Federal Communications Commission FCC 21-121
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Application of Verizon Communications Inc.
and
América Móvil, S.A.B. de C.V.
For Consent To Transfer Control of
International Section 214 Authorization
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GN Docket No. 21-112
IBFS File No. ITC-T/C-20200930-00173
MEMORANDUM OPINION AND ORDER
Adopted: November 19, 2021 Released: November 22, 2021
By the Commission: Commissioner Carr concurring and issuing a statement.
TABLE OF CONTENTS
Heading Paragraph #
I. INTRODUCTION .................................................................................................................................. 1
II. VERIZON’S COMMITMENTS ............................................................................................................ 5
III. BACKGROUND .................................................................................................................................. 12
A. Description of the Applicants ........................................................................................................ 12
B. Description of the Transaction ....................................................................................................... 14
C. Transaction Review Process .......................................................................................................... 16
D. Department of Justice Review ....................................................................................................... 20
IV. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK .......................................... 21
V. POTENTIAL PUBLIC INTEREST HARMS ...................................................................................... 26
A. Market Definitions and Market Participants .................................................................................. 27
B. Competitive Effects of the Proposed Transaction .......................................................................... 33
1. Initial Screen............................................................................................................................ 35
2. Unilateral Effects ..................................................................................................................... 38
3. Coordinated Effects ................................................................................................................. 48
4. Vertical Harms in Wholesale Services .................................................................................... 52
5. Potential Harms to Lifeline Customers ................................................................................... 59
VI. POTENTIAL PUBLIC INTEREST BENEFITS ................................................................................. 72
VII. OTHER PUBLIC INTEREST ISSUES .............................................................................................. 99
A. Roaming ......................................................................................................................................... 99
B. Employment ................................................................................................................................. 103
C. Customer Migration and Transition ............................................................................................. 110
D. Handset Unlocking....................................................................................................................... 122
E. Handset Accessibility................................................................................................................... 126
VIII. REMEDIES ................................................................................................................................. 129
A. Lifeline ......................................................................................................................................... 131
Federal Communications Commission FCC 21-121
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B. Assumption of Liability ............................................................................................................... 136
C. Customer Migration and Transition ............................................................................................. 137
D. Handset Unlocking....................................................................................................................... 144
E. Wholesale Service ........................................................................................................................ 145
F. Compliance Officers and Reporting ............................................................................................ 146
G. Enforcement ................................................................................................................................. 149
IX. CONCLUSION .................................................................................................................................. 150
X. ORDERING CLAUSES ..................................................................................................................... 151
APPENDIX A – List of Commenters
APPENDIX B – Verizon’s Commitments
APPENDIX C – Compliance Program and Reporting Conditions
I. INTRODUCTION
1. In this Memorandum Opinion and Order, we approve, subject to conditions, the
application of Verizon Communications Inc. (Verizon), América Móvil S.A.B. de C.V. (América Móvil),
and TracFone Wireless, Inc. (TracFone) (together, the Applicants) for Commission consent to the transfer
of control of TracFone’s international section 214 authorization from América Móvil to Verizon.
2. As a result of the transaction, TracFone will become a direct subsidiary of Verizon.
TracFone offers prepaid services to more than 20 million customers, including offering prepaid services
to approximately 1.7 million Lifeline customers.
1
The Applicants assert that the transaction will benefit
underserved consumers by allowing Verizon and TracFone to better serve customers in the prepaid
segment.
2
The Applicants maintain that the transaction will deliver public interest benefits in the form of
more choices, better service, and new features and devices, including 5G, to underserved communities
and TracFone’s generally value-conscious customers.
3
3. Commission staff has conducted an exhaustive review of the record filings in this
proceeding, including reviewing thousands of pages of pleadings, documents, and information request
responses, as well as conducting a thorough economic analysis of the potential harms and benefits. Based
on our extensive review and analysis of the record, we find that the proposed transaction has the potential
to cause some public interest harms. In particular, 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. In addition,
Verizon, as a result of the transaction, may have an increased incentive to raise the costs of mobile virtual
network operators (MVNOs) that compete directly against TracFone for Lifeline and other low-cost
prepaid customers and for which Verizon is their wholesale provider.
4. However, we adopt a number of demanding conditions herein to address these public
interest harms and to ensure the realization of certain public interest benefits. These include strong
conditions to protect low-income consumers from price increases and to ensure that TracFone remains a
supportive Lifeline participant. Given the likelihood that any violation of these conditions would harm
low-income consumers, we also require more than seven years of oversight. Finally, we create strong,
independent enforcement mechanisms—including both an internal and an independent compliance officer
who are empowered to proactively monitor conditions, ensure that low-income consumers are not being
harmed, and facilitate consumer complaints about potential violations—particularly from Lifeline
subscribers. We find that these and the other conditions imposed herein adequately address the concerns
1
Application of Verizon Communications Inc. and América Móvil, S.A.B. de C.V. for Consent to Transfer Control
of International Section 214 Authorization, File No. ITC-T/C-20200930-00173, at 18 (Sept. 30, 2020) (Application).
2
Id. at 22.
3
Id. at 2.
Federal Communications Commission FCC 21-121
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and potential harms identified in the record such that, considering that the transaction also will yield some
benefits (in the form of lower marginal costs) for TracFone, on balance, we are able to find that the
proposed transaction serves the public interest.
II. VERIZON’S COMMITMENTS
5. Verizon has made certain commitments to ensure that this transaction will serve the
public interest by addressing the potential public interest harms and helping to realize the asserted public
interest benefits.
4
We make these commitments conditions of our approval of the proposed transaction.
We briefly summarize many of the major commitments here, which address Lifeline and low-income
consumers, customer migration and transition, wholesale services, unlocking devices, compliance and
reporting, and assumption of liability.
5
6. Lifeline Commitments. Verizon commits to continue to offer TracFone’s Lifeline-
supported services over the same service area where TracFone currently offers Lifeline service for a
minimum of seven years following the close of the transaction.
6
In addition, Verizon will offer a free,
compatible device or SIM in certain circumstances where customers are being required to transition to
Verizon’s network. Subject to certain specific limitations, Verizon will continue to offer and advertise
existing Lifeline plans and will not add new co-pays to TracFone’s existing Lifeline plans offered at no
cost to prepaid customers for at least three years. Within six months after the transaction closes, Verizon
also will make available to existing and new Lifeline prepaid customers a 5G plan and will offer a range
of cost-effective 5G devices to existing and new Lifeline customers. Verizon will also maintain a
specified level of marketing and advertising expenditures for Lifeline and will establish and maintain a
dedicated website with information about the Lifeline program and a dedicated customer service line for
Lifeline customers.
7. Customer Migration and Transition Commitments. For at least three years after the close
of the transaction, Verizon will maintain TracFone’s existing MVNO agreements to serve customers
outside Verizon’s network coverage (including Puerto Rico), and it will maintain existing TracFone rate
plans for new and existing customers. During this period, in order to assist customers in the transition,
Verizon will maintain an exclusive, toll-free customer service line; conduct outreach, advertise, and
display all plans on a dedicated website; and separately notify all TracFone customers of the transaction.
In addition, during this period, Verizon will notify customers at least twice before they are transitioned to
Verizon’s network and, in certain circumstances, will provide a free compatible device in order to prevent
interruption or degradation of service.
8. Unlocking Devices Commitment. Subject to certain conditions and limitations, Verizon
commits to extending its 60-day unlocking period to all 700 MHz C Block devices purchased from
TracFone after closing and activated on the Verizon network, subject to a two-year waiver of the
automatic unlocking requirement to allow manual unlocking for those TracFone devices that currently do
not have automatic unlocking capabilities. Verizon will provide notice to affected TracFone customers of
its unlocking policy.
9. Wholesale Service Commitment. Verizon commits to provide MVNOs that have current
contracts with Verizon an option to extend, subject to the limitations specified below, their existing
4
Letter from William H. Johnson, Senior Vice President, Verizon, to Marlene H. Dortch, Secretary, FCC, GN
Docket No. 21-112 (filed Nov. 18, 2021) (Verizon Nov. 18, 2021 Commitment Letter).
5
After extensive discussion with Commission staff, Verizon has made a set of commitments that staff believes
sufficiently mitigate the potential public interest harms. See Verizon Nov. 18, 2021 Commitment Letter; Letter from
William H. Johnson, Senior Vice President, Verizon, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112
(filed Nov. 17, 2021) (Verizon Nov. 17, 2021 Ex Parte Letter). Verizon’s full commitments, which we adopt as
conditions to our approval are discussed in more detail in section VIII below and set forth in Appendices B and C.
6
Unless otherwise specified, the time periods described in this order begin after this transaction closes.
Federal Communications Commission FCC 21-121
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MVNO wholesale agreements, on the same terms and conditions, on a month-to-month basis until three
years after the transaction closes.
10. Compliance and Reporting Commitments. For seven years and six months following the
close of the transaction, Verizon commits to paying for and retaining both an internal company
compliance officer and an independent compliance officer to ensure compliance with these commitments.
For seven years, Verizon will also submit publicly available semi-annual reports describing its
compliance that includes information regarding Lifeline and non-Lifeline customers.
11. Assumption of Liability Commitments. Without prejudicing contractual indemnification
rights between Verizon and América Móvil, Verizon assumes liability for any forfeitures, restitution, or
other obligations that may be imposed by the Commission or the Universal Service Administrative
Company (USAC) on TracFone and its subsidiaries, and any successors or assigns, unless such liability
has been resolved by TracFone prior to the closing of the transaction. In addition, Verizon will comply
with any agreements with the Commission or USAC, including following any compliance plans, or other
obligations, agreed to by TracFone, its subsidiaries, or any successors or assigns.
III. BACKGROUND
A. Description of the Applicants
12. Verizon is a publicly traded Delaware corporation headquartered in New York, New
York.
7
It is a holding company that, through its subsidiaries, offers voice, data and video services
nationwide.
8
Verizon states that it is “one of the world’s leading providers of communications,
technology, information and entertainment products and services”
9
and that its wireless division, Cellco
Partnership d/b/a Verizon Wireless, “provides nationwide voice and data services to nearly 120 million
total wireless connections, including nearly 94 million consumer wireless customers.”
10
Verizon further
states that it operates in both the prepaid and postpaid markets for wireless services, and that, as of
December 2020, approximately 96% of its consumer retail connections were postpaid connections.
11
Verizon asserts that it has “the largest 4G LTE network of any US wireless service provider.”
12
Verizon
reported 2020 operating revenues of approximately $128 billion, with an operating income of
approximately $29 billion, and total assets of approximately $316 billion.
13
13. TracFone is a Delaware corporation headquartered in Miami, Florida.
14
It is an indirect,
wholly-owned subsidiary of América Móvil,
15
a public stock corporation with variable capital organized
under the laws of Mexico, with its principal executive offices in Mexico City, Mexico.
16
TracFone
7
Verizon Communications Inc., SEC Form 10-K (filed Feb. 25, 2021) (Verizon Form 10-K).
8
Id. at 4.
9
Id.
10
Application at 7.
11
Verizon Form 10-K at 4.
12
Application at 7.
13
Verizon Form 10-K at 54, 56.
14
Application at 20.
15
TracFone is a wholly owned subsidiary of AMX USA Holding, S.A. de C.V., which is a wholly owned subsidiary
of Sercotel, S.A. de C.V. Sercotel, in turn, is a direct wholly owned subsidiary of América Móvil. Application at 7
& n.13.
16
Application at 7. América Móvil reports operations worldwide, but largely focuses on Latin America, with the
largest portion of its income coming from operations in Mexico. América Móvil S.A.B. de C.V., SEC Form 20-F
(filed Apr. 28, 2021) (América Móvil Form 20-F).
Federal Communications Commission FCC 21-121
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operates only in the United States. It offers prepaid plans under the names SafeLink Wireless, Straight
Talk Wireless, Net10 Wireless, Walmart Family Mobile, Total Wireless, Go Smart Mobile, Page Plus,
and Simple Mobile.
17
TracFone states that these brands account for more than 20 million prepaid wireless
customers in the U.S.,
18
and that it provides Lifeline services to close to two million customers.
19
TracFone further states that it is not a facilities-based mobile network operator and does not hold wireless
radio licenses.
20
Rather, TracFone is an MVNO that uses the networks of mobile network operators
(MNOs) to provide its services.
21
América Móvil reported 2020 operating revenues of approximately $50
billion in total ($9 billion of which was in the United States), 2020 total operating income of
approximately $8 billion ($535 million of which was in the United States), and total assets of
approximately $81 billion (U.S.-only assets were not disclosed).
22
B. Description of the Transaction
14. On September 13, 2020, the Applicants entered into a purchase agreement (Agreement)
pursuant to which Verizon will purchase TracFone from América Móvil for approximately $3.125 billion
in cash and approximately $3.125 billion in Verizon common stock.
23
Following consummation,
TracFone will become a 100% owned direct subsidiary of Verizon.
24
All of TracFone’s subsidiaries will
become indirect subsidiaries of Verizon.
25
No changes to the Board of Directors for either company will
result from consummation of the Agreement.
15. The Applicants assert that the proposed transaction will generate substantial public
interest benefits to TracFone customers and will enhance competition in the U.S. wireless marketplace.
Specifically, they claim that the transaction “will allow Verizon to bring its resources to TracFone,”
26
including “access to a wider variety of Verizon-compatible devices, new technologies and service options
(like 5G), and more international roaming options,”
27
expanded distribution points,
28
and increased
“customer choice and competition”
29
without any “material impact on the broader mobile
telephony/broadband services market.”
30
17
Application at 7.
18
Id. at 8; see also Safelink Wireless, About Us,
https://www.safelinkwireless.com/Enrollment/Safelink/en/Web/www/default/index.html#!/aboutUs
(last visited
Nov. 16, 2021) (stating that “TracFone is the largest ‘No-Contract’ cellular service provider in the U.S.”).
19
América Móvil and TracFone May 14, 2021 RFI Response at 6.
20
Application at 8.
21
Id.
22
América Móvil Form 20-F at 27, F-6.
23
Application at 9.
24
Id. at 9, Appx. A.
25
Id. at 9.
26
Id. at 11.
27
Id. at 11-12.
28
Id. at 13.
29
Id. at 14.
30
Id. at 16.
Federal Communications Commission FCC 21-121
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C. Transaction Review Process
16. On September 30, 2020, Verizon and América Móvil filed an application for consent to
transfer control of TracFone,
31
which holds a single international section 214 authorization,
32
from
América Móvil to Verizon. As part of the application, the Applicants requested streamlined processing
procedures.
33
Three parties opposed the Applicants’ streamlined treatment request.
34
On October 23,
2020, the Applicants filed a response to the streamlining oppositions,
35
and subsequently, replies were
filed.
36
On November 20, 2020, the Commission released a public notice stating that this application is
not subject to streamlined processing procedures under the Commission’s rules and that parties may file
comments.
37
Six comments were filed during this comment period,
38
and the Applicants filed a Joint
Reply on December 28, 2020.
39
On February 4, 2021, 17 State Attorneys General requested that the
Commission obtain additional information from the Applicants.
40
On February 12, 2021, a public notice
was released stating that the Commission has not yet issued an order acting on this application because it
raises issues of extraordinary complexity and thus an additional 90-day period for review is necessary.
41
17. On March 30, 2021, the Wireless Telecommunications Bureau (WTB) released a public
notice to announce the opening of a docket and to specify the ex parte procedures.
42
In response to the
31
See generally Id.
32
IBFS File No. ITC-214-20030401-00162.
33
Application at 11.
34
Letter from Kathleen O’Brien Ham, Senior Vice President, Government Affairs, T-Mobile, to Marlene H. Dortch,
Secretary, FCC, GN Docket No. 21-112 (filed Oct. 13, 2020); Public Knowledge et al., Opposition to Petition for
Streamlining and Motion to Dismiss Application as Incomplete (rec. Oct. 16, 2020) (Public Knowledge et al. Oct.
16, 2020 Opposition); Communications Workers of America (CWA), Opposition to Petition for Streamlining and
Motion to Dismiss Application as Incomplete (rec. Nov. 19, 2020) (CWA Nov. 19, 2020 Opposition).
35
Letter from Alejandro Cantú Jiménez, General Counsel, América Móvil, William H. Johnson, Senior Vice
President, Verizon, and Richard B. Salzman, Executive Vice President and General Counsel, TracFone, to Marlene
H. Dortch, Secretary, FCC, GN Docket No. 21-112 (filed Oct. 23, 2020) (Applicants’ Streamlining Response).
36
Public Knowledge et al., Reply to Applicants’ Streamlining Response (rec. Oct. 30, 2020) (Public Knowledge et
al. Oct. 30, 2020 Reply); Letter from Kathleen O’Brien Ham, Senior Vice President, Government Affairs, T-Mobile,
to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112 (filed Oct. 29, 2020).
37
Non-Streamlined International Applications/Petitions Accepted For Filing, Section 214 Applications (47 C.F.R.
§§ 63.18, 63.24); Section 310(b) Petitions (47 C.F.R. § 1.5000), GN Docket No. 21-112, Public Notice, Report No.
TEL-02056NS, 2020 WL 6866833, 1 (Nov. 20, 2020).
38
The commenters are listed in Appx. A.
39
América Móvil, S.A.B. de C.V., TracFone Wireless, Inc., and Verizon Communications Inc., Joint Reply to
Comments, GN Docket No. 21-112 (rec. Dec. 28, 2020) (Applicants’ Dec. 28, 2020 Joint Reply).
40
Letter from Mark R. Herring, Attorney General, Commonwealth of Virginia, Office of the Attorney General et al.,
to Marlene H. Dortch, Secretary, FCC, GN Docket No. 12-112 (filed Feb. 4, 2021) (State Attorneys General Feb. 4,
2021 Ex Parte Letter). This letter was signed by the state attorneys general for the District of Columbia and the
following states: Virginia, Nevada, Rhode Island, Oregon, Minnesota, Delaware, Connecticut, New York, Michigan,
Washington State, Massachusetts, Iowa, Vermont, North Carolina, Colorado, and New Mexico.
41
Non-Streamlined International Applications/Petitions Accepted for Filing, GN Docket No. 21-112, Public Notice,
Report No. TEL-02075NS, 2021 WL 537493 (Feb. 12, 2021).
42
Federal Communications Commission Establishes Docket for Proposed Transfer of Control of Tracfone Wireless,
Inc. to Verizon Communications Inc., GN Docket No. 21-112, Public Notice, 36 FCC Rcd 6557 (WTB Mar. 30,
2021). Prior to the release of this public notice, the application and subsequent filings were submitted via the
International Bureau Filing System (IBFS) under the File No. ITC-T/C-20200930-00173. After the docket was
opened on March 30, 2021, all of these filings became available under GN Docket No. 21-112.
Federal Communications Commission FCC 21-121
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Public Notice, the Commission received numerous comments and ex parte filings as well as several reply
comments.
43
On April 14, 2021, WTB and the Office of Economics and Analytics (OEA) issued
Information Requests to each of the Applicants
44
and simultaneously issued a Protective Order, which
limited access to proprietary or confidential information and more strictly limited access to certain
competitively sensitive information.
45
On July 21, 2021, five U.S. Senators sent a letter to Chairwoman
Rosenworcel to urge the Commission to thoroughly review the proposed transaction.
