FCC: Verizon can acquire TracFone subject to ‘demanding conditions’

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The Federal Communications Commission (FCC) has granted Verizon approval to acquire TracFone, but it will be subject to “demanding conditions”.

Verizon announced its intention to acquire TracFone Wireless for $6.25B back in September 2020.

TracFone is the largest reseller of wireless services in the US and has around 21 million subscribers. The proposed deal naturally caught the eye of regulators.

One of the major concerns is that Verizon could hike prices for TracFone’s customers. Around 1.7 million TracFone’s subscribers are prepaid ‘Lifeline’ customers whose service costs are discounted due to their income.

“TracFone is one of the most significant participants in the Lifeline program, and the evidence points to potential harm to TracFone’s Lifeline-eligible and other low-income customers, especially in geographic markets outside Verizon’s coverage area,” the FCC explained in its opinion and order.

The FCC has attached “a number of demanding conditions” to address such “public interest harms and to ensure the realisation of certain public interest benefits.”

For the Lifeline concerns, Verizon has committed to continue offering the same services to the existing service area for at least seven years and offer a free, compatible device or SIM in certain circumstances where customers are being required to transition to Verizon’s network.

A dedicated customer service line will be established for Lifeline customers and Verizon will also make a 5G plan available to current and new subscribers within six months of the transaction closing.

Other commitments Verizon must abide by include:

  • Continue to offer and advertise existing Lifeline plans, with no added co-pays to
    TracFone’s existing Lifeline plans offered at no cost to prepaid customers for at least
    three years;
  • Maintain a specified level of marketing and advertising expenditures for Lifeline
  • Maintain TracFone’s existing MVNO agreements to serve customers outside Verizon’s network coverage (including Puerto Rico, and maintain existing TracFone rate plans for new and existing customers for three years;
  • Conduct outreach, advertise, and display all plans on a dedicated website;
  • Notify customers at least twice before they are transitioned to Verizon’s network;
  • Extend its 60-day unlocking period to all 700 MHz C Block devices purchased from
    TracFone after closing and activated on the Verizon network;
  • Provide notice to affected TracFone customers of its unlocking policy;
  • Provide MVNOs that have current contracts with Verizon an option to extend, subject
    to certain limitations specified in the order, their existing MVNO wholesale agreements, on the same terms and conditions, on a month-to-month basis until three years after the transaction closes;
  • Submit publicly available semi-annual reports describing its compliance that includes information regarding Lifeline and non-Lifeline customers for seven years;
  • Pay for and retain both an internal company compliance officer and an independent compliance officer to ensure compliance with these commitments for seven and a half years; and
  • Assume liability for forfeitures, restitution, or other obligations that may be imposed by the Commission or the Universal Service Administrative Company (USAC) on TracFone. In addition, Verizon will comply with any agreements with the Commission or USAC, including following any compliance plans, or other obligations, agreed to by TracFone, its subsidiaries, or any successors or assigns.

In addition, the FCC has reserved the right to over seven years of oversight to ensure the deal isn’t harming low-income consumers.

Ronan Dunne, CEO of Verizon Consumer Group, commented: “We’re thrilled to welcome TracFone and its employees to the Verizon family and look forward to bringing new products and enhanced services to this attractive segment of the market.

“Our new premium and value customer base will benefit from the combined organization’s offerings —now and in the future.”

(Photo by David Guenther on Unsplash)

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