work out,” she says."

Not too surprising coming from a company criticized in 2018 for capping California firefighters' "unlimited" wireless plan during an historic wildfire, then trying to upsell them to more expensive plans as they tried to battle the blaze. Only once the press highlighted Verizon's latest COVID relief gamesmanship did they back away from it, issuing an odd press release pretending that none of this had ever happened, and any changes to their approach were entirely of their own making. The company has also been trying to do damage control at the FCC, claiming people didn't experience the thing they clearly experienced:

"Verizon is defending its practice of forcing customers to switch plans to get a government-funded $50-per-month discount, telling the Federal Communications Commission that this is not the same thing as "upselling." Verizon has partially backtracked from this restrictive policy but told the FCC it will take "about a month" to deploy a billing-software update that will let more home-Internet customers get the discounts without changing plans."

Again, not too surprising for a company that spent millions of dollars trying to neuter the FCC and net neutrality, then used a fake journalist to pretend it wasn't actually doing that.

Verizon's particularly sensitive because the company is currently trying to gain regulatory approval for its acquisition of Tracfone, a prepaid wireless carrier predominately used by low income Americans. Consumer groups like Public Knowledge have been warning the FCC (pdf) that a company that thinks nothing of exploiting a program designed for low income Americans might just not be the best steward of a company catering to low income consumers. But I'd wager the Biden FCC approves the deal anyway, given America's obsession with the illusory benefits of near-mindless telecom consolidation.

Filed Under: broadband, covid, emergency broadband benefit, fcc
Companies: tracfone, verizon

16 States Ask The FCC What The Hell Is The Point Of The Verizon Tracfone Merger

from the do-not-pass-go,-do-not-collect-$200 dept

Late last year, Verizon announced it would be acquiring Tracfone for around $6.2 billion. As we noted when the deal was first announced, it was yet another example of the "growth for growth's sake" mindset that has long infected US industry, particularly the telecom sector. There are really no real benefits to be gleaned from further consolidation in the space (especially in the wake of a T-Mobile Sprint merger that immediately resulted in layoffs and reduced US wireless competition by around 25%). Yet we really adore pretending otherwise as the government rubber stamps deal after deal.

In a letter (pdf) to the FCC, attorneys general from 16 states and the District of Columbia urged the agency to actually, you know, do its job and ask more questions about the deal. TracFone is among the biggest providers of Lifeline, the FCC program that provides services for about 1.7 million low-income subscribers in 43 states. Verizon is a lumbering media and telecom monopoly that views such programs (and the regulators that oversee them) as largely an irritant. Putting the TracFone contributions at risk during an historic economic and health crisis isn't particularly bright.

As such, the states are wondering if the FCC might be able to take a few moments to make sure the deal doesn't harm those relying on the program:

"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,” they 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."

The states also are quick to point out that maybe more consolidation in a telecom sector filled with problems caused by mindless consolidation might not be a great idea:

"Furthermore, a vertical merger of the leading Mobile Network Operator (MNO), and the leading Mobile Virtual Network Operator in an already concentrated mobile wireless market would see the last significant MVNO integrated into a national facilities-based provider. If this resulted in a decrease in the number or quality of Lifeline offerings, that could be contrary to the public interest and could have an adverse impact on consumers and the communications industry."

Notice, however, how even the minority of US states that could be bothered to care about these problems can't be bothered to recommend simply blocking a deal that will benefit nobody other than Verizon executives and shareholders. It's not even something that enters their minds.

Instead such mergers are eagerly rubber stamped, conditions are affixed that are usually largely feckless (or volunteered by the companies themselves), then regulators fail to meaningfully enforce them. Monopolies like Verizon then just double down on the same behavior they've engaged in for the better part of the last forty years. We then stand around with a dumb look on our collective faces wondering why Americans pay some of the highest prices in the world for some of the most mediocre telecom speeds and services in the developed world. Wash, rinse, repeat.

Filed Under: broadband, competition, fcc, mvno, wireless
Companies: tracfone, verizon

Tracfone Made Up "Fictitious" Users To Defraud Taxpayers, FCC

from the ill-communication dept

For decades, big and small telecoms alike have abused the FCC Lifeline program, a fund that's supposed to help subsidize telecom connectivity for low income users. Started by Reagan and expanded by Bush Junior, the fairly modest program doles out a measly $9.25 per month subsidy that low-income homes can use to help pay a tiny fraction of their wireless, phone, or broadband bills (enrolled participants have to chose one).

On one hand, the program (which you pay into via your telecom bills) genuinely has helped many low income Americans. On the other, the program has routinely been mired in fraud and scandal due to unethical telecom giants, spotty enforcement, and a failure to adequately track how this money is spent.

Case in point: the FCC last week announced it would be fining low cost mobile service provider Tracfone a cool $6 million for making up "fictitious" subscribers in order to nab Lifeline money it wasn't owned. Some of the fraud was almost comical in its depth and scope, and should have been fairly easy to spot earlier:

"TracFone's sales agents—who were apparently compensated via commissions for new enrollments—apparently manipulated the eligibility information of existing subscribers to create and enroll fictitious subscriber accounts. For example, TracFone claimed support for seven customers in Florida at different addresses using the same name, all seven of whom had birth dates in July 1978 and shared the same last four Social Security Number digits. The Enforcement Bureau's investigation also found that, in 2018, TracFone apparently sought reimbursement for thousands of ineligible subscribers in Texas."

Late last year, the Wall Street Journal also issued a report showing Sprint had allegedly been engaging in this kind of fraud for the better part of the last decade. AT&T also spent years ripping off the program before receiving a wrist slap for the behavior. Like most U.S. regulator enforcement action, the fines usually wind up being a tiny fraction of the money that was gleaned for ripping off taxpayers, users, or competitors for the better part of several decades (see: the FCC's wireless location data enforcement action). Often, with some elbow grease by lobbyists and lawyers, the fines can be reduced or eliminated entirely.

While cracking down on this fraud is certainly a good thing, there are a few problems here. One, the Trump FCC is focusing on enforcement on this issue because they're eager to see the program eliminated entirely, despite the fact that the traditionally Republican-created program provides genuine aid to a lot of U.S. low income homes that need it. The Trump FCC already was slapped down by the courts for trying to take subsidies away from tribal areas without providing anything in the way of, well, factual data supporting the move.

The other program is that while the current FCC has cracked down on this kind of fraud (when the evidence is obvious), it has turned a blind eye to oodles of fraud perpetrated on consumers by these same companies. For example the agency did nothing when one major ISP began charging consumers a "rental fee" for hardware they already owned. Nor has the agency ever cracked down on ISPs that use assorted bullshit fees to falsely advertise a lower rate.

So while you'll see this FCC crack down (sometimes) on fraud to try and discredit a program it ideologically disagrees with, genuine enforcement of fraud remains patchy at best. Especially in the wake of the net neutrality repeal, which further eroded the FCC's authority to hold giant ISPs to account for a laundry list of bad behaviors that extend well beyond net neutrality violations.

Filed Under: fake users, fcc, lifeline, scams
Companies: tracfone

Why Do Some Politicians Want To Ban You From Putting New Software On A Prepaid Mobile Phone?

from the protecting-business-models? dept

Filed Under: business models, ownership, prepaid mobile
Companies: tracfone