46
On August 11,
2021, Chairwoman Rosenworcel responded by letter to each of these five U.S. Senators.
47
18. In addition, on August 11, 2021, Verizon filed a letter in which it made certain
commitments that included Verizon’s commitment to continue to offer TracFone’s current Lifeline-
supported services for a minimum of three years following the close of the transaction.
48
Public
Knowledge and CWA, et al. contemporaneously filed a letter which stated that “these conditions
adequately address their concerns and withdraw their objections to the [t]ransaction contingent on the
Commission’s incorporation of all of Verizon’s commitments as enforceable and mandatory in the final
order of this proceeding.”
49
19. After extensive discussion with Commission staff, on November 18, 2021, Verizon filed
a letter detailing its transaction commitments that today, we make conditions of our approval.
50
Verizon’s
letter expands upon its previous commitments by offering, among other things, to continue Lifeline for
seven years and to provide more fulsome protections to address customer transition concerns.
51
D. Department of Justice Review
20. The Antitrust Division of the U.S. Department of Justice (DOJ) reviews
telecommunications mergers pursuant to section 7 of the Clayton Act, which prohibits mergers that are
likely to substantially lessen competition.
52
The Antitrust Division’s review is limited solely to an
43
The comments and replies filed on or before and after March 30, 2020 and ex parte filings are listed in Appx. A.
44
Verizon Communications Inc. General Information Request, GN Docket No. 21-112 (WTB/OEA Apr. 14, 2021)
(Verizon Apr. 14, 2021 Information Request); América Móvil, S.A.B. de C.V. General Information Request, GN
Docket No. 21-112 (WTB/OEA Apr. 14, 2021).
45
Application of Verizon Communications Inc. and América Móvil, S.A.B. de C.V. for Consent to Transfer Control
of International Section 214 Authorization, GN Docket No. 21-112, Protective Order, 36 FCC Rcd 7281
(WTB/OEA Apr. 14, 2021) (Protective Order). Material set off by double brackets {[ ]} is confidential
information, as described in the Protective Order, and is redacted from the public version of this order. The
unredacted version of the order will be available upon request to persons qualified to view it under the Protective
Order.
46
Letter from U.S. Senators Richard Blumenthal, Dianne Feinstein, Edward J. Markey, Sheldon Whitehouse, and
Ron Wyden, U.S. Senate, to Honorable Jessica Rosenworcel, Chairwoman, FCC, GN Docket No. 21-112 (filed July
21, 2021) (Senators’ July 21, 2021 Ex Parte Letter).
47
Letter from Honorable Jessica Rosenworcel, Chairwoman, FCC, to Honorable Richard Blumenthal, Senator, U.S.
Senate, GN Docket No. 21-112 (filed Aug. 11, 2021). This same letter was also sent to U.S. Senators Dianne
Feinstein, Edward J. Markey, Sheldon Whitehouse, and Ron Wyden.
48
Letter from William H. Johnson, Senior Vice President, Verizon, to Marlene H. Dortch, Secretary, FCC, GN
Docket No. 21-112 (filed Aug. 11, 2021) (Verizon Aug. 11, 2021 Ex Parte Letter).
49
Letter from Kathleen Burke, Public Knowledge, Brian Thorn, CWA, Andrew Jay Schwartzman, Benton Institute
for Broadband & Society, Connie E. Stewart, California Center for Rural Policy, Sean Taketa McLaughlin, Access
Humboldt, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112 (filed Aug. 11, 2021) (Public Interest
Groups Aug. 11, 2021 Ex Parte Letter).
50
Verizon Nov. 18, 2021 Commitment Letter; see also Verizon Nov. 17, 2021 Ex Parte Letter.
51
Verizon Nov. 18, 2021 Commitment Letter.
52
15 U.S.C. § 18.
Federal Communications Commission FCC 21-121
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examination of the competitive effects of the acquisition, without reference to national security, law
enforcement, or other public interest considerations. The Antitrust Division reviewed the proposed
transaction between Verizon and América Móvil, and on November 24, 2020, it granted an early
termination of the Hart-Scott-Rodino waiting period for Verizon’s proposed acquisition of TracFone.
53
IV. STANDARD OF REVIEW AND PUBLIC INTEREST FRAMEWORK
21. Pursuant to section 214(a),
54
we must determine whether the proposed transfer of control
to Verizon of a section 214 authorization held by TracFone will serve the public interest, convenience,
and necessity.
55
In making this determination, we first assess whether the proposed transaction complies
with the specific provisions of the Act, other applicable statutes, and the Commission’s rules.
56
If the
proposed transaction does not violate a statute or rule, we then consider whether the transaction could
result in public interest harms by substantially frustrating or impairing the objectives or implementation
of the Act or related statutes.
57
We then employ a balancing test weighing any potential public interest
harms of the proposed transaction against any potential public interest benefits.
58
The Applicants bear the
burden of proving, by a preponderance of the evidence, that the proposed transaction, on balance, serves
the public interest.
59
53
FTC, Early Termination Notices, Transaction No. 20201618: Verizon Communications Inc., América Móvil,
S.A.B. de C.V. (Nov. 24, 2020),
https://www.ftc.gov/enforcement/premerger-notification-program/early-
termination-notices/20201618.
54
47 U.S.C. § 214(a).
55
See, e.g., China Mobile International (USA) Inc., Application for Global Facilities-Based and Global Resale
International Telecommunications Authority Pursuant to Section 214 of the Communications Act of 1934, as
Amended, Memorandum Opinion and Order, 34 FCC Rcd 3361, 3366, para. 9 (2019); Applications for Consent to
the Assignment and/or Transfer of Control of Licenses, Adelphia Communications Corporation (and subsidiaries,
debtors-in-possession), Assignors, to Time Warner Cable Inc. (subsidiaries), Assignees; Adelphia Communications
Corporation, (and subsidiaries, debtors-in-possession), Assignors and Transferors et al., MB Docket No. 05-192,
Memorandum Opinion and Order, 21 FCC Rcd 8203, 8219-21, paras. 27-28 (2006) (Adelphia-TWC Order).
56
See, e.g., Applications of T-Mobile US, Inc., and Sprint Corporation, Consent to Transfer Control of Licenses and
Authorizations, Applications of American H Block Wireless L.L.C., DBSD Corporation, Gamma Acquisitions L.L.C.,
and Manifest Wireless L.L.C. for Extension of Time, WT Docket No. 18-197, Memorandum Opinion and Order,
Declaratory Ruling, and Order of Proposed Modification, 34 FCC Rcd 10578, 10595, para. 39 (2019) (T-Mobile-
Sprint Order); Applications of Level 3 Communications, Inc. and CenturyLink, Inc. for Consent To Transfer Control
of Licenses and Authorizations, WC Docket No. 16-403, Memorandum Opinion and Order, 32 FCC Rcd 9581,
9585, para. 8 (2017) (CenturyLink-Level 3 Order); Applications of Cricket License Company, LLC, et al., Leap
Wireless International, Inc., and AT&T Inc. for Consent to Transfer Control of Authorizations, et al., WT Docket
No. 13-193, Memorandum Opinion and Order, 29 FCC Rcd 2735, 2741-42, para. 13 (WTB/IB 2014) (AT&T-Leap
Order).
57
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10595, para. 40; CenturyLink-Level 3 Order, 32 FCC Rcd at
9585, para. 9; AT&T-Leap Order, 29 FCC Rcd at 2741-42, para. 13.
58
See, e.g., Applications of AT&T Inc. and DIRECTV for Consent to Assign or Transfer Control of Licenses and
Authorizations, MB Docket No. 14-90, Memorandum Opinion and Order, 30 FCC Rcd 9131, 9140, para. 18 (2015)
(AT&T-DIRECTV Order); General Motors Corp. and Hughes Electronics Corp., Transferors, and the News
Corporation, Transferee, MB Docket No. 03-124, Memorandum Opinion and Order, 19 FCC Rcd 473, 483, para. 15
(2004) (News Corp.-Hughes Order); see also AT&T-Leap Order, 29 FCC Rcd at 2741-42, para. 13.
59
See, e.g., AT&T-DIRECTV Order, 30 FCC Rcd at 9140, para. 18; Adelphia-TWC Order, 21 FCC Rcd at 8217,
para. 23; Application of EchoStar Communications Corp., General Motors Corp., and Hughes Electronics Corp.,
Transferors, and EchoStar Communications Corp., Transferee, CS Docket No. 01-348, Hearing Designation Order,
17 FCC Rcd 20559, 20574, para. 25 (2002) (EchoStar-DIRECTV HDO); see also AT&T-Leap Order, 29 FCC Rcd
at 2741-42, para. 13.
Federal Communications Commission FCC 21-121
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22. Our public interest evaluation necessarily encompasses the “broad aims of the
Communications Act,”
60
which include, among other things, a deeply rooted preference for preserving
and enhancing competition in relevant markets,
61
accelerating private sector deployment of advanced
services,
62
promoting a diversity of information sources and services to the public,
63
and generally
managing the spectrum in the public interest.
64
Our public interest analysis also entails assessing whether
the proposed transaction would affect the quality of communications services or result in the provision of
new or additional services to consumers.
65
In conducting this analysis, we may consider technological
and market changes, and the nature, complexity, and speed of change of, as well as trends within, the
communications industry.
66
23. The Commission’s competitive analysis, which forms an important part of the public
interest evaluation, is informed by, but not limited to, traditional antitrust principles.
67
The Commission,
like the DOJ, considers how a transaction would affect competition by defining a relevant market, looking
at the market power of incumbent competitors, and analyzing barriers to entry, potential competition, and
the efficiencies, if any, that may result from the transaction.
68
However, the Commission’s competitive
analysis under the public interest standard is broader, and may, for example, consider whether a
transaction would enhance, rather than merely preserve, existing competition, and often takes a more
expansive view of potential and future competition in analyzing that issue.
69
60
Western Union Division, Commercial Telegrapher’s Union, A.F. of L. v. United States, 87 F. Supp. 324, 335
(D.D.C. 1949), aff’d, 338 U.S. 864 (1949); see AT&T-DIRECTV Order, 30 FCC Rcd at 9140, para. 19; see also
FCC v. RCA Communications, Inc., 346 U.S. 86, 93-95 (1953).
61
47 U.S.C. §§ 521(6), 532(a); see, e.g., Applications for Consent to the Transfer of Control of Licenses and
Authorizations by Time Warner, Inc. and America Online, Inc. to AOL Time Warner Inc., Memorandum Opinion
and Order, 16 FCC Rcd 6547, 6555-56, para. 22 (2001) (AOL-Time Warner Order).
62
47 U.S.C. §§ 254, 332(c)(7), 1302; Telecommunications Act of 1996, Preamble, Pub. L. No. 104-104, 110 Stat.
56 (1996) (one purpose of the Act is to “accelerate rapidly private sector deployment of advanced
telecommunications and information technologies and services”).
63
47 U.S.C. §§ 521(4), 532(a); see Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622, 663 (1994) (“[I]t has long been a
tenet of national communications policy that the widest possible dissemination of information from diverse and
antagonistic sources is essential to the welfare of the public.”) (quoting United States v. Midwest Video Corp., 406
U.S. 649, 668, n.27 (1972)) (internal quotation marks omitted).
64
47 U.S.C. §§ 301, 303, 307, 309, 310(d).
65
See, e.g., AT&T-DIRECTV Order, 30 FCC Rcd at 9140, para. 19; Adelphia-TWC Order, 21 FCC Rcd at 8218,
para. 24; EchoStar-DIRECTV HDO, 17 FCC Rcd at 20575, para. 26.
66
See, e.g., AT&T-DIRECTV Order, 30 FCC Rcd at 9140, para. 19; Application of Comcast Corp., General Electric
Company and NBC Universal, Inc. For Consent to Assign Licenses and Transfer Control of Licenses, MB Docket
No. 10-56, Memorandum Opinion and Order, 26 FCC Rcd 4238, 4248, para. 23 (2011) (Comcast-NBC Universal
Order); EchoStar-DIRECTV HDO, 17 FCC Rcd at 20575, para. 26.
67
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10595-96, para. 40; CenturyLink-Level 3 Order, 32 FCC Rcd at
9585-86, para. 9; AT&T-Leap Order, 29 FCC Rcd at 2742-43, para. 15; see also Northeast Utils. Serv. Co. v. FERC,
993 F.2d 937, 947 (1st Cir. 1993) (public interest standard does not require agencies “to analyze proposed mergers
under the same standards that the Department of Justice . . . must apply”).
68
See, e.g., AT&T-DIRECTV Order, 30 FCC Rcd at 9141, para. 20; EchoStar-DIRECTV HDO, 17 FCC Rcd at
20575, para. 27; see also Applications of Sprint Nextel Corp. and SoftBank Corp. and Starburst II, Inc. for Consent
to Transfer Control of Licenses and Authorizations, IB Docket No. 12-343, Memorandum Opinion and Order,
Declaratory Ruling, and Order on Reconsideration, 28 FCC Rcd 9642, 9652, para. 25 (2013) (SoftBank-Sprint
Order).
69
See, e.g., AT&T-DIRECTV Order, 30 FCC Rcd at 9141, para. 21; EchoStar-DIRECTV HDO, 17 FCC Rcd at
20575-76, para. 27. Cf. Verizon Commc’ns, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 415 (2004)
(continued….)
Federal Communications Commission FCC 21-121
10
24. Finally, the Commission’s public interest authority enables us, where appropriate, to
impose and enforce transaction-related conditions to ensure that the public interest is served by the
transaction.
70
Specifically, section 214(c) of the Act authorizes the Commission to attach to the certificate
“such terms and conditions as in its judgment the public convenience and necessity may require.”
71
Indeed, our extensive regulatory and enforcement experience informs our actions under this authority.
72
In exercising this authority to carry out our responsibilities under the Act and related statutes, we have
imposed conditions to confirm specific benefits or remedy harms likely to arise from transactions.
73
25. We note that the Commission and the DOJ each has independent authority to examine the
competitive impacts of proposed wireless mergers and transactions.
74
The DOJ reviews
telecommunications mergers pursuant to section 7 of the Clayton Act, and if it sues to enjoin a merger, it
must demonstrate to a court that the merger may substantially lessen competition or tend to create a
monopoly.
75
The DOJ review is consequently limited solely to an examination of the competitive effects
of the acquisition, without reference to diversity, localism, or other public interest considerations.
76
V. POTENTIAL PUBLIC INTEREST HARMS
26. We find that the proposed transaction will not violate any statutory provisions or
Commission rules and so turn to the other potential public interest harms. We have performed an
extensive review and thorough economic analysis of the proposed transaction to determine any potential
public interest harms. In our examination of the potential competitive effects, following long-standing
Commission precedent, we first define the relevant product and geographic markets and the input market
for spectrum, and we then identify the current market participants. Second, we evaluate likely price
effects as a result of the proposed transaction. After our rigorous and in-depth review, while we find that
significant unilateral effects are unlikely, for the reasons explained below, we cannot conclude that certain
groups of consumers or certain segments of the market, such as very low-income consumers, might not be
(Continued from previous page)
(“The 1996 Act is, in an important respect, much more ambitious than the antitrust laws. It attempts ‘to eliminate
the monopolies enjoyed by the inheritors of AT&T’s local franchises.’ Section 2 of the Sherman Act, by contrast,
seeks merely to prevent unlawful monopolization. It would be a serious mistake to conflate the two goals.”)
(emphasis in original) (quoting Verizon Commc’ns v. FCC, 535 U.S. 467, 476 (2002) (internal citations omitted)).
70
See, e.g., AT&T-DIRECTV Order, 30 FCC Rcd at 9141, para. 22; Comcast-NBC Universal Order, 26 FCC Rcd at
4249, para. 25; EchoStar-DIRECTV HDO, 17 FCC Rcd at 20575, para. 27; see also Application of WorldCom, Inc.
and MCI Commc’ns Corp. for Transfer of Control of MCI Communications Corporation to WorldCom, Inc.,
Memorandum Opinion and Order, 13 FCC Rcd 18025, 18032, para. 10 (1998) (WorldCom-MCI Order) (stating that
the Commission may attach conditions to the transfers); T-Mobile-Sprint Order, 34 FCC Rcd at 10596, para. 42.
71
47 U.S.C. § 214(c); see, e.g., AT&T Inc. and BellSouth Corp. Application for Transfer of Control, Memorandum
Opinion and Order, 22 FCC Rcd 5662, 5674, para. 22 (2007); Adelphia-TWC Order, 21 FCC Rcd at 8219, para. 26;
WorldCom-MCI Order, 13 FCC Rcd at 18031-32, para. 10.
72
See, e.g., AT&T-DIRECTV Order, 30 FCC Rcd at 9141, para. 22; Comcast-NBC Universal Order, 26 FCC Rcd at
4249, para. 25; EchoStar-DIRECTV HDO, 17 FCC Rcd at 20575, para. 27.
73
See, e.g., AT&T-DIRECTV Order, 30 FCC Rcd at 9141, para. 22; Adelphia-TWC Order, 21 FCC Rcd at 8219,
para. 26; see also T-Mobile-Sprint Order, 34 FCC Rcd at 10596, para. 42.
74
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10595-96, para. 40; CenturyLink-Level 3 Order, 32 FCC Rcd at
9585-86, para. 9; AT&T-Leap Order, 29 FCC Rcd at 2742-43, para. 15.
75
15 U.S.C. § 18; see, e.g., AT&T-DIRECTV Order, 30 FCC Rcd at 9141, para. 21; Comcast-NBC Universal Order,
26 FCC Rcd at 4248, para. 24; News Corp.-Hughes Order, 19 FCC Rcd at 484, para. 17; see also AT&T-Leap
Order, 29 FCC Rcd at 2742-43, para. 15.
76
See, e.g., AT&T-DIRECTV Order, 30 FCC Rcd at 9141, para. 21; Comcast-NBC Universal Order, 26 FCC Rcd at
4248, para. 24; SoftBank-Sprint Order, 28 FCC Rcd at 9652, para. 25; see also AT&T-Leap Order, 29 FCC Rcd at
2742-43, para. 15.
Federal Communications Commission FCC 21-121
11
harmed by the transaction. However, Verizon’s commitments to address potential harms to Lifeline-
eligible and other low-income consumers, and to ensure a stable, orderly, and streamlined migration of
TracFone customers to Verizon’s network, which we adopt as conditions of our approval, will minimize
potential harms to consumers seeking low-cost plans. Third, as part of our competitive analysis, we also
evaluate whether the proposed transaction may lessen competition by making coordination among rival
service providers more likely. Finally, we address the potential for vertical harms as a result of the
transaction and find that Verizon, post-transaction, may have an increased incentive to raise the wholesale
costs of MVNOs that compete directly with TracFone for prepaid customers. We find, however, that
Verizon’s commitment to extend the existing wholesale agreements of certain MVNOs should mitigate
this potential harm.
A. Market Definitions and Market Participants
27. Product Market. Consistent with recent Commission precedent, we define the relevant
product market as a combined “mobile telephony/broadband services” product market that comprises
mobile voice and data services, including mobile voice and data services provided over advanced
broadband wireless networks (mobile broadband services).
