The Federal Communications Commission (FCC) has approved Verizon’s acquisition of TracFone, but the merger will proceed only under a set of stringent conditions intended to protect consumers and the public interest.
Verizon first announced its agreement to buy TracFone Wireless for $6.25 billion in September 2020. TracFone is the largest wireless reseller in the United States, serving roughly 21 million subscribers, and the proposed acquisition drew close regulatory scrutiny.
Regulators expressed particular concern that Verizon’s control of TracFone could result in higher prices or reduced service quality for TracFone’s low-income customers. About 1.7 million of TracFone’s subscribers participate in the Lifeline program, which provides discounted phone service to qualifying low-income households.
The FCC noted that “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.” To address those risks and secure public interest benefits, the agency approved the deal while attaching a series of demanding conditions.
To protect Lifeline subscribers, Verizon has committed to maintain current service levels in TracFone’s service areas for at least seven years. The company will also provide a free compatible device or SIM card in certain situations where customers must transition onto Verizon’s network.
Verizon must set up a dedicated customer service line for Lifeline customers and make a 5G plan available to both current and new TracFone subscribers within six months of the deal closing.
Key additional commitments Verizon is required to follow include:
- Continue offering and advertising existing Lifeline plans without adding co-pays; TracFone’s Lifeline plans that are currently offered at no cost to prepaid customers must remain available for at least three years.
- Maintain a specified level of marketing and advertising expenditures targeted to Lifeline customers.
- Preserve TracFone’s existing MVNO (mobile virtual network operator) agreements to serve customers in areas where Verizon does not provide coverage, including Puerto Rico; keep existing TracFone rate plans for new and current customers for three years.
- Conduct outreach, advertise, and display all plans on a dedicated website to ensure transparency and accessibility.
- Notify customers at least twice before transitioning them to Verizon’s network.
- Extend a 60-day device unlocking period to all 700 MHz C Block devices purchased from TracFone after closing and activated on Verizon’s network, and provide notice to affected customers about the unlocking policy.
- Offer MVNOs with current contracts with Verizon an option, subject to specified limitations, to extend their existing MVNO wholesale agreements on the same terms on a month-to-month basis for up to three years after the transaction closes.
- Submit publicly available semi-annual compliance reports for seven years that include information on Lifeline and non-Lifeline customers.
- Fund and retain both an internal company compliance officer and an independent compliance officer to monitor adherence to these commitments for seven and a half years.
- Assume liability for any forfeitures, restitution, or other obligations that may be imposed by the FCC or the Universal Service Administrative Company (USAC) on TracFone. Verizon must also comply with any existing agreements between TracFone (or its affiliates) and the Commission or USAC, including agreed compliance plans and other obligations.
The FCC has also reserved oversight authority for more than seven years to ensure the merger does not harm low-income consumers and that Verizon meets the conditions attached to the approval.
Ronan Dunne, CEO of Verizon Consumer Group, welcomed TracFone and its employees, saying the combined organization will bring new products and improved services to a broad range of customers. “Our premium and value customer bases will benefit from the combined organization’s offerings—now and in the future,” he said.
(Photo by David Guenther on Unsplash)
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