Verizon/Tracfone CPUC Nov. OK Possible
Unconditionally allowing Verizon to acquire Tracfone would hurt competition and fail California’s public interest test, said a California Public Utilities Commission proposed decision Friday. The CPUC may vote Nov. 18 on a proposal by Administrative Law Judge Thomas Glegola to conditionally clear the deal that would affect many low-income customers.
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The CPUC would adopt conditions meant to smooth customer migration and keep the new company committed for life to the California LifeLine program, under the proposal in docket A.20-11-001. It would establish reporting requirements and an enforcement program like the one the commission adopted in its T-Mobile/Sprint order.
Verizon is reviewing the proposed decision, a spokesperson emailed Friday: “We're encouraged that the process has moved to the next step.”
Verizon/Tracfone would need only FCC approval if California gives a green light. The FCC declined to comment Friday.
“One significant competitive impact of approving the proposed transaction is that Verizon changes from a very small player in the California prepaid wireless market into the largest,” wrote Glegola. “This changes market dynamics because [mobile virtual network operators] that currently are Verizon’s wholesale customers become competitors if Verizon acquires TracFone.” The deal “will lead to a somewhat less competitive market, though the reduction in competition may not be significant enough to cause an adverse public impact,” he said.
While the applicants “make a good case that Verizon’s acquisition can provide TracFone customers more options in terms of devices and plans, and devices with higher capabilities than they may currently receive, there is no condition or certainty that TracFone customers will have access to these benefits without incurring additional costs,” the ALJ said. “More certainty is needed here, especially given that there are indications that the merger could reduce competition in the prepaid market that largely serves low-income customers in California.” More than 200,000 customers might have incompatible devices and Verizon lacks a “complete plan ... to migrate hundreds of thousands of customers,” he said.
The regulator would require companies to migrate within six months Tracfone customers not currently using Verizon's network, with priority for LifeLine customers. The agency would require Verizon to have a support hotline for migrating customers, with enough staff to ensure 80% of calls are answered within 60 seconds. Within four months, Verizon would have to provide a free compatible 4G handset or SIM card to customers with incompatible devices. Verizon must offer prepaid plans previously offered by Tracfone at the same price for five years, the proposal said.
The companies must offer California LifeLine service “for as long as the companies operate” in the state, on terms that are “comparable or better” than Tracfone has now, and Verizon stores must sell LifeLine plans, handsets and devices, the proposal said. It noted the applicants proposed only a three-year commitment to LifeLine, “which it can withdraw from if the company does not like the outcome of the open California LifeLine proceeding or the Commission’s annual revision of California LifeLine minimum service requirements.”
The CPUC would require LifeLine customer enrollment milestones, reaching 200,000 by June 30, 2023. The commission would adopt a Verizon-proposed commitment to maintain a $1 million LifeLine marketing budget for at least three years.
The proposed decision would provide “some protection from the merger's harms,” emailed Ashley Salas, staff attorney for The Utility Reform Network. The California consumer group earlier asked the CPUC to deny the deal. “TURN is still reviewing” the plan, Salas said, and is “hopeful” the CPUC “will ease the potential harms from this merger, especially for low-income and fiscally-vulnerable Californians.”