77
28. The Applicants, adopting the mobile telephony/broadband services market definition,
argue that the proposed transaction will not harm competition for mobile telephony/broadband services
for consumers and will enhance competition in the prepaid segment.
78
Several commenters support
defining separate product markets or otherwise conducting separate analyses for narrower categories of
services in addition to evaluating a combined mobile telephony/broadband services market.
79
The
Applicants respond that separately examining prepaid and postpaid consumer markets runs counter to
existing Commission precedent and the facts of the marketplace.
80
29. After carefully reviewing the record, we find no reason to depart from the Commission’s
current product market definition, particularly given the Commission’s previous recognition that the
77
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10601, para. 55; SprintCom, Inc., Shenandoah Personal
Communications, LLC, and NTELOS Holdings Corp. for Consent to Assign Licenses and Spectrum Lease
Authorizations and to Transfer Control of Spectrum Lease Authorizations and an International Section 214
Authorization, WT Docket No. 15-262, Memorandum Opinion and Order, 31 FCC Rcd 3631, 3636, para. 11
(WTB/IB 2016) (Sprint-Shentel-NTELOS Order); AT&T-Leap Order, 29 FCC Rcd at 2746, para. 23; see also
Policies Regarding Mobile Spectrum Holdings, Expanding the Economic and Innovation Opportunities of Spectrum
Through Incentive Auctions, WT Docket No. 12-269, Report and Order, 29 FCC Rcd 6133, 6224, para. 234 & n.623
(2014) (Mobile Spectrum Holdings Report and Order).
78
Application at 14.
79
Public Knowledge et al. Oct. 16, 2020 Opposition at 10-11 (asserting that Verizon and TracFone are the largest
facilities-based mobile wireless service provider and the largest MVNO in the country, respectively, and the
Commission should analyze the changes in competitive dynamics that would arise under a combination of these
companies); CWA Mar. 12, 2021 Comments at 14-15 (arguing post competitive harm in the prepaid segment and in
the wholesale market where the MNO market is too concentrated to protect independent MVNOs from anti-
competitive actions); Communication Workers of America, First Comments, GN Docket No. 21-112, at 9-11, 18
(rec. Dec. 18, 2020) (CWA Dec. 18, 2020 Comments) (asserting that the transaction results in anticompetitive harm
in the MVNO market impacting wireless competition and the prepaid segment where the MVNOs compete; further,
if fewer MVNOs enter the market, consumers may pay the price with fewer options and less innovation). The
American Antitrust Institute (AAI) argues for defining separate markets for prepaid retail services and for wholesale
services, and maintains there is a distinct prepaid wireless market of lower-income consumers that in many cases
require Lifeline wireless services. American Antitrust Institute Ex Parte Reply Comments at 2-3 (Apr. 2, 2021)
(AAI Apr. 2, 2021 Ex Parte Reply).
80
Letter from Alejandro Cantú Jiménez, General Counsel, América Móvil, William H. Johnson, Verizon, and
Richard B. Salzman, Executive Vice President and General Counsel, TracFone, to Marlene H. Dortch, Secretary,
FCC, GN Docket No. 21-112, at 2-3 (Apr.16, 2021) (Applicants’ Apr. 16, 2021 Ex Parte Letter).
Federal Communications Commission FCC 21-121
12
mobile/telephony broadband services market encompasses differentiated services (e.g., voice-centric or
data-centric), devices (e.g., feature phone, smartphone, tablet, etc.), and contract features (e.g., prepaid vs.
postpaid),
81
which are distinctions that wireless providers often recognize in their internal analyses of the
marketplace.
82
We note that the parties proposing narrower relevant product markets have failed to
provide any quantitative analysis or other persuasive evidence to support their arguments. Thus,
consistent with Commission precedent, we will consider product differentiation in the offering of prepaid
or value-conscious wireless services as appropriate in our analysis of the likely competitive effects.
83
30. Geographic Market. Consistent with Commission precedent, we further find that the
geographic market for wireless transactions is local.
84
The Commission also has found, however, that a
proposed transaction’s competitive effects should also be evaluated at the national level where a proposed
transaction exhibits certain national characteristics that provide cause for concern.
85
No commenter
proposed changes to our evaluation of the relevant geographic markets, so we find no reason to deviate
from Commission precedent.
31. Input Market for Spectrum. In proposed transactions involving facilities-based mobile
wireless service providers, the Commission typically examines the input market for spectrum in
reviewing the impact of the transaction on spectrum concentration.
86
Because this transaction involves no
transfer of spectrum, there is no need to evaluate the input market for spectrum in the instant transaction.
32. Market Participants. In reviewing proposed transactions involving facilities-based
mobile wireless providers, the Commission typically has focused its initial analysis of market
concentration on facilities-based providers of mobile-telephony/broadband services.
87
The Commission
81
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10603, para. 60; AT&T- Leap Order, 29 FCC Rcd 2735, 2747-
48, para. 26; see also Applications of Deutsche Telekom AG, T-Mobile USA, Inc., and MetroPCS Communications,
Inc. for Consent to Transfer of Control of Licenses and Authorizations, WT Docket No. 12-301, Memorandum
Opinion and Order and Declaratory Ruling, 28 FCC Rcd 2322, 2336, para. 41 (WTB/IB 2013) (T-Mobile-MetroPCS
Order).
82
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10603, para. 60.
83
T-Mobile-Sprint Order, 34 FCC Rcd at 10604, para. 63; AT&T-Leap Order, 29 FCC Rcd at 2747, para. 26.
Consistent with previous Commission determinations, we find that mobile telephony/broadband services provided to
enterprise and government customers is a relevant product market for antitrust analysis; however, TracFone does not
offer enterprise or government services, and thus, evaluation of this product market is not applicable to the instant
transaction.
84
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10605, para. 66; Sprint-Shentel-NTELOS Order, 31 FCC Rcd at
3636-37, para. 12; AT&T-Leap Order, 29 FCC Rcd at 2748, para. 27; T-Mobile-MetroPCS Order, 28 FCC Rcd at
2332, para. 29.
85
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10606, para. 66; AT&T-Leap Order, 29 FCC Rcd at 2748, para.
27; T-Mobile-MetroPCS Order, 28 FCC Rcd at 2332, para. 29.
86
The input market for spectrum includes the following bands: cellular, PCS, SMR, 700 MHz, AWS-1 (1710-1755
and 2110-2155 MHz), BRS, WCS, 600 MHz, AWS-4 (2000-2020 MHz and 2180-2200 MHz), H Block, EBS,
AWS-3, and the 3.7 GHz band. See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10607, para. 70; Communications
Marketplace Report, GN Docket No. 20-60, 2020 Communications Marketplace Report, 36 FCC Rcd 2945, 2965,
para. 31, Fig. II.A.10. (2020) (2020 Communications Marketplace Report); Expanding Flexible Use of the 3.7 to 4.2
GHz Band, GN Docket No. 18-122, Report and Order and Order of Proposed Modification, 35 FCC Rcd 2343,
2384, para. 88 (2020).
87
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10609, para. 73; Sprint-Shentel-NTELOS Order, 31 FCC Rcd at
3638, para. 16; AT&T-Leap Order, 29 FCC Rcd at 2752, para. 37; see also 2020 Communications Marketplace
Report, 36 FCC Rcd at 2949-51, paras. 9, 12.
Federal Communications Commission FCC 21-121
13
also has recognized that MVNOs may provide additional competitive constraints, however,
88
and we will
consider the role of all MVNOs in our analysis of this transaction.
B. Competitive Effects of the Proposed Transaction
33. The market for mobile telephony/broadband services in the United States is
differentiated: Service providers compete not only on the basis of price, but also on non-price variables,
such as plan terms and conditions, call quality, geographic coverage, and customer service.
89
In this
market, three facilities-based service providers have been described as “nationwide”: AT&T, T-Mobile,
and Verizon Wireless.
90
In addition to the three nationwide facilities-based service providers, there are a
number of regional and local facilities-based service providers,
91
such as U.S. Cellular and C Spire. There
are also dozens of other facilities-based mobile wireless service providers throughout the United States,
many of which provide service in a single, often rural, geographic area.
92
In addition, dozens of MVNOs
beyond TracFone provide service to retail customers. Further, cable companies such as Altice, Comcast,
and Charter have begun to enter the mobile wireless market through MVNO arrangements.
93
34. The proposed transaction would combine the second largest facilities-based service
provider in the United States with the largest MVNO. Because Verizon and TracFone both sell mobile
telephony services in the same geographic areas, the proposed transaction has a horizontal component.
Horizontal transactions raise potential competitive concerns when the combined entity post-merger has
the incentive and the ability, either unilaterally or in coordination with other service providers, to raise
prices, lower quality, or otherwise harm competition in a relevant market.
94
Further, the proposed
88
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10609, para. 73; Sprint-Shentel-NTELOS Order, 31 FCC Rcd at
3638, para. 16 & n.48; AT&T-Leap Order, 29 FCC Rcd at 2752, para. 37; see also 2020 Communications
Marketplace Report, 36 FCC Rcd at 2951, para. 12. MVNOs do not own any network facilities, but instead
purchase mobile wireless services wholesale from facilities-based service providers and resell these services. 2020
Communications Marketplace Report, 36 FCC Rcd at 2951, para. 12.
89
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10612, para. 83; AT&T-Leap Order, 29 FCC Rcd at 2756, para.
49; T-Mobile-MetroPCS Order, 28 FCC Rcd at 2336, para. 41; AT&T Wireless Services, Inc. and Cingular Wireless
Corporation for Consent to Transfer Control of Licenses and Authorizations, et al., WT Docket No. 04-70, et al.,
Memorandum Opinion and Order, 19 FCC Rcd 21522, 21570, para. 116 (2004) (Cingular-AT&T Wireless Order).
While service providers can change some of these conduct variables, for example, price, relatively quickly, other
variables—particularly non-price variables, such as quality and coverage—require investments in spectrum or
infrastructure and are not easily modified. See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10612, para. 83 &
n.259; AT&T-Leap Order, 29 FCC Rcd at 2752, para. 37 & n.173; T-Mobile-MetroPCS Order, 28 FCC Rcd at 2336,
para. 41 & n.100; Cingular-AT&T Wireless Order, 19 FCC Rcd at 21570, para. 116.
90
2020 Communications Marketplace Report, 36 FCC Rcd at 2949-50, para. 9; T-Mobile-Sprint Order, 34 FCC Rcd
at 10613, para. 83.
91
T-Mobile-Sprint Order, 34 FCC Rcd at 10613, para. 84.
92
Id. at 10613, para. 84.
93
2020 Communications Marketplace Report, 36 FCC Rcd at 2951-52, para. 13.
94
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10611, para. 79; Sprint-Shentel-NTELOS Order, 31 FCC Rcd at
3638-39, para. 17; AT&T-Leap Order, 29 FCC Rcd at 2744-46, para. 21; T-Mobile-MetroPCS Order, 28 FCC Rcd
at 2330, para. 21; EchoStar-DIRECTV HDO, 17 FCC Rcd at 20608, para. 97. Unilateral effects arise when the
merged firm finds it profitable to alter its behavior following the merger by increasing its price or otherwise harming
competition. U.S. Dept. of Justice and Federal Trade Commission, Horizontal Merger Guidelines (Aug. 19, 2020),
§ 6 at 20 (2010 DOJ/FTC Horizontal Merger Guidelines),
https://www.justice.gov/atr/horizontal-merger-guidelines-
08192010. In the case of the provision of mobile wireless services, in addition to increasing prices, this might take
the form of delaying improvements in service quality, adversely adjusting the features of a service offering without
changing the price of the plan or reducing the rate of new product development or other innovation in a relevant
market. See, e.g., Sprint-Shentel-NTELOS Order, 31 FCC Rcd at 3638-39, para. 17 & n.51; AT&T-Leap Order, 29
FCC Rcd at 2756-57, para. 49.
(continued….)
Federal Communications Commission FCC 21-121
14
transaction raises vertical issues because Verizon provides wholesale services to TracFone as well as to
other MVNOs.
1. Initial Screen
35. In the past, the Commission has used a two-part screen to help identify those markets that
provide particular reason for further competitive analysis.
95
The first part of the screen is based on the
size of the post-transaction Herfindahl-Hirschman Index (HHI),
96
and the change in the HHI in the
relevant geographic market.
97
We do not apply the HHI screen for the reasons outlined below. The
second part of the screen, which is applied on a county-by-county basis, identifies local markets where the
merged entity would hold approximately one-third or more of the total spectrum suitable and available for
the provision of mobile telephony/broadband services, post-transaction.
98
We do not apply the spectrum
screen as there is no transfer of spectrum implicated by the instant transaction.
36. The Applicants argue that in calculating market shares, including for market
concentration metrics, the Commission attributes MVNO customers to their host facilities-based
providers.
99
Following that methodology, the Applicants find that the HHI would increase by 20-27
points in a combined postpaid/prepaid market and decrease by 28-119 points in a standalone prepaid
market.
100
In contrast, various commenters raise concerns about increased post-transaction
(Continued from previous page)
Coordinated effects arise when firms take actions that are profitable for each of them only as a result of the
accommodating reactions of others. A merger may diminish competition by enabling or encouraging post-merger
coordinated interaction among firms in the relevant market that harms customers. 2010 DOJ/FTC Horizontal
Merger Guidelines, § 7 at 24-25; see also Sprint-Shentel-NTELOS Order, 31 FCC Rcd at 3638-39, para. 17 & n.51;
AT&T-Leap Order, 29 FCC Rcd at 2756-57, para. 49. Either or both unilateral and coordinated effects may arise
from a proposed transaction, and the distinction between them is not always clear cut. See, e.g., Sprint-Shentel-
NTELOS Order, 31 FCC Rcd at 3638-39, para. 17 & n.51; AT&T-Leap Order, 29 FCC Rcd at 2757, para. 49.
95
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10614-15, para. 87; Sprint-Shentel-NTELOS, 31 FCC Rcd at
3635-36, para. 9; AT&T-Leap Order, 29 FCC Rcd at 2752-53, 2755-56, paras. 39, 41, 47; see also Mobile Spectrum
Holdings Report and Order, 29 FCC Rcd at 6140-41, para. 13.
96
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10614-15, para. 87; Sprint-Shentel-NTELOS Order, 31 Rcd at
3638-39, para. 17; AT&T-Leap Order, 29 FCC Rcd at 2753, para. 41; 2010 DOJ/FTC Horizonal Merger Guidelines
at § 5.3; see also Mobile Spectrum Holdings Report and Order, 29 FCC Rcd at 6140-41, 6221-22, para. 13 & n.34,
para. 225 & n.604.
97
The initial HHI screen identifies, for further case-by-case market analysis, those markets in which, post-
transaction: (1) the HHI would be greater than 2800 and the change in HHI would be 100 or greater; or (2) the
change in HHI would be 250 or greater, regardless of the level of the HHI. See, e.g., T-Mobile-Sprint Order, 34
FCC Rcd at 10614-15, para. 87 & n.277; Sprint-Shentel-NTELOS, 31 FCC Rcd at 3638-39, para. 17 & n.50; AT&T-
Leap Order, 29 FCC Rcd at 2753, para. 41 & n.140; see also Mobile Spectrum Holdings Report and Order, 29 FCC
Rcd at 6140-41, para. 13 & n.34.
According to the 2010 DOJ/FTC Horizontal Merger Guidelines, an HHI above 2500 indicates a market with a high
degree of concentration, and mergers resulting in concentration above this level that increase the HHI by more than
200 points are presumed likely to enhance market power. 2010 DOJ/FTC Horizontal Merger Guidelines, § 5.3 at
18-19 (Under the 2010 DOJ/FTC Horizontal Merger Guidelines, lesser concentration levels and increases may also
raise competitive concerns.). Id. The 2010 DOJ/FTC Horizontal Merger Guidelines are commonly relied upon by
the courts. See, e.g., FTC v. Heinz, 246 F.3d at 716, 720.
98
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10614-15, para. 87; Sprint-Shentel-NTELOS, 31 FCC Rcd at
3638-39, para. 17; AT&T-Leap Order, 29 FCC Rcd at 2753, para. 41; see also Mobile Spectrum Holdings Report
and Order, 29 FCC Rcd at 6222-23, para. 228.
99
Application at 5 & n.10.
100
Applicants’ Apr. 16, 2021 Ex Parte Letter at 4. The range of HHIs depends on the assumptions made about
DISH. Id.
Federal Communications Commission FCC 21-121
15
concentration.
101
The American Antitrust Institute (AAI) argues that the Applicants’ attribution of market
shares to host facilities-based providers is misleading because it ignores the market power that prepaid
MVNOs can exercise by pricing above their wholesale cost.
102
Focusing on the prepaid market, AAI
finds that the transaction would increase concentration by more than 300 HHI points.
103
37. Increased market concentration arising from any proposed transaction is an indicator of
potential harm to competition, although it is important to note that market concentration measures are
merely the beginning of the competitive analysis.
104
In previous transactions involving facilities-based
mobile wireless providers (Mobile Network Operators or MNOs), the Commission typically has
attributed the customers of MVNOs to the underlying MNO when calculating initial concentration
measures.
105
This approach is inappropriate, however, for transactions between an MNO and an MVNO
because it effectively treats the MVNO as fully under the control of the MNO and thus might
underestimate the transaction’s competitive impact.
106
A potential alternative approach is to treat the
MVNO as a fully independent competitor.
107
However, this is also inappropriate because MVNOs’
network access costs are higher than the MNO’s own costs, which limits their competitive impact.
108
Thus, neither approach accurately measures the likely competitive impact of MVNOs.
109
Accordingly, we
do not apply the HHI screen. However, as discussed below, there are other generally accepted initial
screens available to evaluate the likelihood of potential adverse unilateral effects.
110
2. Unilateral Effects
38. As noted above, horizontal transactions raise potential competitive concerns when the
combined entity may have the incentive and the ability unilaterally to raise prices, lower quality, or
otherwise harm competition in a relevant market.
111
Unilateral effects arise when firms find it profitable
101
Public Knowledge et al. Dec. 18, 2020 Comments at 12; Letter from Matthew A. Brill, Counsel, Mobile X, to
Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112, at 1 (filed Mar. 1, 2021) (Mobile X Mar. 1, 2021 Ex
Parte Letter); AAI Apr. 2, 2021 Ex Parte Reply at 7.
102
AAI Apr. 2, 2021 Ex Parte Reply at 6-7.
103
Id. at 5.
104
2010 DOJ/FTC Horizontal Merger Guidelines, §§ 2.1, 5.3 at 3, 19.
105
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10610, para. 78; Sprint-Shentel-NTELOS Order, 31 FCC Rcd at
3638, para. 16 & n.48; AT&T-Leap Order, 29 FCC Rcd at 2752, para. 37.
106
By treating MVNOs as wholly controlled subsidiaries, we ignore the ability of MVNOs to set their own retail
price, thereby ignoring any pre-transaction market power that they hold. See, e.g., AAI Apr. 2, 2021 Ex Parte Reply
at 6-7; Opening Testimony of Mark A. Israel on behalf of TracFone Wireless, Inc., California Public Utility
Commission, In the Matter of the Joint Application of TracFone Wireless, Inc. (U4321C), América Móvil, S.A.B. de
C.V. and Verizon Communications Inc. for Approval of Transfer of Control over Tracfone Wireless, Inc.,
Application 20-11-001, Mar. 12, 2021, at 21-22, paras. 39-40 (Dr. Israel Testimony on behalf of TracFone),
https://docs.cpuc.ca.gov/PublishedDocs/SupDoc/A2011001/3436/371909249.pdf
(last visited Nov. 18, 2021).
