Verizon Resists CPUC Draft Tracfone Conditions
Verizon disagreed with draft conditions on state LifeLine and customer migration proposed in the California Public Utilities Commission’s Tracfone acquisition review. The CPUC posted comments Friday in docket A.20-11-001 on a proposed decision by Administrative Law Judge Thomas Glegola to conditionally clear the deal that would affect many low-income customers (see 2110150051). California commissioners may vote Nov. 18 on Verizon/Tracfone, which also needs FCC OK.
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Don’t make Verizon’s obligation to state LifeLine endless, warned Verizon and Tracfone, suggesting a five-year requirement instead of a proposed perpetual requirement. “Thereafter, in the unlikely event TracFone were to seek to withdraw from LifeLine, it would need Commission approval.” The low-income program was meant to be voluntary, they said. As long as it provides a “compensatory subsidy,” Verizon has “every incentive to continue to participate,” but the proposed mandate “seems designed to free the Commission from these constraints,” the companies said. “If a future Commission were to set the LifeLine subsidy amount too low to cover TracFone’s costs, then the [proposal] would effectively compel Verizon to offer the service at a loss or else face substantial fines. This result would be unreasonable, discriminatory, and unlawful.”
The combining businesses opposed requiring 200,000 LifeLine enrollments by June 30, 2023, and various milestone requirements before then: "Achieving these subscriber counts in that timeframe is infeasible." Tracfone is losing California customers, many may not renew when a COVID-19 hold lifts Dec. 31, some customers may choose a different provider, and the world faces a handset shortage, they explained: If the CPUC must have a requirement, make it four years; and instead of fines, require Verizon to spend more on LifeLine marketing.
The deal partners disagreed with a draft condition giving six months to migrate all Tracfone customers currently on other networks to Verizon. It's “impossible to achieve,” they said. Others “advocated against a flash-cut,” and a “gradual transition, marked by promotions by Verizon and competitive offers from other network carriers, benefits TracFone customers.” Migration can’t happen without the customer first giving permission, choosing a service plan and obtaining a new SIM card or compatible handset, and many customers "will require repeated communications over time to prompt those actions,” the companies said. The time frame includes requiring Verizon to give new devices in four months, but a “worldwide shortage of handsets, exacerbated by supply-chain disruptions, creates an insuperable obstacle to Verizon’s ability to comply with this directive.”
Consumer advocates mostly supported the CPUC proposal, though they bristled at a drafted statement that the commission lacks jurisdiction over fixed-wireless home internet service. The CPUC’s independent Public Advocates Office said California should require Verizon to offer that to LifeLine customers and in areas with environmental and social justice communities. “The public interest is not served if Californian’s low-income and LifeLine customers are marginalized from receiving the products and services the Joint Applicants laud as a benefit of the Proposed Transaction, specifically broadband service to customers’ homes.” PAO said the CPUC should require Verizon to offer wholesale services to all nonaffiliated mobile virtual network operators on same terms and conditions it gives Tracfone.
The draft decision "thoroughly addresses many of the likely significant harms of the proposed transaction and thoughtfully crafts mitigation measures to help alleviate those harms,” said the Center for Accessible Technology and The Utility Reform Network: It would “impose measurable and enforceable merger-specific conditions.”