RCC Takeover by Verizon Wireless Hit by Consumer Groups
Consumers Union, the Consumer Federation of America and other public interest groups opposed Verizon Wireless’s proposed acquisition of Rural Cellular Corp. Their biggest objection was that RCC’s customers, now on a GSM-based network, would be shifted to Verizon’s CDMA network. The change would mean reduced choice for consumers, the groups said in a petition to deny filed with the FCC.
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“The acquisition, as proposed, would have anti-competitive and anti-consumer effects in several, particularly rural, areas,” the groups said. “Following the acquisition, [Verizon Wireless] will maintain the GSM network only temporarily and then migrate RCC’s customers to the CDMA network, and will apparently offer generic handsets to the migrating customers. Applicants have failed to prove by a preponderance of evidence that the proposed transaction, even as restructured to divest certain GSM spectrum and operations to AT&T, would serve the public interest.”
The groups said RCC received $150 million through the Universal Service Fund in the past five years to expand its network. “Citizens paid for the GSM network and deserve access to it,” they said. Also signing the petition was Free Press, the U.S. Public Interest Research Group and Vermont PIRG.
The filing isn’t meant to block the merger, Chris Murray, senior counsel at Consumers Union, told us Tuesday. “We're interested in conditioning [the merger] to make sure that we don’t have anti-consumer effects from the drop out of the GSM network, that the platform stays open,” Murray said. “We don’t know that we necessarily believe that it could be blocked at this point but we would like to see some pro-consumer conditions imposed.”
The Vermont Department of Public Service also filed an objection. Shutting down the GSM network would severely threaten not only Vermont wireless competition, but also “the availability of mobile service at all to Vermont vacationers and business travelers with GSM handsets,” the agency said.
Under the $2.67 billion deal, announced in July, RCC would become a subsidiary of AirTouch Cellular and an indirect subsidiary of Verizon Wireless. Verizon said at the time it planned to build an overlay CDMA network and convert RCC’s GSM customers. Verizon has also committed to sell AT&T its GSM networks in areas where Verizon’s and RCC’s networks overlap.