107
This is AAI’s preferred approach. AAI Apr. 2, 2021 Ex Parte Reply at 5.
108
Dr. Israel Testimony on behalf of TracFone at 24, para. 44.
109
Id. at 21-22, para. 40.
110
See 2010 DOJ/FTC Horizontal Merger Guidelines, § 6.1, at 21 (“Diagnosing unilateral price effects based on the
value of diverted sales need not rely on market definition or the calculation of market shares and concentration. The
Agencies rely much more on the value of diverted sales than on the level of the HHI for diagnosing unilateral price
effects in markets with differentiated products.”).
111
2010 DOJ/FTC Horizontal Merger Guidelines, §§ 1, 6 at 1-2, 20-22.
Federal Communications Commission FCC 21-121
16
to raise prices or otherwise exercise market power following a horizontal merger without regard to the
anticipated actions or responses of other firms.
112
39. The Applicants claim that Verizon is committed to serving TracFone’s customers and to
competing vigorously in the prepaid segment through low price options and plans.
113
Various
commenters argue, however, that by eliminating the largest independent MVNO, the proposed transaction
potentially leads to higher retail prices.
114
Commenters also claim that the transaction would result in
fewer provider choices, lower quality, and reduced innovation.
115
More generally, commenters claim that
the acquisition would increase the market power of the three nationwide MNOs, which would harm
competition.
116
40. The Applicants counter that the transaction would lower TracFone’s costs and promote
price competition.
117
They contend that a robust Verizon presence in the prepaid segment will generate a
new competitive dynamic for value-conscious consumers through low price options and plans.
118
The
Applicants claim that the transaction would make TracFone a stronger competitor vis-à-vis the Metro and
Cricket brands, in part, by eliminating the need for extensive arm’s length negotiations.
119
Several
commenters support approval of this transaction based in part on additional consumer choice among
prepaid providers operated by a facilities-based provider.
120
112
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10625, para. 111; AT&T-DIRECTV Order, 30 FCC Rcd at
9166, para. 84; 2010 DOJ/FTC Horizontal Merger Guidelines, §§ 1, 6 at 2, 20-22.
113
Application at 18.
114
Public Knowledge et al. Oct. 16, 2020 Opposition at 11; Next Century Cities Dec. 18, 2020 Comments at 11;
Mobile X Mar. 1, 2021 Ex Parte Letter at 1; Public Interest and Civil Rights Groups Apr. 6, 2021 Comments at 3.
115
AAI Apr. 2, 2021 Ex Parte Reply at 2; Public Knowledge et al. Dec. 18, 2020 Comments at 7-8; Letter from
Brian Thorn, Senior Researcher, Communications Workers of America, to Marlene H. Dortch, Secretary, FCC, GN
Docket No. 21-112, at 2 (filed Mar. 1, 2021) (CWA Mar. 1, 2021 Ex Parte Letter); Public Interest and Civil Rights
Groups Apr. 6, 2021 Comments at 2.
116
CWA Nov. 19, 2020 Opposition at 21 (“Post-merger, the leading MVNOs will now be aligned with, or
controlled by, the three current [facilities-based providers].”); AAI Apr. 2, 2021 Ex Parte Reply at 2 (“The
acquisition would cement an oligopoly in the pre-paid wireless market between Verizon, T-Mobile, and AT&T. . .
Both the pre-paid and post-paid wireless markets in the U.S. would thus be fundamentally restructured in the space
of two years, to the detriment of competition and consumers.”); Letter from Claire Par, New America’s Open
Technology Institute, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112, at 2 (OTI Apr. 12, 2021 Ex
Parte Letter) (“As corporate market power grows, providers’ interest in serving low-income consumers diminishes
as firms are incentivized to increase prices.”).
117
Applicants’ Dec. 28, 2020 Joint Reply at 8.
118
Id. at 5.
119
Id. at 8-9; Letter from Alejandro Cantú Jiménez, General Counsel, América Móvil, William H. Johnson, Verizon,
and Richard B. Salzman, Executive Vice President and General Counsel, TracFone, to Marlene H. Dortch,
Secretary, FCC, GN Docket No. 21-112, at 1 (Feb. 11, 2021) (Applicants’ Feb. 11, 2021 Ex Parte Letter); Letter
from Alejandro Cantú Jiménez, General Counsel, América Móvil, William H. Johnson, Verizon, and Richard B.
Salzman, Executive Vice President and General Counsel, TracFone, to Marlene H. Dortch, FCC, GN Docket No.
21-112, at 2 (Mar. 5, 2021) (Applicants’ Mar. 5, 2021 Ex Parte Letter); Letter from Alejandro Cantú Jiménez,
General Counsel, América Móvil, William H. Johnson, Verizon, and Richard B. Salzman, Executive Vice President
and General Counsel, TracFone, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112,
at 1 (filed Apr. 7,
2021) (Applicants’ Apr. 7, 2021 Ex Parte Letter); Letter from Eduardo Diaz Corona, Chief Executive Officer,
TracFone, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112, at 1-2 (filed Sep. 30, 2021); see also Dr.
Israel Testimony on behalf of TracFone at 16-18, paras. 27-32.
120
See Letter from Chiling Tong, President and CEO, and Dr. Karen Eng, Chair, National Asian /Pacific Islander
American Chamber of Commerce and Entrepreneurship, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-
(continued….)
Federal Communications Commission FCC 21-121
17
41. In its review of proposed transactions, the Commission previously has calculated upward
pricing pressure (UPP) indices as an additional preliminary screen for potential unilateral effects.
121
We
calculate here the net upward pricing pressure index that was first proposed by Farrell and Shapiro.
122
To
calculate the net UPP, we estimated the diversion rates between the merging firms’ products, the merging
firms’ profit margins, and the marginal-cost efficiencies that are expected to result from the merger.
123
The UPP index for TracFone is:
where
is the “diversion ratio” from TracFone to Verizon, or the fraction of customers leaving
TracFone that would choose wireless service from Verizon following a price increase by TracFone,
is
the pre-transaction price of Verizon products,
and are, respectively, the marginal costs of the
TracFone and Verizon products, and
is TracFone’s credited marginal cost efficiencies.
124
The first
(Continued from previous page)
112, at 1 (filed Sept. 29, 2021) (National ACE Sept. 29, 2021 Ex Parte Letter); Letter from Yanira Cruz, President
and CEO, National Hispanic Council on Aging, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112, at 2
(filed Oct. 13, 2021) (NHCOA Oct. 13, 2021 Ex Parte Letter); Letter from Dr. Justin Véléz-Hagan, Executive
Director, National Puerto Rican Chamber of Commerce, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-
112, at 1 (filed Sept. 28, 2021) (NPRCOC Sept. 28, 2021 Ex Parte Letter); Letter from Ken Lee, CEO, OCA–Asian
Pacific American Advocates, to The Honorable Jessica Rosenworcel, Chairwoman, FCC, GN Docket No. 21-112, at
2 (filed Sept. 24, 2021) (OCA Sept. 24, 2021 Ex Parte Letter); Letter from Alice Rodriguez, Chairwoman, Board of
Directors, and Ramiro A. Cavazos, President and CEO, U.S. Hispanic Chamber of Commerce, to Marlene H.
Dortch, Secretary, FCC, GN Docket No. 21-112, at 1 (filed Oct. 5, 2021) (USHCC Oct. 5, 2021 Ex Parte Letter).
121
T-Mobile-Sprint Order, 34 FCC Rcd at 10636, para. 129 & n.447; AT&T-Leap Order, 29 FCC Rcd at 2740,
paras. 70-71; Applications of AT&T Inc. and Deutsche Telekom AG for Consent to Transfer Control of Licenses and
Authorizations, Staff Analysis and Findings, 26 FCC Rcd 16184, 16325-26, Appx. C, para. 20 (WTB 2011) (AT&T-
T-Mobile Staff Report). As the 2010 DOJ/FTC Horizontal Merger Guidelines explain, “Adverse unilateral price
effects can arise when the merger gives the merged entity an incentive to raise the price of a product previously sold
by one merging firm and thereby divert sales to products previously sold by the other merging firm, boosting the
profits on the latter products. Taking as given other prices and product offerings, that boost to profits is equal to the
value to the merged firm of the sales diverted to those products. The value of sales diverted to a product is equal to
the number of units diverted to that product multiplied by the margin between price and incremental cost on that
product.” 2010 DOJ/FTC Horizontal Merger Guidelines, § 6.1 at 21. See also Joseph Farrell, & Carl Shapiro,
Antitrust evaluation of horizontal mergers: An economic alternative to market definition, 10 The BE Journal of
Theoretical Economics 1 at 7-9 (2010) (Farrell and Shapiro (2010)).
122
Farrell and Shapiro (2010) at 2. As Farrell and Shapiro observe,“[t]his involves comparing two opposing forces:
the loss of direct competition between the merging parties, which creates upward pricing pressure, and marginal-cost
savings from the merger, which create (offsetting) downward pricing pressure.” Id.; see also Roy J. Epstein &
Daniel L. Rubinfeld, Understanding UPP, 10 The B.E. Journal of Theoretical Economics 3 (Epstein and Rubinfeld
(2010)). Dr. Israel, in his testimony before the California Public Utility Commission, agreed that “mergers are often
evaluated by considering the ‘first-order effects’ – i.e., by balancing upward pricing pressure against marginal cost
efficiencies.” Rebuttal Testimony of Mark A. Israel on behalf of TracFone Wireless, Inc., California Public Utility
Commission, In the Matter of the Joint Application of TracFone Wireless, Inc. (U4321C), América Móvil, S.A.B. de
C.V. and Verizon Communications, Inc. for Approval of Transfer of Control over Tracfone Wireless, Inc.,
Application 20-11-001, Apr. 9, 2021, at 19, para. 27 (Dr. Israel Rebuttal Testimony on behalf of TracFone),
https://docs.cpuc.ca.gov/PublishedDocs/SupDoc/A2011001/3528/377541152.pdf
(last visited Nov. 18. 2021).
123
See, e.g., Epstein and Rubinfeld (2010) at 3 (“[t]he comparative strengths of these effects depend on the
underlying profit margins for each product, the diversion of demand from product 1 to product 2, and the magnitude
of the efficiencies.”).
124
See 2010 DOJ/FTC Horizontal Merger Guidelines, § 6.1 at 21; Farrell and Shapiro (2010) at 12. Efficiencies of
imply that the post-transaction marginal cost for TracFone would be .
Federal Communications Commission FCC 21-121
18
part of the expression represents the upward pricing pressure on TracFone’s services,
125
while the second
part of the expression represents the opposing downward pricing pressure due to merger efficiencies. The
UPP expression for Verizon is analogous.
42. Diversion Rates. Since 2004, the Commission has relied on porting data from the Local
Number Portability (LNP) database to calculate diversion ratios in evaluating mobile wireless
transactions.
126
Unfortunately, our LNP data do not permit us to distinguish MVNO customer ports from
the ports of the underlying facilities-based service providers that those customers use; thus, we cannot use
the LNP data to calculate customer switching rates for this transaction.
127
Further, the Applicants do not
themselves provide customer switching rates.
128
To calculate customer switching, we used instead
market-share based diversion rates (i.e., we will assume that diversion is proportional to subscriber
market shares). Market-share-based diversion rates previously have been employed in calculating
diversion ratios when better data are unavailable.
129
Moreover, this approach is conservative, as it likely
overstates true diversion between Verizon and TracFone which, in turn, implies that our estimated upward
pricing pressure will overstate true upward pricing pressure.
130
Staff calculated market-share-based
125
The term represents, in absolute terms, the value of diverted sales to Verizon, and it is higher
when either the diversion ratio is higher or the margin between price and marginal cost is higher. Steven C. Salop
and Serge Moresi, Updating the Merger Guidelines: Comments at 19 (2009), https://ssrn.com/abstract=2756487
.
126
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10626, para. 112; AT&T-Leap Order, 29 FCC Rcd at 2759-60,
paras. 55, 70 & n.197, n.199, n.248; AT&T-T-Mobile Staff Report, 26 FCC Rcd at 16212-13, 16216-18, 16319-23,
para. 51 & n.148, paras. 55-56, Appx. C, paras. 8-15; Applications of AT&T Inc. and Centennial Communications
Corp. for Consent to Transfer Control of Licenses, Authorizations, and Spectrum Leasing Arrangements, WT
Docket No. 08-246, Memorandum Opinion and Order, 24 FCC Rcd 13915, 13948, para. 75 & n.288 (2009) (AT&T-
Centennial Order). The LNP data include each instance of a customer porting (i.e., transferring) a phone number
from one mobile provider to another, and indicate both the origin and destination provider. AT&T-Centennial
Order, 24 FCC Rcd at 13948, para. 75 & n.288.
127
Mobile service providers can receive telephone numbering resources only in those areas in which they own
spectrum, and because MVNOs generally do not hold any spectrum, they are therefore precluded from directly
obtaining telephone numbering resources. MVNOs requiring telephone numbering resources must therefore
contract with mobile service providers to receive those numbers. Our data do not distinguish MNO numbers subject
to an MVNO contract from other MNO numbers. See Numbering Resource Optimization, CC Docket No. 99-200,
Report and Order and Further Notice of Proposed Rulemaking, 15 FCC Rcd 7574, 7615, para. 97 (2000).
128
For example, the Applicants’ porting data do not permit us to separate out the TracFone brand in a way that
would allow us to fully capture diversion between Verizon and TracFone. See, e.g., VZ-DOJHSR-001341 (Verizon,
“Verizon Prepaid” worksheet, 2018Q1-2020Q2); VZ-DOJHSR-001451, (Verizon, “Porting Data” worksheet, Aug.
1, 2018 to Sep. 1, 2020); VZ-DOJHSR-002607, at 52 (Verizon, {[“ ]}); VZ-
DOJHSR-007886, at 73 (Verizon, {[“ ).]}).
129
See, e.g., Carl Shapiro, Mergers with Differentiated Products, 10 Antitrust 24 at 25-26 (1996). See also AT&T-T-
Mobile Staff Report, 26 FCC Rcd at 16321, Appx. C, para. 11. Market-share-based diversion also underpins the
logit model of differentiated product competition that is commonly used to study mergers. See, e.g., Nathan H.
Miller & Gloria Sheu, Quantitative Methods for Evaluating the Unilateral Effects of Mergers, 58 Review of
Industrial Organization 149 (2021); Gregory J. Werden, Luke M. Froeb, and Timothy J. Tardiff, The Use of the
Logit Model in Applied Industrial Organization, 3 International Journal of the Economics of Business 95 (1996);
Gregory J. Werden & Luke M. Froeb, The Effects of Mergers in Differentiated Products Industries: Logit Demand
and Merger Policy, 10 J.L. Econ. & Org. 408 (1994).
130
The Applicants argue that Verizon and TracFone focus on serving distinctly different retail segments, and
commenters do not dispute this claim. See, e.g., Applicants’ Dec. 28, 2020 Joint Reply at 11; Applicants’ Apr. 7,
2021 Ex Parte Letter at 2; Public Knowledge et al. Oct. 30, 2020 Reply at 11-12; CWA Nov. 19, 2020 Opposition at
21. This suggests that customers switch across Verizon and TracFone in proportions that are likely below their
respective market shares. Dr. Israel argued that “as a result of the substantial differentiation between [the
Applicants’] products, substitution between Verizon and TracFone in response to a small price increase . . . would
surely be tiny, as [customers] would have many closer options to turn to.” Dr. Israel Testimony on behalf of
(continued….)
Federal Communications Commission FCC 21-121
19
diversion from Verizon to TracFone as {[ ]}% and from TracFone to Verizon as {[ ]}%,
respectively.
131
These values are inserted for in the UPP calculation.
43. Margins. Following Commission precedent, we estimate profit margins by calculating a
customer lifetime value (CLV) margin
132
using the Applicants’ data.
133
Staff calculated CLV margins for
Verizon and TracFone as {[ ]}% and {[ ]}%, respectively,
134
which implies price-cost margins
for Verizon and TracFone of ${[ ]} and ${[ ]}, respectively.
135
These values are inserted for
in the UPP calculation.
44. Efficiencies. A merger with vertical elements such as is the case here may generate
efficiencies through the elimination of double marginalization, which the Commission has previously
credited.
136
The Applicants argue that a combined Verizon/TracFone would benefit from “owner’s
economics,” (i.e., elimination of double marginalization), which will lower TracFone’s costs and enable it
(Continued from previous page)
TracFone at 26, para. 49. Internal documents comport with this view. VZ-CA-000044, at 7-9 {[(
)]}; VZ-
DOJHSR-000346, at VZ-DOJHSR-000352 { (
]}; VZ-DOJHSR-000202, at 8 {[
]}.
131
Staff derived MNO market shares from public subscribership data on mobile telephony/broadband services and
MVNO market shares from Applicant documents. VZ-DOJHSR-007886, at 60-61. To the extent possible, our
calculations exclude enterprise and government customers because of our finding that this is a separate, relevant
product market. To assess potential credit constraints that would prevent certain consumers from switching to
postpaid service following a price increase, staff also used credit-score distribution data to modify the market-share-
based diversion estimates. This alternative methodology did not alter our conclusions.
132
To calculate a CLV margin for a company , we use the formula:
where
is the CLV margin for company , , our measure of price, represents average revenue per user
(i.e., the average monthly price that a subscriber pays),
represents cash cost per user (i.e., the average
monthly per subscriber cost) and
represents the cost per gross add (i.e., the one time subscriber acquisition
cost). In addition to accounting for the incremental costs of serving individual customers, CLV margins account for
one-time subscriber acquisition and upgrade costs over the customer lifetime. T-Mobile-Sprint Order, 34 FCC Rcd
at 10637, para. 132 & n.453; AT&T-T-Mobile Staff Report, 26 FCC Rcd at 16324, Appx. C, paras. 17-18.
133
Verizon May 14, 2021 RFI Response, Exhibit 7e; América Móvil and TracFone May 14, 2021 RFI Response,
Exhibits 7a and 7b; Verizon July 2, 2021 Supplemental RFI Response, Revised Exhibit 7e.
134
In order to back out , the marginal costs of the Verizon product in our expression for UPP above, we assumed
that our CLV margin corresponded to a “simple margin” in which the marginal cost effectively incorporates both
and . That is, we set , so that , where is Verizon’s CLV
margin. Setting
to Verizon’s ARPU and using our estimate of yields corresponding Verizon marginal cost
${[ ]}. The analogous marginal cost for TracFone is ${[ ]}.
135
As in previous transactions, our estimate of price is ARPU, based on Applicants’ data for dates that correspond
with cost and other data that we use in our CLV estimates. See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10637,
para. 132 & n.453. The ARPU for Verizon and TracFone is ${[ ]} and ${[ ]}, respectively.
