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Conditions Expected

Verizon Tracfone Gaining Steam, but Formal OK Unlikely Until October

Verizon and Tracfone approval appears unlikely until after October, with the companies awaiting clearance from the FCC and California regulators, but the companies appear to be making progress. At least one deal opponent, Public Knowledge, appears poised to withdraw its objections. PK hasn’t filed anything at the FCC, but it's looking to do so soon, a spokesperson confirmed. Industry officials said Communications Workers of America will also soon lay out its latest take at the FCC.

When this transaction was first announced, Verizon was very hesitant to make enforceable commitments to protect TracFone’s most vulnerable subscribers,” emailed Kathleen Burke, PK policy counsel. “After nearly a year of advocating for TracFone’s Lifeline subscribers, we believe that Verizon’s commitments are a win for consumers and serve the public interest. They mirror many of the commitments that Public Knowledge originally sought when it first opposed this transaction.”

Some say the FCC may have to wait until a third Democrat is confirmed before voting, especially after Senate Democrats asked in July that the commission do a thorough review of the deal (see 2107210054).

Things have been quiet, but I believe the commission is considering conditions,” said Joshua Stager, New America's Open Technology Institute deputy director-broadband and competition policy: “I don't think a decision is imminent, as there remain unresolved issues around enforcement and protecting low-income consumers.”

Without a fifth commissioner, “the agency does not want to take any action,” said Daniel Hanley, Open Markets Institute policy analyst. The FCC declined comment.

Until we get a full chair and all Democrat commissioners confirmed, then it’s unlikely we’re going to see the FCC move on more controversial issues, including the Verizon/Tracfone merger,” said Lincoln Network lawyer Joel Thayer. “Senate Democrats have made this merger overly political, which puts the interim chair in a tough spot to act … without a full commission.”

The CPUC's Feb. 24 scoping memo said to expect a decision in September, meaning a possible October vote, but Verizon and Tracfone in recent meetings urged an early August proposal to allow a September vote (see 2107020017). Consumer group officials opposing the deal said in interviews they don’t expect the CPUC to act urgently. The agency didn’t comment.

On Tracfone “nothing has changed since we outlined or we proposed [the] acquisition,” Verizon CEO Hans Vestberg said during a July 21 earnings call. “It’s tracking according to plan with a process that we need to go through,” he said: “The team is responding to all the questions we have.”

The companies and consumer groups are meeting frequently with CPUC member offices. The Center for Accessible Technology (CforAT), The Utility Reform Network (TURN) and the CPUC’s independent Public Advocates Office (PAO) met virtually Aug. 5 with an aide to Commissioner Darcie Houck, said a Tuesday filing. The deal opponents met Aug. 3 with aides to Commissioner Genevieve Shiroma and July 29 with aides to commissioners Cliff Rechtschaffen and Martha Guzman Aceves. Verizon and Tracfone met July 20 with aides to CPUC President Marybel Batjer (see 2107230046). They planned to meet two days ago with Houck’s office and said Wednesday they will meet virtually Thursday with Guzman Aceves’ office.

The impression I got is that the commission is taking a hard look at this merger, especially in light of the pandemic” and its impact on low-income customers, said TURN Telecommunications Staff Attorney Ashley Salas. “It’s not something they’re going to rubber stamp.” TURN at first sought a draft decision in October or November but the CPUC administrative law judge set it in September, “so the commission is trying to accommodate the companies’ request.”

The CPUC “indicated it’s going to be closer to late August” or early September for the proposed decision, and commission rules allow 30 days for comments before commissioners may vote, said Paul Goodman, CforAT legal counsel. Companies seeking speedy review usually say why, said Goodman: “Verizon has never actually said what the hurry is.” CforAT, PAO and TURN spoke with Verizon and Tracfone but didn’t reach agreement, he said.

The CPUC “should stick to its schedule, take its time to review all the critical information that shows this merger will impact low-income customers in California who rely on prepaid service,” said Ana Maria Johnson, program manager at the PAO. “If more time is needed to really understand what the ramifications are ... take it.” She said the companies’ urgency is “really about making it faster for them to profit.”

Consumer groups want the deal denied but suggested conditions if the CPUC decides to approve. “This merger is not in the public interest,” but there could be mitigating measures to support low-income customers like requiring prepaid plans at current prices, free devices and home internet service, said Johnson. Goodman says it's “difficult to see conditions that would be sufficient to protect against the harms and ... that Verizon would follow.”

Johnson doesn’t think consumers would be disrupted if the CPUC denied as the feds approved Verizon/Tracfone. Goodman agreed: “This is not a merger where Tracfone owns any facilities,” so not allowing the deal in one state wouldn’t be complex or harmful. He conceded he couldn’t find an example in any state of a telecom deal getting federal but not a state’s OK. The commission historically grants transactions with strict conditions, though there were some cases where the commission proposed conditions and companies withdrew their application, said Salas.

Heavy lobbying from July to August shows parties think a proposed decision is “imminent,” said former CPUC Commissioner Rachelle Chong. But she doubted an early decision, including because assigned Commissioner Rechtschaffen previously led the agency’s review of T-Mobile/Sprint, where California was the final state to act. Chong, also a former FCC commissioner, said she doesn’t recall a time when California denied and the federal government OK’d a deal.

Tracfone CEO Eduardo Diaz Corona urged OK in a Monday letter to Rechtschaffen and Guzman Aceves. Consumer groups “clearly care very much about California consumers and the California LifeLine program,” he said in a letter emailed to the service list in docket A.20-11-001. “So do we.” Act quickly and don’t impose conditions, he said. “Every day that goes by is another day that TracFone is precluded from offering and delivering significant additional value to our customers.”

Some critics of the deal say Verizon is already too big. “Verizon is already a telecommunications behemoth,” Hanley blogged: The FCC “has exceptionally broad merger review authority. The agency must use it to block this merger.”