136
See, e.g., Applications of Charter Communications, Inc., Time Warner Cable Inc., and Advance/Newhouse
Partnership For Consent to Assign or Transfer Control of Licenses and Authorizations, MB Docket No. 15-149,
Memorandum Opinion and Order, 31 FCC Rcd 6327, 6501, para. 373 (2016) (Charter-Time Warner Cable Order);
Comcast-NBC Universal Order, 26 FCC Rcd at 4335, para. 237 (finding that the elimination of double
marginalization will result in some benefits for consumers); News Corp.-Hughes Order, 19 FCC Rcd at 544-45
paras. 154-56 (agreeing that vertical integration can reduce prices by reducing double marginalization).
Federal Communications Commission FCC 21-121
20
to better compete for prepaid customers against rival providers’ flanker brands.
137
Dr. Israel argues that
TracFone purchases wholesale network access at prices substantially above Verizon’s network cost and
that the transaction would allow it instead to realize lower costs by internalizing Verizon’s incremental
network costs when setting prices.
138
45. We quantify the cost reductions from the elimination of double marginalization using the
Applicants’ data. TracFone’s standalone monthly wholesale costs of ${[ ]} per subscriber are
based on the weighted average cost that TracFone incurs on its current and recent customers across all
MNOs from which it purchases network access.
139
The estimate of monthly on-network costs of
${[ ]} per subscriber that Verizon incurs on TracFone customers consists of network,
and{[ ]} expenses for current and recent customers.
140
The difference of
${[ ]} represents the estimated magnitude of the elimination of double marginalization.
141
This value
is entered for E x C in the UPP calculation. We note that Dr. Israel also quantified the cost reducing
effect of elimination of double marginalization.
142
Compared to Dr. Israel’s estimate, our estimated
savings from the elimination of double marginalization are smaller, which will lead to a higher estimate
for net UPP.
46. Net Upward Pricing Pressure Calculation. Based on our estimates, we have calculated
net upward pricing pressure for TracFone of {[ ]}< 0.
143
Because we do not have data to calculate
Verizon’s likely efficiencies, we can estimate the upward pricing pressure only. Our estimate is
{[ ]} which is necessarily positive, since we account for no offsetting efficiencies. However, this
137
Applicants’ Dec. 28, 2020 Joint Reply at 7-8; Applicants’ Mar. 5, 2021 Ex Parte Letter at 2; Applicants’ Apr. 7,
2021 Ex Parte Letter at 1; Letter from Alejandro Cantú Jiménez, General Counsel, América Móvil, William H.
Johnson, Verizon, and Richard B. Salzman, Executive Vice President and General Counsel, TracFone, to Marlene
H. Dortch, Secretary, FCC, GN Docket No. 21-112, at 2 (May 18, 2021) (Applicants’ May 18, 2021 Ex Parte
Letter) (“Combining Verizon and TracFone will eliminate this double marginalization and generate owner’s
economics, resulting in a substantial reduction of TracFone’s incremental costs[.]”); see also Verizon May 14, 2021
RFI Response at 4-5.
138
Dr. Israel Testimony on behalf of TracFone at 8-10, paras. 15-18.
139
We note that TracFone’s marginal cost of ${[ ]} and Verizon’s marginal cost of ${[ ]} also factor in
non-network costs, including recurring and one-time acquisition costs, and so are higher than, respectively,
TracFone’s wholesale costs and Verizon’s on-network costs. Non-network recurring costs could include channel,
commission, and call support and one-time acquisition costs include equipment subsidies, promotions and
concessions, offsets of activations and upgrade fees, content promotion, bad debt, and advertising, as well as
channel, commission and call support. América Móvil and TracFone May 14, 2021 RFI Response, Exhibit 7a;
Verizon July 2, 2021 Supplemental RFI Response, Revised Exhibit 7e.
140
To the extent that {[ ]} should not be included as a network cost, this estimate may be too high, and
consequently, our estimate of elimination of double marginalization may be too low.
141
Dr. Israel notes that, to the extent that lower TracFone prices attract customers who would otherwise be getting
network service from Verizon, then the lost Verizon wholesale access revenue associated with that MVNO customer
would offset the incremental profit associated with attracting that customer to TracFone. In this case, the pre-merger
wholesale price paid by TracFone would be replaced by the opportunity cost of reduced wholesale revenue for
Verizon, thus undoing the elimination of double marginalization, and leaving effective marginal costs largely
unchanged. This opportunity-cost effect arises only in cases where the customer attracted by TracFone comes from
another MVNO using the Verizon network. Dr. Israel Testimony on behalf of TracFone at 13-14, para. 23.
Incorporating this countervailing effect into our analysis reduces the magnitude of elimination of double
marginalization to ${[ ]}.
142
Dr. Israel Rebuttal Testimony on behalf of TracFone at 15, 37, paras. 22, 52.
143
Excluding efficiencies, TracFone’s UPP is calculated as diversion from TracFone to Verizon multiplied by the
margin between price and incremental cost on that product, or {[ ]}. We obtain our net UPP
estimates by subtracting the efficiencies calculated above.
Federal Communications Commission FCC 21-121
21
corresponds to less than {[ ]}% of Verizon’s pre-transaction average revenue per user (ARPU),
indicating that even though we did not consider potential efficiencies, the transaction is unlikely to raise
significant unilateral effects concerns with respect to Verizon’s pricing.
144
We note that our net UPP
calculations for both TracFone and Verizon are likely too high. First, we have not accounted for any
potential merger efficiencies except for the elimination of double marginalization for TracFone. Second,
as discussed above, our estimates of diversion between the Applicants’ brands are likely too high because
we rely on market-share-based diversion, which does not account for the Applicants’ claimed
differentiation between TracFone and Verizon services, and we also do not factor in customers’ ability to
leave the market following a price increase.
47. While, on balance, we find that significant unilateral effects are unlikely, our analysis is
based on the potential average impact on consumers. We cannot conclude that certain groups of
consumers, such as very low-income consumers, might not be harmed by the transaction. For example,
Applicant documents indicate that ARPU for some TracFone plans would go up, while going down for
others, and that on average, ARPU would increase between 2021 and 2025 as a result of the transaction,
while ARPU per GB is anticipated to decline.
145
While an increase in average ARPU
146
could result from
consumers choosing to consume higher end plans, which could make them better off, consumers who do
not value additional data could be left worse off if they face higher prices.
147
We find, however, that
Verizon’s commitments as set out in section VIII that address potential harms to Lifeline-eligible and
other low-income consumers,
and ensure a stable, orderly, and streamlined migration,
148
which we adopt
as conditions of our approval, will minimize potential harms to consumers seeking low-cost plans.
3. Coordinated Effects
48. Coordinated effects arise when competing firms, on recognizing their interdependence,
take actions that are profitable for them only as a result of the accommodating reactions of the other
firms.
149
A market typically is more vulnerable to coordinated conduct if there are few significant
144
The 2010 DOJ/FTC Horizontal Merger Guidelines indicate that a merger is unlikely to raise significant unilateral
effects concerns if the value of diverted sales (i.e., upward pricing pressure) is proportionately small. While the
guidelines define proportionately (“in proportion to the lost revenues attributable to the reduction in unit sales
resulting from the price increase”), they do not define small. However, a threshold level of 5% is commonly
considered. 2010 DOJ/FTC Horizontal Merger Guidelines, § 6.1 at 21; see also Carl Shapiro, Deputy Assistant
Attorney General for Economics, Antitrust Div., U.S. Dept. of Justice, Remarks as Prepared for the American Bar
Association Section of Antitrust Law Fall Forum at 25 (Nov. 18, 2010),
http://www.justice.gov/atr/public/speeches/264295.pdf
; Farrell and Shapiro (2010) at 14.
145
See, e.g., VZ-VZ-0000824 (“Cost per GB” worksheet); VZ-DOJHSR-000160, at VZ-DOJHSR-000166 (as
compared to VZ-DOJHSR-000160 at VZ-DOJHSR-000163); see also Verizon May 14, 2021 RFI Response at 7-8,
64; Rebuttal Testimony of Verizon Communications Inc., Apr. 9, 2021 at 17-18.
146
See, e.g., VZ-CA-003684; VZ-DOJHSR-000160, at VZ-DOJHSR-000161, VZ-DOJHSR-000164; VZ-DOJHSR-
000954, at VZ-DOJHSR-000993, VZ-DOJHSR-000995; VZ-DOJHSR-001061, at VZ-DOJHSR-001073; VZ-
DOJHSR-001454, at 12; VZ-DOJHSR-002396, at 10; VZ-VZ-0001133 (“Summary - Standalone Case” and
“Summary by Brand” worksheets, Gross ARPU Tables); VZ-VZ-0000126, at 7; VZ-VZ-0000213, at 8; VZ-VZ-
0000221; VZ-VZ-0000591, at 12, 39; VZ-VZ-0000649, at 9; VZ-VZ-0000867, at 40; VZ-VZ-0000952 at 10; VZ-
VZ-0001454, at 7; VZ-DOJHSR-002085, at 9; VZ-DOJHSR-002465, at 9. Additionally, Applicants anticipate
offering {[ ]} to incentivize competitors’ customers to TracFone. See, e.g., Verizon May 14,
2021 RFI Response at 26; VZ-CA-003867; VZ-DOJHSR-000954, at VZ-DOJHSR-000996; VZ-DOJHSR-002396,
at 11; VZ-VZ-0000952, at 11.
147
Dr. Israel Rebuttal Testimony on behalf of TracFone at 25-26, paras. 35-37.
148
For example, Verizon’s commitment to maintain existing TracFone rate plans will give cost-conscious
consumers sufficient time to decide whether to accept a post-transaction TracFone service plan or to switch to an
alternative low-cost provider.
149
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10654-55, para. 178; T-Mobile-MetroPCS Order, 28 FCC Rcd
(continued….)
Federal Communications Commission FCC 21-121
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competitors, relatively homogeneous products, and if consumers find it relatively easy to switch between
firms.
150
In contrast, coordinated effects are less likely if, for example, the relevant market is marked by
leapfrogging technological innovation, so that responses by rivals leave the gains from successful
innovation largely intact, or if the market elasticity of demand is relatively high.
151
For the reasons
discussed below, we find that this instant transaction is unlikely to significantly increase the risk of
coordinated effects.
49. Commenters raise two coordinated effects concerns. First, commenters argue that,
because post-transaction, all significant MVNOs would be vertically integrated with the nationwide
facilities-based providers, the vertically integrated MVNOs could coordinate to exclude or otherwise
harm competing, standalone MVNOs or adopt parallel strategies to discourage postpaid customers from
migrating to lower-cost prepaid plans.
152
Second, commenters claim that coordination would be more
likely because the transaction would remove an independently-competing maverick MVNO from the
market.
153
50. The Applicants deny that there is a risk of coordinated effects.
154
The Applicants argue
that wireless competition is largely driven by the economic imperative of filling the networks of facilities-
based providers, that the transaction should increase AT&T’s and T-Mobile’s incentives to pursue
agreements with other MVNOs to make up for TracFone traffic they could lose to Verizon, and that DISH
soon plans to be a fourth facilities-based service provider with wholesale services as a significant part of
its business plan.
155
The Applicants further note that Verizon has expanded its wholesale arrangements
with Comcast and Charter since announcing its deal with TracFone.
156
The Applicants argue that retail
mobile wireless telecommunications is not particularly vulnerable to coordination because of product and
service differentiation and the rapidly changing nature of mobile wireless technological offerings and
asymmetric capacity utilization among providers.
157
Finally, the Applicants claim that coordination
would not be a concern because as an MVNO, TracFone is constrained in its ability to compete
independently against facilities-based service providers and there would be no reduction of independent
competitors.
158
51. We find that this transaction is unlikely to significantly increase the risk of coordinated
effects. Post-transaction, there will remain, in addition to the prepaid brands offered by the three
nationwide MNOs, prepaid brands offered by regional MNOs and by numerous independent MVNOs,
(Continued from previous page)
at 2336-37, para. 43; Cingular-AT&T Wireless Order, 19 FCC Rcd at 21570, para. 114; see also 2010 DOJ/FTC
Horizontal Merger Guidelines, § 7 at 24-25.
150
2010 DOJ/FTC Horizontal Merger Guidelines, § 7.2 at 25-27; see also T-Mobile-Sprint Order, 34 FCC Rcd at
10655, para. 179.
151
2010 DOJ/FTC Horizontal Merger Guidelines, § 7.2 at 25-27; see also T-Mobile-Sprint Order, 34 FCC Rcd at
10655, para. 179.
152
Public Knowledge et al. Oct. 16, 2020 Opposition at 12; CWA Nov. 19, 2020 Opposition at 20-21; Public
Knowledge et al. Dec. 18, 2020 Comments at 13; CWA Dec. 18, 2020 Comments at 20.
153
CWA Nov. 19, 2020 Opposition at 21; CWA Dec. 18, 2020 Comments at 20; CWA Mar. 12, 2021 Comments at
7.
154
Applicants’ Dec. 28, 2020 Joint Reply at 3.
155
Id. at 3, 13, 14.
156
Id. at 12.
157
Id. at 14.
158
Applicants’ Apr. 16, 2021 Ex Parte Letter at 4.
Federal Communications Commission FCC 21-121
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including Boost and the other MVNOs served by Verizon.
159
These MVNOs will continue to have the
incentive and ability to compete for prepaid customers, including cost-conscious customers, which will
likely continue to constrain opportunities for coordination on prepaid plans by the three nationwide
MNOs. Further, at the wholesale level, contracts between MNOs and MVNOs are complex and specific
to the needs of the MVNO that is party to the negotiation, generally last for a period of years, and
generally are subject to strict non-disclosure agreements.
160
These features of the wholesale contracts
make it difficult for MNOs to coordinate on the terms of wholesale contracts to harm rival stand-alone
MVNOs, and the transaction does not affect these features of wholesale contracts except between Verizon
and TracFone.
161
Moreover, Verizon’s commitment, which we accept as a condition to our approval, to
extend its existing agreements with certain MVNOs for at least three years limits its ability to coordinate
to raise wholesale prices.
4. Vertical Harms in Wholesale Services
52. The proposed transaction raises concerns regarding whether the addition of TracFone to
Verizon’s portfolio of wireless brands increases the likelihood of foreclosure or price increases by
Verizon in the wholesale market. We find that, in general, the acquisition of TracFone is unlikely to
increase Verizon’s incentive to raise the cost of those MVNOs that do not compete directly with
TracFone. Further, we find that Verizon’s commitment to extend the wholesale agreements of MVNOs
that are in direct competition with TracFone mitigates our concerns regarding an increase in the incentive
to raise the costs of such MVNOs.
53. Various commenters argue that the acquisition of TracFone could increase Verizon’s
incentive post-transaction to increase wholesale prices or degrade wholesale service quality provided to
MVNOs, particularly those offering prepaid service in competition with TracFone.
162
AAI contends that
the increase in Verizon’s market share among prepaid subscribers makes it more advantageous for
Verizon to disadvantage rival prepaid brands.
163
Commenters further contend that entry barriers may
increase or Verizon may foreclose rivals and new entrants from network access altogether.
164
CWA also
159
Independent prepaid MVNO competitors like Freedom Pop, Google Fi, H2O Mobile, and Mint Mobile provide
cost-conscious consumers with low cost options for mobile wireless service. See, e.g., FreedomPop, Build the Plan
That is Right for You, https://www.freedompop.com/plans
(last visited Nov. 16, 2021); Mint Mobile, Plans,
https://www.mintmobile.com/plans/ (last visited Nov. 16, 2021). Independent prepaid MVNOs other than TracFone
that Verizon serves, include {[ ]}. Verizon May 14, 2021 RFI
Response at 76.
160
Based on staff analysis of wholesale agreements filed in the record.
161
A market typically is less vulnerable to coordinated conduct if, for instance, products are relatively non-
homogeneous, prices are less transparent, and sales are large and infrequent, as is the case at the wholesale level.
2010 DOJ/FTC Horizontal Merger Guidelines, § 7.2 at 25-27.
162
See, e.g., AAI Apr. 2, 2021 Ex Parte Reply at 7; CWA Dec. 18, 2020 Comments at 13; Public Knowledge et al.
Oct. 16, 2020 Opposition at 12; Public Interest and Civil Rights Groups Apr. 6, 2021 Comments at 3.
163
AAI Apr. 2, 2021 Ex Parte Reply at 7-8 (“[C]ombining Verizon’s existing pre-paid subscribers with Tracfone
subscribers will give Verizon the largest base of pre-paid subscribers of any of the Big 3. Verizon’s much larger
share of the pre-paid market, coupled with control of a critical input (network access) will increase the company’s
bargaining power vis-à-vis rival MVNOs and incentive to disadvantage rival pre-paid brands.”); see also Letter from
Kathleen O’Brien Ham, Senior Vice President, Government Affairs, T-Mobile, to Marlene H. Dortch, Secretary,
FCC, GN Docket No. 21-112, at 3 (filed Oct. 13, 2021) (T-Mobile Oct. 13, 2021 Ex Parte Letter) (“The
Commission should inquire into the impact that the transaction could have on other MVNOs to whom Verizon
currently supplies wholesale services once it owns and controls their competitor, TracFone.”).
164
CWA Dec. 18, 2020 Comments at 13, 18 (asserting that entry barriers are already significant in the MVNO
segment and that the proposed merger could increase entry barriers); Public Knowledge et al. Dec. 18, 2020
Comments at 12-13 (“All significant MVNOs will be vertically integrated with facilities-based carriers. Every
(continued….)
Federal Communications Commission FCC 21-121
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argues that the Commission must assess the transaction’s potential to soften competition given Verizon’s
access to competitively-sensitive information.
165
54. The Applicants respond that the transaction will not affect future wholesale agreements
with MVNOs or the renegotiation of existing MVNO agreements.
166
Verizon maintains it provides
capacity on its network to approximately {[ ]} MVNOs in addition to TracFone,
167
and that it
recently signed wholesale agreements with additional MVNOs, but these MVNOs have not yet launched
service.
168
Verizon further maintains that its business strategy is to expand the use of its network,
including through wholesale opportunities such as existing and new MVNO agreements that supply
revenue-generating traffic.
169
Verizon argues that post-transaction it will still have strong incentives to
sell wholesale services to MVNOs.
170
55. Dr. Israel argues that Verizon will continue to sell wholesale network access because the
remaining MVNOs are sufficiently differentiated from Verizon and TracFone.
171
Dr. Israel notes that,
besides TracFone, cable companies are the primary MVNOs that Verizon serves, and he argues that the
cable companies’ ability to bundle wireline and wireless services generates a competitive value that
Verizon cannot match and thus it will continue to have an incentive to offer wholesale network access
post-merger.
172
The Applicants argue that AT&T and T-Mobile will have additional incentives to
compete for MVNO resellers following this transaction as Verizon seeks to migrate TracFone customers
from those networks.
173
Regarding access to competitively sensitive information, the Applicants respond
that Verizon has safeguards and procedures to prevent inappropriate disclosure of its MVNO customers’
confidential information, such as firewalls between its wholesale and retail systems.
174
56. As the Commission has long recognized, a vertical merger may increase a merged firm’s
incentive to “raise rivals’ costs either by foreclosing supply of the input it sells downstream competitors
or by raising the price at which it sells the input to competitors.”
175
The integrated firm will foreclose or
(Continued from previous page)
facilities-based carrier will have incentive to exclude all other MVNOs, including potential new entrants, from its
network.”); CWA Mar. 12, 2021 Comments at 15.
165
CWA Dec. 18, 2020 Comments at 19 (arguing that Verizon currently provides wholesale services to many
independent MVNOs and can glean competitively-sensitive information that it can supply to TracFone including
data usage metrics across various geographic markets).
166
Verizon May 14, 2021 RFI Response at 77.
167
Id. at 76.
168
Id. at 76, 78.
169
Id. at 77.
170
Id. (asserting that Verizon’s business strategy is focused on finding new opportunities and generating new
revenue by striking arrangements to load traffic on Verizon’s network, including wholesale arrangements with
MVNOs).
171
Dr. Israel Testimony on behalf of TracFone at 28, para. 54.
172
Id. at 28-29, para. 54.
173
Verizon May 14, 2021 RFI Response at 79-80; see also Dr. Israel Testimony on behalf of TracFone at 30, paras.
55-56 (noting that the other nationwide facilities-based providers continue to sell wholesale network access despite
controlling substantial prepaid brands).
174
Applicants’ Dec. 28, 2020 Joint Reply at 27 (stating that Verizon provides antitrust and confidential information
sharing training to its employees and instructs its employees in its wholesale business unit not to share MVNO
confidential information with Verizon employees in other business units unless doing so is necessary to facilitate
Verizon’s contractual obligations to the MVNO).
175
NewsCorp-Hughes Order, 19 FCC Rcd at 510, para. 78; see also Comcast-NBC Universal, 26 FCC Rcd at 4250-
51, para. 29.
Federal Communications Commission FCC 21-121
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raise input prices if the profits gained in the downstream (retail) market exceed the profits lost in the
upstream (wholesale) market.
176
The changes to Verizon’s incentives to foreclose access or raise
wholesale prices to particular MVNOs hinge therefore on the degree of substitutability (i.e., the diversion
rate) between TracFone and the non-TracFone MVNOs that Verizon supplies.
57. In general, we agree with the Applicants that there is a high degree of differentiation
between TracFone and the largest MVNOs that Verizon supplies. Specifically, TracFone, Comcast, and
Charter, combined, make up the vast majority (roughly {[ ]}) of Verizon’s wholesale connections,
177
and the acquisition of TracFone is unlikely to increase the incentive of Verizon to raise the cost of those
cable MVNOs who do not compete directly with TracFone. Both Comcast and Charter are focused on
reaching their cable subscribers who prefer to bundle their wireless and wireline services.
178
In addition,
both cable companies offer postpaid wireless services, a fact which further differentiates their offerings
from those of TracFone.
179
By supplying the cable companies with network access, Verizon is able to
appeal to a segment of the market where Verizon has only limited reach.
180
58. Subscribers of the remaining MVNOs make up a small percentage of Verizon’s
wholesale subscribers, and some of those subscribe to MVNO providers that do not compete directly with
TracFone.
181
There are, however, a few MVNOs that Verizon supplies that do offer low-cost prepaid
services in direct competition with TracFone, and Verizon may have an increased incentive to raise the
costs of those direct competitors. However, Verizon’s commitment to extend the wholesale agreements
of such MVNOs, which we accept as a condition to our approval, mitigates that concern.
182
5. Potential Harms to Lifeline Customers
59. While we find that the transaction as proposed has the potential to cause certain public
interest harms to Lifeline customers, Verizon’s commitments mitigate the potential harms and help ensure
that Lifeline subscribers experience the claimed public interest benefits of the transaction. We agree with
commenters’ concerns that TracFone continue to provide Lifeline service and that TracFone’s Lifeline
176
Michael H Riordan and Steven C. Salop, Evaluating Vertical Mergers: A Post-Chicago Approach, 63 Antitrust
L. J. 528 (1995).
177
TRAC-CPUC-00000032 at 28-29, para. 54. Dr. Israel reports that {[ ]} of Verizon’s wholesale subscribers
are “Non-cable MVNOs other than TracFone.” Additionally, together, TracFone and Comcast comprised
approximately {[ ]} of Verizon’s wholesale revenue. VZ-VZ-0000778, at 3 (indicating that {[
)]}.
178
2020 Communications Marketplace Report, 36 FCC Rcd at 2951-52, para. 13.
179
Kelly Hill, Comcast and Charter’s MVNOs are Disrupting the Postpaid Market, Tutela Finds (Oct. 11, 2019),
https://www.rcrwireless.com/20191011/test-and-measurement/comcast-and-charters-mvnos-are-disrupting-the-
postpaid-market-tutela-finds. “[T]he entrance of cable companies into the market have pushed MVNO service into
the more lucrative postpaid segment; and multi-network MVNOs are innovating on the network side of the equation,
rather than solely differentiating on price or customer service.” Id.
180
Whereas Verizon Wireless is a nationwide competitor, Verizon’s fixed broadband footprint reaches only 11.5%
of households and 11.5% of households where Comcast or Charter likewise offer fixed broadband service of at least
25/3 Mbps. FCC, Fixed Broadband Deployment Data from FCC Form 477, Data as of June 30, 2020,
https://www.fcc.gov/general/broadband-deployment-data-fcc-form-477
(last visited Nov. 16, 2021).
181
For example, of the remaining approximately {[
.]} VZ-DOJHSR-001316, at VZ-DOJHSR-001322
{ (
)]}; TRAC-CPUC-00000095. In addition, {[
]}. VZ-DOJHSR-001316, at VZ-DOJHSR-001322; TRAC-CPUC-00000095.
182
See infra section VIII.E.
Federal Communications Commission FCC 21-121
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consumers not be forced from inexpensive prepaid services to higher-cost plans as a result of this
transaction.
183
Moreover, although we find some potential public interest benefits likely to arise from the
transaction due to the addition of a second facilities-based Lifeline service provider, these potential
benefits by themselves are insufficient to outweigh the potential harms to Lifeline consumers. As
described below, Verizon has made a number of commitments intended to address concerns raised in the
record concerning Lifeline, which we accept and make conditions to our approval of the proposed
transaction. For example, Verizon has committed to continuing to offer TracFone’s current Lifeline-
supported services for a minimum of seven years following the close of the transaction. Before any
TracFone Lifeline customer is required to transition to Verizon’s network, Verizon will offer at no cost a
compatible device with comparable functionality and/or SIM replacement to that customer if the
customer’s existing device is not compatible with the Verizon network. Below we evaluate the record,
including conditions proposed by commenters and commitments made by Verizon to benefit Lifeline
customers.
60. Commenters argue that the elimination of TracFone as an independent competitor will
harm the approximately 1.7 million Lifeline consumers served by TracFone, and they urge the
Commission to impose conditions to ensure that Lifeline services are protected and maintained post-
transaction.
184
Next Century Cities, for example, asserts Lifeline is a critical service that provides
alternatives for low-income consumers, and it asserts that, if TracFone’s Lifeline services are phased out
or Verizon suddenly decides to withdraw from the program, low-income consumers could find
themselves without reliable access to an Internet connection or an equivalent alternative.
185
Commenters
urge the Commission to impose protections to safeguard the Lifeline program,
186
and note that the
transaction eliminates a substantial Lifeline MVNO.
187
In addition, commenters argue that the
Commission should ensure that there are post-transaction compliance and structural safeguards in place
for Verizon’s participation in the Lifeline program.
188
CWA questions Verizon’s statements that it will
maintain TracFone’s eligible telecommunications carrier (ETC) status and whether it will continue to
183
Public Interest and Civil Rights Groups Apr. 6, 2021 Comments at 3; Letter from Joshua Stager, Amir Nasr,
Sarah Morris of New America’s Open Technology Institute and Yosef Getachew, Jonathan Walter of Common
Cause, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112, at 2 (OTI and Common Cause Aug. 23, 2021
Ex Parte Letter); Senators’ July 21, 2021 Ex Parte Letter (stating that it is important that the FCC secures long-term
and enforceable commitments to ensure that Lifeline and budget plans remain accessible, competitive, and
responsive to the needs of consumers).
184
State Attorneys General Feb. 4, 2021 Ex Parte Letter at 1-2 (requesting conditions requiring Verizon to provide
Lifeline services to customers at an affordable rate and at a quality that is commensurate with modern standards or
requiring it to offer for a period of years, Lifeline service packages that are at least commensurate with, if not more,
consumer friendly than, TracFone’s existing lowest-cost Lifeline packages); see also CWA Mar. 12, 2021
Comments at 6-14; OTI Apr. 12, 2021 Ex Parte Letter at 3.
185
Next Century Cities Dec. 18, 2020 Comments at 2, 4-7; see also Public Interest and Civil Rights Groups Apr. 6,
2021 Comments at 3; OTI and Common Cause Aug. 23, 2021 Ex Parte Letter at 2-3.
186
Senators’ July 21, 2021 Ex Parte Letter; Free Press Ex Parte Letter at 3; The Leadership Conference Apr. 6,
2021 Comments at 2; Letter from Kathleen Burke, Policy Counsel, Public Knowledge, to Marlene H. Dortch,
Secretary, FCC, GN Docket No. 21-112, at 2 (filed May 21, 2021) (Public Knowledge May 21, 2021 Ex Parte
Letter); Letter from Joshua Stager, Deputy Director, Broadband & Competition Policy, New America’s Open
Technology Institute, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112, 4-5 (filed July 22, 2021) (OTI
July 22, 2021 Ex Parte Letter).
187
Public Knowledge et al. Oct. 16, 2020 Opposition at 2-3. Public Knowledge et al. Oct. 30, 2020 Reply at 7
(Applicants may not serve all TracFone customers post-transaction given the coverage footprints that might be lost
if TracFone were to exclude the AT&T and T-Mobile networks; and the types of service offerings and speeds that
Verizon might provide to TracFone Lifeline subscribers).
188
Public Knowledge et al. Oct. 16, 2020 Opposition at 6.
Federal Communications Commission FCC 21-121
27
offer services to existing and future Lifeline customers following consummation of the transaction.
189
CWA also notes the importance of Lifeline especially during the recent pandemic.
190
Commenters assert
that the transaction creates a risk that Verizon could degrade the services relied upon by low-income
consumers that would deepen the digital divide.
191
The Applicants argue that the transaction will increase
competition for Lifeline customers by introducing a second facilities-based competitor for wireless
Lifeline customers.
192
Verizon claims that it will seek to transfer TracFone’s ETC designation, maintain
TracFone’s ETC status, and continue to offer Lifeline service through TracFone.
193
61. Lifeline Coverage Availability. TracFone has ETC status in approximately 43 states, the
District of Columbia, and Puerto Rico.
194
The Applicants acknowledge, however, that Verizon’s network
coverage does not extend to all populated areas where TracFone customers are located.
195
According to
the Applicants, TracFone provides service to its Lifeline customers primarily through its SafeLink brand
with some customers receiving service over Verizon’s network.
196
The Applicants explain that, for the
SafeLink customers who already ride on Verizon’s network, migration is not necessary.
197
For the
SafeLink customers that are not currently served by Verizon’s network, the Applicants maintain that
TracFone will continue to operate as an MVNO, and that these customers will continue to receive Lifeline
service over non-Verizon networks for a certain period of time.
198
The Applicants state that
approximately {[ ]} of TracFone’s SafeLink subscribers live outside of Verizon’s coverage area with
the majority of these SafeLink subscribers located in {[ ]}.
199
The Applicants maintain that, in
the areas where TracFone offers Lifeline service over non-Verizon networks and Verizon lacks an
underlying network, Verizon post-transaction will continue existing wholesale arrangements for an
extended time period.
200
Regarding customers in Puerto Rico, the Applicants state that TracFone and
Claro have reached a preliminary agreement to extend their wholesale agreement {[ ]}.
201
The Applicants argue that by extending its agreement with Claro, TracFone has ensured that it can
continue to provide service in Puerto Rico without interruption.
202
189
CWA Dec. 18, 2020 Comments at 8.
190
CWA Mar. 12, 2021 Comments at 11 (arguing that the Lifeline program increasingly relies on TracFone, which
accounted for 22.8% of the Lifeline claims in 2019); see also Letter from Brian Thorn, Senior Researcher,
Communications Workers of America, et al. to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112, at 10
(filed Jan. 21, 2021) (CWA Jan. 21, 2021 Ex Parte Letter).
191
CWA Nov. 19, 2020 Opposition at 6-9.
192
Verizon May 14, 2021 RFI Response at 19; Applicants’ Dec. 28, 2020 Joint Reply at 16 & n.57.
193
Application at 18. The Applicants filed TracFone’s Amended Compliance Plan, which reflects Verizon’s
proposed ownership of TracFone. TracFone Wireless, Inc., Amended Compliance Plan, WC Docket Nos. 09-197,
11- 42, CC Docket No. 96-45 (filed Dec. 15, 2020). Verizon currently markets and offers wireless federal Lifeline
in the service areas of ten rural partnership markets. Verizon May 14, 2021 RFI Response at 31.
194
Verizon May 14, 2021 RFI Response at 32.
195
Id. at 47.
196
Id. at 30.
197
Id..
198
Id. The Applicants assert that the majority of TracFone’s Lifeline customers are served by TracFone over T-
Mobile’s network. Id.
199
Id. at 37-38.
200
Id. at 39.
201
América Móvil and TracFone July 7, 2021 RFI Supplemental Response at 2; see also Verizon May 14, 2021 RFI
Response at 34-35.
202
América Móvil and TracFone July 7, 2021 RFI Supplemental Response at 2.
Federal Communications Commission FCC 21-121
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62. Conditions Recommended by Commenters. Commenters argue that, despite Verizon’s
assurances that it will continue to offer Lifeline services through TracFone, significant conditions are
needed to protect existing TracFone Lifeline customers, including requiring Verizon to commit to offer
Lifeline service and to maintain existing packages available to Lifeline subscribers for a minimum period
of five years.
203
Commenters assert that Verizon’s participation in the Lifeline program must be of
sufficient duration because the transaction eliminates TracFone as one of the few major providers that
focuses on low-income consumers.
204
Commenters argue that the Applicants’ commitments should detail
its participation in Lifeline post-transaction.
205
63. Several U.S. Senators urge the Commission to take a number of steps to protect Lifeline
subscribers including: requiring Verizon’s participation in the Lifeline program with at least the same
level of geographic and service offerings as TracFone currently provides; making 5G networks and
equipment available to Lifeline on the same basis and same timetable as made available to Verizon’s
postpaid customers; maintaining the existing service packages of TracFone subscribers, including Lifeline
products; and marketing to, and providing customer services for, Lifeline customers including non-
English speaking customers, at least at the same level as TracFone provides today.
206
Free Press also
urges the Commission to adopt enforceable, robust, and lasting protections.
207
Public Knowledge
maintains that the Commission should require Verizon to keep customers, particularly Lifeline customers,
on non-Verizon networks if that is the only way to ensure adequate quality of service for those
customers.
208
Public Knowledge and CWA argue that Verizon may pressure subscribers into more
expensive plans,
209
and Public Knowledge questions Verizon’s dedication to servicing Lifeline and low-
income subscribers.
210
Several organizations and public interest groups have filed in support of the
transaction arguing that Verizon’s participation will increase competition for Lifeline services.
211
203
OTI and Common Cause Aug. 23, 2021 Ex Parte Letter at 2; see also CWA Mar. 12, 2021 Comments at 14
(arguing for a commitment by Verizon to: participate in the Lifeline program for a minimum of five years with at
least the same level of geographic and service offerings as TracFone currently provides; make 5G networks and
equipment available to Lifeline and pre-paid customers on the same basis as made available to Verizon’s post-paid
customers; maintain the existing packages available to Lifeline customers for a minimum of five years; continue to
market to, and provide customer services for, Lifeline customers, including non-English speaking customers, at least
at the same level as TracFone provides today; assume liability for any forfeitures or restitution that may be imposed
by the Commission on TracFone, unless such liability has been resolved by TracFone before the closing of the
transaction; and other conditions the record demonstrates are necessary to protect Lifeline subscribers); Public
Knowledge May 21, 2021 Ex Parte Letter at 3-4; CWA Jan. 21, 2021 Ex Parte Letter at 3 (asserting that conditions
are necessary because existing rules are insufficient to prevent a provider from ceasing to offer Lifeline offerings);
CWA Mar. 1, 2021 Ex Parte Letter at 3.
204
OTI and Common Cause Aug. 23, 2021 Ex Parte Letter at 2-3 (arguing that TracFone has been a key provider of
Lifeline services as other companies have shifted their business models to target a more affluent customer bases).
205
Id. at 3 (asserting that the Applicants’ commitment to maintain TracFone’s marketing budget lacks granularity
and raises questions about the extent to which the merged company would continue marketing to non-English
speakers or provide necessary customer support).
206
Senators’ July 21, 2021 Ex Parte Letter at 2.
207
Free Press Mar. 12, 2021 Ex Parte Letter at 2-4 (asserting that Verizon’s commitments to the Lifeline program
must be capable of being verified).
208
Public Knowledge May 21, 2021 Ex Parte Letter at 3; Public Knowledge et al. Dec. 18, 2020 Comments at 3.
209
Public Knowledge May 21, 2021 Ex Parte Letter at 3; see also CWA Dec. 18, 2020 Comments at 8.
210
Public Knowledge et al. Oct. 30, 2020 Reply at 7 (asserting that the Commission should scrutinize Verizon’s
promises to make its 5G network and new devices available to TracFone customers).
211
Letter from Asian Americans Advancing Justice and the National Council of Asian Pacific Americans, to The
Honorable Jessica Rosenworcel, Chairwoman, FCC, GN Docket No. 21-112, at 2 (filed Oct. 5, 2021) (AAJC and
(continued….)
Federal Communications Commission FCC 21-121
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64. Verizon Commitments. On August 11, 2021, Verizon and several commenters
simultaneously filed letters setting forth conditions that had been negotiated between Verizon and several
public interest groups.
212
Then on November 18, 2021, Verizon submitted more detailed commitments to
address remaining public interest concerns.
213
Regarding Lifeline services, Verizon commits to, directly
or through its affiliates, offer TracFone’s current Lifeline-supported services for a minimum of seven
years following the close of the transaction.
214
Verizon commits to ensure continued service for existing
and new Lifeline customers for the entirety of that period either via its own network or through MVNO
agreements.
215
Verizon commits that all of its Lifeline service offerings will meet or exceed the Lifeline
minimum service standards (MSS) in place throughout this time period. Verizon commits to not adding
new co-pays to TracFone’s existing Lifeline plans offered at no cost to prepaid customers for at least
three years after the transaction closes.
216
Verizon further commits, for at least seven years, to maintain
Lifeline marketing and advertising expenditures at a level that equals or exceeds the average of
TracFone’s marketing and advertising expenditures for the three calendar years preceding filing of the
application.
217
In addition, Verizon commits that, within six months after the transaction closes, Verizon
will make available a TracFone service plan to Lifeline prepaid customers that includes 5G service
218
and
that it will offer a range of cost-effective 5G devices available to TracFone customers.
219
Regarding
(Continued from previous page)
NCPA Oct. 5, 2021 Ex Parte Letter); Letter from Mario H. Lopez, President, Hispanic Leadership Fund, to The
Honorable Jessica Rosenworcel, Chairwoman, FCC, GN Docket No. 21-112, at 1 (filed Sept. 21, 2021) (HLF Sept.
21, 2021 Ex Parte Letter); Letter from Amy L. Hinojosa, President and CEO, MANA, to Marlene H. Dortch,
Secretary, FCC, GN Docket No. 21-112, at 1 (filed Sept. 27, 2021) (MANA Sept. 27, 2021 Ex Parte Letter); Letter
from Robert Branson, President and CEO, Multicultural Media, Telecom and Internet Council; Representative Billy
Mitchell, President National Black Caucus of State Legislators; Representative Karen Camper, President National
Organization of Black Elected Legislative Women; Ron Busby, President and CEO US Black Chambers, Inc.; and
Reverend Jesse Jackson, Sr., Founder and President Rainbow PUSH Coalition, to Marlene H. Dortch, Secretary,
FCC, GN Docket No. 21-112, at 2 (filed Oct. 1, 2021) (MMTC et. al. Oct. 1, 2021 Ex Parte Letter); Comment from
Kayne Jones, President and CEO, National Caucus and Center on Black Aging at 1 (Oct. 20, 2021) (NCBA Oct. 20,
2021 Comment); NHCOA Oct. 13, 2021 Ex Parte Letter at 2; Justin G. Nelson, Co-Founder & President, National
LGBT Chamber of Commerce, Chance E. Mitchell, Co-Founder & CEO, National LGBT Chamber of Commerce,
to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112, at 1 (filed Oct. 6, 2021) (NLGBTCC Oct. 6, 2021
Ex Parte Letter); NPRCOC Sept. 28, 2021 Ex Parte Letter at 1; Letter from Marc Morial, President and CEO,
National Urban League, Rev. Al Sharpton, President and CEO, National Action Network and Melanie Campbell,
President & CEO, National Coalition for Black Civic Participation, and Convener, Black Women’s Roundtable, to
The Honorable Jessica Rosenworcel, Chairwoman, FCC, GN Docket No. 21-112, at 2 (filed Sept. 23, 2021)
(National Urban League et al. Sept. 23, 2021 Ex Parte Letter); OCA Sept. 24, 2021 Ex Parte Letter at 1.
212
Verizon Aug. 11, 2021 Ex Parte Letter at 1; Public Interest Groups Aug. 11, 2021 Ex Parte Letter. Public
Knowledge and CWA stated that they would withdraw their objections to the merger contingent upon the
Commission’s incorporation of all of Verizon’s commitments as mandatory and enforceable commitments. Public
Interest Groups Aug. 11, 2021 Ex Parte Letter at 3 (stating that while the Public Interest Groups are conditionally
withdrawing their objections, the groups may remain active in relevant state proceedings, and Verizon’s
commitments merely meet the federal floor of regulatory requirements, but more searching review may be required
under the law and policy of each state where the transaction is under review).
213
Verizon Nov. 18, 2021 Commitment Letter.
214
Id.
215
Id.
216
Id. (stating that nothing in this commitment shall prevent Verizon from pursuing compensation through state or
federal device reimbursement programs so long as no unrecovered costs are passed on to Verizon’s Lifeline
subscribers).
217
Id.
218
Id.; see also Verizon Aug. 11, 2021 Ex Parte Letter at 2.
219
Verizon Nov. 18, 2021 Commitment Letter.
Federal Communications Commission FCC 21-121
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enforcement, Verizon states that it will submit publicly-available semi-annual reports to the Commission
covering the seven-year period.
220
In addition, Verizon’s independent compliance officer will submit
compliance reports following Verizon’s semi-annual reports and will monitor compliance for a seven and
a half year period.
221
65. Lifeline Term Length. Verizon argues that one of the main benefits of the transaction is
the addition of another facilities-based competitor into the Lifeline program to compete for the Lifeline
segment of the market.
222
While Verizon initially stated its intention to continue TracFone’s Lifeline
service offerings for three years, it subsequently extended this commitment to seven years, as set forth
below. We find that this commitment sufficiently mitigates concerns expressed in the record concerning
Verizon’s commitment to the Lifeline program. We require Verizon to ensure continued service for
existing and new Lifeline customers for at least seven years from the close of the transaction over the
same service area where TracFone currently offers Lifeline service either through the Verizon network or
as an MVNO. Verizon may seek a waiver of this commitment in areas where it does not have its own
network if it is unable to extend a necessary MVNO agreement under commercially reasonable terms.
Before any TracFone Lifeline customer is required to transition to Verizon’s network, Verizon will offer
at no cost a compatible device with comparable functionality and/or SIM replacement to that customer if
the customer’s existing device
223
is not compatible with the Verizon network.
66. Maintain Existing Plans. Verizon states that it will continue to offer and advertise
existing TracFone Lifeline rate plans for at least three years after the transaction closes unless the plan no
longer meets the Lifeline MSS standards. Verizon may substitute better terms for any existing plan
provided that the monthly price and any co-pays do not increase. Nothing in these commitments prevents
Verizon from offering additional Lifeline plans with different terms. Verizon will continue to offer and
advertise and will not add new co-pays to TracFone’s existing Lifeline plans that currently are offered at
no cost to prepaid customers for at least three years. In the event the Commission increases the Lifeline
MSS, Verizon will offer at least one plan in compliance with these new requirements at no cost to
Lifeline eligible consumers for at least three years. Nothing in this commitment shall prevent Verizon
from seeking a waiver of the commitment to offer a no-cost plan should an increase in Lifeline MSS
significantly raise compliance costs. In addition, nothing in this commitment shall prevent Verizon from
pursuing compensation through state or federal device reimbursement programs so long as no
unrecovered costs are passed on to Verizon’s Lifeline subscribers.
67. Marketing and Advertising. Verizon commits to maintain marketing and advertising
expenditures for Lifeline at levels that equal or exceed the average of Tracfone’s marketing and
advertising expenditures for the three calendar years prior to the filing of the instant application for at
least seven years following the close of the transaction. During this period, Verizon also commits that it
will market and advertise through similar channels as TracFone. Verizon commits to maintain a new,
dedicated website with information about the Lifeline program, how to apply for Lifeline, and a list of its
220
Verizon Nov. 18, 2021 Commitment Letter. Regarding Lifeline, Verizon’s semi-annual report to the
Commission will include the current number of Lifeline customers, data regarding TracFone customers that have
been transitioned to Verizon’s network from other networks, and the number of Lifeline customers that are receiving
5G. The report will list all states where TracFone offers a Lifeline-supported service, and will provide a state-by-
state breakdown of amounts spent on advertising and other marketing activities associated with Lifeline. Verizon
may file proprietary information with the Commission on a confidential basis, making it available only to
representatives of parties to the transaction docket who have signed the relevant protective order (either during the
pendency of the proceeding or thereafter) provided that Verizon shall also file a public version redacting the
proprietary information to be available for review by the public. Id.
221
Verizon Nov. 18, 2021 Commitment Letter.
222
Joint Reply at 16 & n.57.
223
“Existing device” refers to the customer’s device as of the closing date.
Federal Communications Commission FCC 21-121
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Lifeline plans and instructions for obtaining any necessary replacement devices and/or SIM cards. A link
to the new, dedicated Lifeline website should appear on the home page of the Verizon.com and TracFone
websites. The website will be clearly accessible in each language that TracFone has used in its own
marketing and advertising. The Verizon.com home page will contain a link to “TracFone” under the
“Shop” category that directly links to the home page of TracFone’s website (containing the information
detailed in these commitments). The search function on Verizon’s home page will also lead to a
“Lifeline” page that includes the details of TracFone’s offerings, including a link to the dedicated Lifeline
customer service line and the new, dedicated Lifeline website. Verizon will maintain a dedicated
customer service line for Lifeline customers, staffed by trained customer service agents able to address
customer inquiries concerning how to apply for Lifeline, Lifeline offerings, and transition issues,
including instructions for obtaining any necessary replacement devices and/or SIM cards. The telephone
number for this customer service line will be displayed on the home page of TracFone’s website and on
Verizon’s new, dedicated Lifeline website. Verizon will target Lifeline advertisements to Lifeline eligible
subscribers, using the same languages, similar advertising and outreach media, and grassroot efforts that
TracFone used.
68. Given that TracFone customers will be transitioned from other networks in many
different states, customer outreach and service efforts will be critical to ensure that the Lifeline customers,
in particular, will have transition information that is easy to locate and understand. Accordingly, we
accept Verizon’s marketing and advertisement commitments and make them conditions to our approval.
69. 5G Condition. Consistent with the requests of various public interest groups, Verizon has
agreed that within six months after the transaction closes, it will make available to existing and new
Lifeline prepaid customers the lowest cost plan that includes 5G service and meets Lifeline MSS that is
offered by any of its subsidiaries or affiliates and will offer a range of cost-effective 5G devices to
existing and new Lifeline customers for a minimum of seven years after the close of the transaction.
224
Within six months of closing, Verizon will furnish to the Wireless Telecommunications Bureau a list of
devices that currently meet these criteria, which shall be used for comparison during the length of this
commitment.
225
We accept Verizon’s commitment and make it a condition to our approval.
70. Enforcement Monitoring. New America’s Open Technology Institute asserts that the
conditions must include rigorous enforcement mechanisms to protect low-income consumers from
harm.
226
OTI and Common Cause assert that the Commission should appoint an ombudsman or
compliance officer who is empowered to proactively monitor the conditions to ensure that low-income
consumers are not being harmed, and facilitate consumer complaints about potential violations,
particularly from Lifeline subscribers.
227
We agree and accept Verizon’s commitment to pay for both an
internal compliance officer and an independent, external compliance officer to monitor its compliance
with its commitments that today become conditions to our approval.
71. Assumption of Tracfone Liability. The Applicants argue in their Joint Reply that the
Commission should not include any pending notices of liability against Tracfone as part of this section
224
Verizon Nov. 18, 2021 Commitment Letter; see also Verizon Aug. 11, 2021 Ex Parte Letter at 2. Subsequently,
additional organizations supported Verizon’s 5G Lifeline commitment. See Letter from Mario H. Lopez, President,
Hispanic Leadership Fund, to The Honorable Jessica Rosenworcel, Chairwoman, FCC, GN Docket No. 21-112, at 1
(filed Sept. 21, 2021) (HLF Sept. 21, 2021 Ex Parte Letter); NHCOA Oct. 13, 2021 Ex Parte Letter at 2; NPRCOC
Sept. 28, 2021 Ex Parte Letter at 1; OCA Sept. 24, 2021 Ex Parte Letter at 1.
225
Verizon Aug. 11, 2021 Ex Parte Letter at 1.
226
OTI July 22, 2021 Ex Parte Letter (recommending the appointment of an ombudsman or compliance officer
empowered to monitor the conditions to ensure that low-income consumers are not being harmed, and facilitate
consumer complaints about potential violations, particularly from Lifeline subscribers); see also OTI and Common
Cause Aug. 23, 2021 Ex Parte Letter at 2.
227
OTI and Common Cause Aug. 23, 2021 Ex Parte Letter at 2.
Federal Communications Commission FCC 21-121
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214 transfer.
228
Regarding any other enforcement actions the Commission or any other government
agency has pending against the Applicants, we continue to investigate possible violations of the
Commission’s rules and our grant of the Application is without prejudice to any enforcement actions the
Commission or any other government agency may deem appropriate in light of any facts uncovered in
any investigations of possible violations of law.
229
Nevertheless, out of an abundance of caution, we
accept Verizon’s commitment and condition our grant of the Application on Verizon and its successors,
assigns, and transferees, assuming liability for any forfeitures, restitution, or other obligations that may be
imposed by the Commission or USAC on TracFone and its subsidiaries, and any successors or assigns,
unless such liability has been resolved by TracFone prior to the closing of the transaction, and on Verizon
complying with any agreements with the Commission or USAC, including following any compliance
plans, or other obligations, agreed to by TracFone, its subsidiaries, or any successors or assigns.
230
VI. POTENTIAL PUBLIC INTEREST BENEFITS
72. After assessing the potential competitive harms of the proposed transaction, we next
consider whether the proposed transaction is likely to generate verifiable, transaction-specific public
interest benefits. As discussed below, after a thorough analysis, we anticipate that the proposed
transaction likely would facilitate certain transaction-specific public interest benefits, including the
elimination of double marginalization. Because of these anticipated benefits, in addition to Verizon’s
numerous commitments, we find that overall the transaction is in the public interest.
73. The Commission has recognized that efficiencies generated through a transaction can
mitigate competitive harms “if such efficiencies enhance the merged firm’s ability and incentive to
compete and therefore result in lower prices, improved quality, enhanced service or new products.”
231
Moreover, the Commission will find a claimed benefit to be cognizable only if it is transaction-specific—
meaning it naturally arises as a result of the transaction and likely could not be accomplished in the
absence of the transaction
232
—and verifiable.
233
Because much of the information relating to the potential
benefits of a transaction is in the sole possession of the applicants, they are required to provide sufficient
evidence supporting each claimed benefit so that the Commission can verify its likelihood and
magnitude.
234
Further, the Commission is “more likely to find marginal cost reductions to be cognizable
than reductions in fixed cost”
235
as, in general, reductions in marginal cost are more likely to result in
228
Joint Reply at 18 & n.66.
229
T-Mobile-Sprint Order, 34 FCC Rcd at 10598, para. 46.
230
Verizon Nov. 18, 2021 Commitment Letter (without prejudicing the contractual indemnification rights between
Verizon and América Móvil); see also T-Mobile-Sprint Order, 34 FCC Rcd at 10598, para. 46.
231
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10671, para. 214; CenturyLink-Level 3 Order, 32 FCC Rcd at
9604, para. 50; AT&T-Leap Order, 29 FCC Rcd at 2793, para. 131; T-Mobile-MetroPCS Order, 28 FCC Rcd at
2342, para. 57.
232
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10671, para. 214; 2010 DOJ/FTC Horizontal Merger
Guidelines, § 10 at 29-31; see also CenturyLink-Level 3 Order, 32 FCC Rcd at 9604, para. 50; AT&T-Leap Order,
29 FCC Rcd at 2793-94, para. 132; T-Mobile-MetroPCS Order, 28 FCC Rcd at 2342, para. 58.
233
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10671, para. 214; CenturyLink-Level 3 Order, 32 FCC Rcd at
9604, para. 50; AT&T-Leap Order, 29 FCC Rcd at 2793-94, para. 132; T-Mobile-MetroPCS Order, 28 FCC Rcd at
2342, para. 58.
234
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10671-72, para. 214; AT&T-Leap Order, 29 FCC Rcd at 2793-
94, para. 132; T-Mobile-MetroPCS Order, 28 FCC Rcd at 2342, para. 58. In addition, “the magnitude of benefits
must be calculated net of the cost of achieving them.” See, e.g., AT&T-Leap Order, 29 FCC Rcd at 2793-94, para.
132; T-Mobile-MetroPCS Order, 28 FCC Rcd at 2342, para. 58.
235
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10672, para. 214; CenturyLink-Level 3 Order, 32 FCC Rcd at
9604, para. 50; AT&T-Leap Order, 29 FCC Rcd at 2793-94, para. 132; T-Mobile-MetroPCS Order, 28 FCC Rcd at
2342, para. 58.
Federal Communications Commission FCC 21-121
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lower prices for consumers. In addition, benefits expected to occur only in the distant future may be
discounted or dismissed because, among other things, predictions about the distant future are inherently
more speculative than predictions that are expected to occur closer to the present.
236
74. The Applicants claim that a number of transaction-specific benefits will result from
Verizon’s acquisition of TracFone. The Applicants generally contend that a combined Verizon and
TracFone will enable TracFone to better compete for value-conscious customers than a standalone
TracFone.
237
We have performed extensive and careful analysis of these claimed benefits. In this section,
we discuss the record and the Applicants’ claimed benefits from: (1) improved economic efficiency from
owner’s economics;
238
(2) greater device purchasing power to enable better plan and device offerings;
239
(3) other non-network efficiencies; (4) improvements in device subsidies;
240
(5) access to Verizon devices
and advanced 5G technologies;
241
(6) elimination of negotiation delays;
242
(7) increased distribution;
243
(8) access to the high-quality Verizon network;
244
(9) the addition of fixed wireless offerings;
245
(10) improved international roaming benefits;
246
and (11) other services. Verizon claims that, taking into
account all synergies and efficiencies, the transaction will generate approximately {[ ]} million in
network synergies and {[ ]} million in net operational synergies {[ ]}.
247
75. Elimination of Double Marginalization. The Applicants assert that the replacement of
the Verizon-TracFone MVNO agreement with direct ownership will eliminate double marginalization,
resulting in a substantial reduction of incremental network costs to serve TracFone’s customers.
248
Verizon asserts that these cost savings will be passed through to consumers and that the cost savings will
be significant on a per consumer per GB basis, about {[ ]}.
249
76. After a careful review, we find that the elimination of double marginalization will reduce
the costs of serving TracFone customers. We further find, however, that the Applicants have not
236
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10672, para. 214; AT&T-Leap Order, 29 FCC Rcd at 2793-94,
para. 132; T-Mobile-MetroPCS Order, 28 FCC Rcd at 2342, para. 58.
237
Verizon May 14, 2021 RFI Response at 4.
238
Id.
239
Application at 2, 11-12; Verizon May 14, 2021 RFI Response at 4.
240
Verizon May 14, 2021 RFI Response at 11.
241
Application at 2, 11-13.
242
Verizon May 14, 2021 RFI Response at 11-13.
243
Application at 3, 13.
244
Id.
245
Verizon May 14, 2021 RFI Response at 17.
246
Application at 2, 12-13.
247
Verizon May 14, 2021 RFI Response at 24-25. Verizon maintains that its projections are based on a model it
created to estimate the value of the transaction, using actual data provided by TracFone combined with Verizon’s
own assessments. Id. at 24-27 (asserting that their internal model estimated TracFone’s overall operational costs if it
continued as a standalone company as compared to TracFone’s overall operational costs after the transaction); see
also VZ-VZ-0000824 (“Operational Synergies Walk (Acquisition Case vs. Stand Alone Case)”).
248
Verizon May 14, 2021 RFI Response at 4-5, 21-22 (maintaining that the transaction will reduce costs to serve
TracFone customers from the wholesale prices that TracFone currently pays to Verizon to Verizon’s incremental
network costs to serve Verizon customers on its network, and as TracFone customers on other networks migrate to
Verizon’s network over time, the other MNO/TracFone double marginalization will also be eliminated and the cost
of serving those customers will decrease).
249
Verizon May 14, 2021 RFI Response at 7-8.
Federal Communications Commission FCC 21-121
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provided enough information for us to determine exactly how these cost savings would flow through to
particular service offerings.
250
We therefore credit the benefit of owner’s economics, but recognize the
effect may not be uniform across all service offerings.
77. Greater Device Purchasing Power. The Applicants assert that the transaction will
improve their device buying power, which should allow the combined firm to develop new opportunities
to reach price-conscious consumers.
251
The Applicants claim that cost savings from volume discounts
will contribute to a decline in general and administrative and other costs that will total approximately
{[ ]}.
252
The Applicants assert that TracFone has less purchasing power in
negotiations with device manufacturers than competing brands AT&T/Cricket and T-Mobile/Metro,
which limits TracFone’s ability to offer deep discounts on devices.
253
The Applicants also claim greater
device purchasing power in combination with “owner’s economics” will enable improved plan and device
offerings,
254
including 5G devices.
255
78. We agree that greater bargaining power is a creditable benefit of the transaction.
Verizon’s larger subscriber base (94 million subscribers compared with 20 million subscribers for
TracFone),
256
means that TracFone customers likely will benefit from the greater bargaining power of the
merged entity post-transaction. In addition, the combined entity may gain somewhat increased bargaining
power compared with pre-transaction Verizon as a result of the addition of the TracFone subscribers.
257
79. Other Non-Network Efficiencies. The Applicants also report several other sources of
non-network efficiencies. According to the Applicants, there will be cost savings from improvements to
TracFone’s {[ ]}.
258
They also
report a decline in general and administrative and other costs that will total approximately {[
]}.
259
80. We do not find these other non-network efficiencies to be cognizable benefits of the
transaction. As the Applicants have not provided further explanation on how these efficiencies will come
about, we cannot verify the claimed quantifications. Additionally, the Applicants acknowledge that these
claimed efficiencies are balanced out by a planned {[
250
While the Verizon Model does include cost reductions from the elimination of double marginalization, it is not
possible to causally link these with any additional changes in Verizon and TracFone’s expenditure or pricing therein
as these are not linked by formulas. VZ-VZ-0000824 (“Operational Synergies Walk (Acquisition Case vs. Stand
Alone Case)” and “TracFone Revenue Per GB”); VZ-VZ -0001133 (“Summary - Standalone Case”, “Summary -
Current Case”, “Other Network Costs”, “VZ Network Costs”).
251
Verizon May 14, 2021 RFI Response at 8-9.
252
Id. at 26; see also VZ-VZ-0001133 (“Summary-Standalone Case,” “Summary-Current Case”).
253
Verizon May 14, 2021 RFI Response at 8-9.
254
Id. at 4, 56.
255
Id. at 10-11, 23.
256
Application at 7-8.
257
VZ-DOJHSR-000395, at 10 (“Verizon Communications Inc. Attachment 4(c)9”). Verizon estimates that buying
TracFone will add an additional {[ ]} units {[ .
.]}
258
Verizon May 14, 2021 RFI Response at 26; see also VZ-VZ-0001133 (“Summary-Standalone Case,” “Summary-
Current Case,” and “Other G&A and Customer Care”).
259
Verizon May 14, 2021 RFI Response at 26; see also VZ-VZ-0001133 (“Summary-Standalone Case,” “Summary-
Current Case”).
Federal Communications Commission FCC 21-121
35
,
. ]}.
260
81. Improved Handset Subsidies. Verizon claims that post-transaction it will make a
significant investment in device subsidies, expected to increase with the transaction {[
]}.
261
Verizon claims
additional handset subsidies will total approximately {[
]}.
262
Further, Verizon expects to use {[
]}.
263
82. We do not find improved handset subsidies to be a cognizable benefit of the transaction.
While we recognize efficiencies from the transaction will increase the competitive incentives of the joint-
entity post-transaction, the Applicants have not provided enough information for us to conclude that they
have an incentive to increase handset subsidies specifically. Further, the Applicants have not provided
detailed plans for how the subsidy increases will be implemented.
264
83. Access to Devices and Advanced 5G Technologies. The Applicants maintain that the
transaction will give TracFone consumers access to “a wider variety of Verizon-compatible devices,”
265
and it lists “more low cost devices (with both 4G LTE and 5G),” “hotspots,” “jetpacks,” “children’s
watches,” “a 4G fixed wireless device” and “low cost flip phones with app store capabilities” as
examples.
266
The Applicants claim this will be implemented because of the “minimal incremental” cost of
allowing TracFone consumers access to “certain devices in Verizon’s device portfolio.”
267
84. In addition, the Applicants maintain that the transaction will allow Verizon to bring new
devices and technical advances to TracFone consumers more quickly, such as their “full 5G
experience.”
268
The Applicants acknowledge that TracFone currently makes available certain 5G devices
and some 5G service to customers. However, they note that {[
]}.
269
The Applicants contend that, while TracFone has
made available 5G devices and some 5G services to its customers, the transaction will enable TracFone to
260
Verizon May 14, 2021 RFI Response at 26; see also VZ-VZ-0001133 (“Summary-Standalone Case,” “Summary-
Current Case,” and “Other G&A and Customer Care”).
261
Verizon May 14, 2021 RFI Response at 10-11.
262
Id. at 24.
263
Id. at 11.
264
Verizon plans for handset subsidies vary across internal documents. VZ-VZ-0001133 (“Summary – Case
Comparison,” “Summary – Current Case,” and “Equipment_Subsidy.”) {[
]}. VZ-DOJHSR-
000224 at 9 (“Verizon Communications Inc. Attachment 4(c)41”). {[
]}. VZ-DOJHSR-00057 at 4-5 (“Verizon Communications Inc. Attachment
4(c)7”). {[ ]}.
265
Application at 2.
266
Application at 12. Verizon also claims it is “evaluating” for introduction to TracFone consumers the categories
of “5G Mobile hotspots,” “Wearables,” “Tablets and laptops” and “Fixed wireless / broadband home connections.”
Verizon May 14, 2021 RFI Response at 55.
267
Applicants’ Dec. 28, 2020 Joint Reply at 9.
268
Verizon May 14, 2021 RFI Response at 16.
269
Id.
Federal Communications Commission FCC 21-121
36
realize Verizon’s economies of scale in purchasing 5G devices, which when {[
]} will make such devices more affordable for TracFone customers.
270
85. We find that giving TracFone consumers, including consumers with disabilities, access to
Verizon’s more extensive current portfolio of devices is a partially creditable benefit of the transaction.
271
We agree it will be relatively low cost for Verizon to give access to its current devices to Tracfone
consumers post-transaction. However, we cannot verify how extensively Verizon will provide such
access from the record presented, or whether some TracFone consumers will be excluded from certain 5G
devices.
86. In contrast, we do not find access to future advanced 5G technologies to be a creditable
benefit of the transaction. The record does not allow us to verify that Verizon will expand access to
future 5G technology to TracFone consumers post-transaction. The Applicants also have not supplied
detailed plans on how these 5G technologies will be developed and implemented. While we acknowledge
improved device bargaining power, we lack the information to conclude that better device deals will lead
to an improved selection of 5G devices in the future for TracFone customers.
87. Elimination of Negotiation Delays. The Applicants maintain that the transaction will
eliminate the time associated with arm’s length negotiations inherent in the MVNO model.
272
This will
allow TracFone to implement innovations or new competitive offerings for value-conscious customers
more quickly.
273
88. While the transaction will eliminate most third-party negotiations, we find that the
Applicants both have failed to quantify this benefit and have failed to identify the specific kinds of
innovations and new service offerings that, absent the transaction, would be delayed by required third-
party negotiations.
89. Distribution. The Applicants assert that Verizon plans to revise and expand TracFone’s
existing distribution approach following the transaction, by broadening its physical footprint to thousands
of other distribution outlets, including in urban and diverse communities and rural areas.
274
Verizon
contends that it will seek to maintain TracFone’s relationships with existing retail partners, while
expanding TracFone distribution to an additional {[
]}. Verizon further claims that
it intends to {[
]}. Specifically, Verizon claims that it intends to {[
]}.
In addition, Verizon plans to {[
]}.
275
Further, Verizon states
that it is {[ ]}.
276
270
Id. at 16-17.
271
See infra section VII.E. (addressing the accessibility of low-cost devices to people who are blind).
272
Verizon May 14, 2021 RFI Response at 11-13, 23.
273
Id.
274
Id. at 13.
275
Id. at 13-14; VZ-VZ-0001133 ( “Summary - Current Case”). The Verizon Model submitted in response to our
Request for Information appears to report only {[ ]}. VZ-VZ-0000213 at 8 (“Project
Sycamore”). The {[ ]} figure appears in a presentation reporting transaction financials that are slightly
different from the Verizon Model—we believe this is a different version of that model, going through revision
during the transaction appraisal process.
276
Verizon May 14, 2021 RFI Response at 13-14.
Federal Communications Commission FCC 21-121
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90. We partially credit the benefit of expanded distribution, as these plans are quite detailed
in the record, but we cannot verify how committed Verizon is to completion of those plans.
277
Verizon
maintains it has the incentive to expand distribution for TracFone, because the transaction will give better
“margins and access to capital” to TracFone.
278
This argument implies that but-for a constraint in
resources, TracFone had the incentive to increase density, but we cannot verify this fact from the record.
91. Access to the Verizon Network. Verizon maintains that TracFone’s value-conscious
customers will benefit from access to Verizon’s network and new technologies and services, such as
5G.
279
Some commenters support approval of this transaction based, in part, on TracFone’s access to
Verizon’s network.
280
Verizon asserts that there are several key reasons why access to Verizon network
benefits value-conscious consumers.
281
First, Verizon maintains that the company has made and
continues to make capital investments in its wireless network for its customers, including recent spectrum
purchases that will double its existing mid-band spectrum holdings by adding an average of 161
megahertz of C-Band spectrum nationwide.
282
Second, Verizon states that its network can easily handle
the addition of the 7.6 million TracFone customers nationwide who are not already on the Verizon
network.
283
Third, Verizon maintains that transitioning to the Verizon network will be a significant
benefit for TracFone customers migrating from another provider to Verizon because the company’s
overall network strength suggests that a customer moving to Verizon’s network is likely to be more
satisfied than a customer who migrates to another network.
284
The Applicants argue that customer
satisfaction is demonstrated in the churn rate for TracFone customers currently riding on Verizon’s
network, which TracFone has indicated is {[
]}.
285
92. We do not find access to Verizon’s network to be a cognizable benefit of the transaction.
Assuming for purposes of this analysis that the Applicants’ claims concerning the superiority of the
Verizon network are true, the Applicants have failed to adequately explain why, absent the merger,
TracFone could not have transferred more of its customers to Verizon’s network.
93. Fixed Wireless. Verizon asserts that it intends to improve access to fixed wireless
broadband home Internet solutions for TracFone customers.
286
Specifically, the Applicants assert that
Verizon and TracFone may make these services {[
277
VZ-DOJHSR-000395, at 10 (“Verizon Communications Inc. Attachment 4(c)9”). {[
]}.
278
Verizon May 14, 2021 RFI Response at 13.
279
Application at 3, 12-13.
280
See MMTC et al. Oct. 1, 2021 Ex Parte Letter; National ACE Sept. 29, 2021 Ex Parte Letter at 1; NLGBTCC
Oct. 6, 2021 Ex Parte Letter at 1;
NPRCOC Sept. 28, 2021 Ex Parte Letter at 1; National Urban League et al. Sept.
23, 2021 Ex Parte Letter at 2; USHCC Oct. 5, 2021 Ex Parte Letter at 1; Letter from Albert Zapanta, President and
CEO, United States–Mexico Chamber of Commerce, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-
112, at 1 (filed Sept. 24, 2021) (U.S.-Mexico COC Sept. 24, 2021 Ex Parte Letter).
281
Verizon May 14, 2021 RFI Response at 15.
282
Id.
283
Id.
284
Id. at 16.
285
Id.
286
Application at 12; see also Verizon May 14, 2021 RFI Response at 17-18.
Federal Communications Commission FCC 21-121
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]}.
287
The Applicants maintain that the fixed wireless offerings may help {[
]}.
288
94. We do not find new fixed wireless service to be a creditable benefit of the transaction.
We find that the Applicants have failed to adequately demonstrate that Verizon has concrete plans to
develop fixed wireless for TracFone or that the transaction creates a strong incentive for Verizon to do so.
The Applicants also have not demonstrated that TracFone, absent the transaction, could not enter into an
agreement with Verizon or another facilities-based provider that would allow TracFone to offer fixed
wireless service to its customers.
95. International Roaming. The Applicants argue that TracFone customers will have
expanded services and plans such as international roaming.
289
Verizon states that TracFone brands that do
not have an international roaming option will have that option available to their customers once they are
migrated to the Verizon network if the customer elects to add an international roaming plan.
290
Several
commenters support approval of this transaction based, in part, on international roaming.
291
96. We do not find increased access to international roaming to be a creditable benefit of the
transaction. The Applicants have failed to demonstrate that TracFone, absent the merger, could not have
negotiated to include international roaming in its wholesale agreements with one or more of its host
facilities-based providers.
97. Other Services. Verizon claims that it will deliver other technology improvements to
TracFone subscribers, including Verizon’s robocall protections and a call filter service to postpaid and
prepaid customers.
292
Verizon also claims that other advances that may be available to prepaid customers
after the close of the transaction, including {[
]}.
293
The Applicants note that, for TracFone
customers who currently ride on other networks, their access to certain services and features will depend
on when they migrate to the Verizon network, and that the timing of the availability of services and
features is not certain.
294
98. We find the claimed public interest benefit of increased access to technology
improvements and other new services to be too speculative to be cognizable. The Applicants have failed
to provide sufficient information or documents for us to verify this claim.
VII. OTHER PUBLIC INTEREST ISSUES
A. Roaming
99. Roaming service is a service that one mobile wireless provider purchases from another
mobile wireless provider to enable the first provider’s subscribers, when traveling outside its service area,
to use the facilities of the roaming provider to place and receive calls, continue in-progress calls, and
transmit and receive data.
295
The Commission has previously determined that the availability of both
287
Verizon May 14, 2021 RFI Response at 17.
288
Id.
289
Application at 12-13, 17; see also Verizon May 14, 2021 RFI Response at 17-18.
290
Verizon May 14, 2021 RFI Response at 18.
291
See, e.g., NHCOA Oct. 13, 2021 Ex Parte Letter at 2; NGLCC Oct. 6, 2021 Ex Parte Letter at 1; U.S.-Mexico
COC Sept. 24, 2021 Ex Parte Letter at 1.
292
Verizon May 14, 2021 RFI Response at 18.
293
Id.
294
Id.
295
See, e.g., T-Mobile-Sprint Order, 34 FCC Rcd at 10708, para. 293; see also Reexamination of Roaming
(continued….)
Federal Communications Commission FCC 21-121
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voice and data roaming arrangements is critical to promoting seamless consumer access to mobile
services nationwide, to promoting innovation and investment, and to promoting facilities-based
competition among providers.
296
The Commission also has established a special dispute-resolution
framework to ensure that providers negotiate in good faith to develop commercially reasonable terms for
data roaming agreements and to confirm that host providers are properly implementing such agreements
when supplying roaming services.
297
100. Various commenters ask for the Commission to determine the implications of the
transaction on, among other things, roaming.
298
Separately, NTCH argues that wholesale service that
nationwide facilities-based providers sell to TracFone is technically identical to roaming services
provided to smaller facilities-based service providers, but that the nationwide service providers refuse to
offer roaming at the comparably lower rates that TracFone pays for wholesale.
299
NTCH asserts that this
wholesale price discrepancy allowed major service providers to enable TracFone to engage in predatory
pricing in the low cost prepaid market, by undercutting smaller facilities-based providers that must pay
high roaming rates and inducing them to exit the market.
300
NTCH claims that following the exit of
independent, financially distressed service providers, remaining facilities-based service providers could
raise rates to or foreclose other MVNOs, eliminating sources of competition.
301
As such, NTCH argues
that the Commission should deny the proposed transaction.
302
101. Responding to NTCH, the Applicants argue that NTCH repeats unsuccessful roaming
arguments it has long made and that the Commission has examined and rejected these concerns.
303
The
Applicants argue that, to the contrary, NTCH shows that the transaction is in the public interest by
underscoring that post-transaction, TracFone would better serve value-conscious consumers, maintaining
(Continued from previous page)
Obligations of Commercial Mobile Radio Service Providers and Other Providers of Mobile Data Services, Second
Report and Order, 26 FCC Rcd 5411 (2011), aff’d sub nom. Cellco Partnership v. FCC, 700 F.3d 534 (D.C. Cir.
2012) (Data Roaming Order).
296
Data Roaming Order, 26 FCC Rcd at 5418-23, paras. 13-21; Reexamination of Roaming Obligations of
Commercial Mobile Radio Service Providers and Other Providers of Mobile Data Services, Order on
Reconsideration and Second Further Notice of Proposed Rulemaking, 25 FCC Rcd 4181, 4182, para. 2 (2010).
297
See, e.g., Data Roaming Order, 26 FCC Rcd at 5448-53, paras. 74-87; 47 CFR § 20.12(e)(1); see also
Reexamination of Roaming Obligations of Commercial Mobile Radio Service Providers and Other Providers of
Mobile Data Services, Declaratory Ruling, 29 FCC Rcd 15483 (WTB 2014) (granting T-Mobile petition regarding
Commission review of data roaming disputes).
298
T-Mobile Oct. 13, 2020 Ex Parte Letter at 4 (“what are the implications, with respect to international roaming or
otherwise”); Public Knowledge et al. Oct. 30, 2020 Reply at 7 (“[T]he Applicants do not say whether post-
transaction TracFone service will include roaming on other carriers’ networks.”); Next Century Cities Dec. 18, 2020
Comments at 7 (“[I]f TracFone consumers are prohibited from roaming on other networks, this may interfere with
service . . . . Service concerns coupled with concerns regarding the competitive nature of the mobile market are
enough for the Commission to press pause on this request.”).
299
NTCH Mar. 10, 2021 Ex Parte Letter at 1.
300
Id. at 2.
301
Id.
302
Id.
303
Letter from Alejandro Cantú Jiménez, General Counsel, América Móvil, William H. Johnson, Senior Vice
President, Verizon, and Richard B. Salzman, Executive Vice President and General Counsel, TracFone, to Marlene
H. Dortch, Secretary, FCC, GN Docket No. 21-112, at 1 (filed Mar. 15, 2021) (Applicants’ Mar. 15, 2021 Ex Parte
Letter).
Federal Communications Commission FCC 21-121
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that a “combined TracFone and Verizon will do even better” than TracFone alone could to offer value-
conscious customers “attractive pre-paid offers.”
304
102. We find that concerns about the availability of domestic roaming service post-transaction
will be addressed adequately by the Commission’s general roaming policies and rules, which are designed
to ensure that entities can obtain roaming agreements on reasonable terms and conditions. Accordingly,
we find that no special roaming-related conditions are necessary. In the event that a service provider
encounters difficulties in obtaining reasonable roaming services or roaming rates, it can file complaints
with the Commission pursuant to our established roaming rules.
305
B. Employment
103. We decline to impose conditions related to employment as part of our approval of the
proposed transaction. Based on the record and our extensive analysis, we find that while the proposed
transaction has the potential to eliminate some jobs, the transaction likely will have limited impacts on
telecommunications workers in the United States.
104. Five U.S. Senators urge the Commission to ensure that Verizon and TracFone employees
are not harmed as the Applicants consolidate operations.
306
Although the Applicants have not claimed
that the transaction will create new jobs, they do claim that TracFone employees would enjoy Verizon’s
generous employee benefits package and workplace diversity and inclusion after the merger.
307
The
Applicants further assert that Verizon values the deep experience of TracFone employees,
308
and does not
plan workforce reductions post-transaction,
309
and that it anticipates leveraging generous Verizon
employee benefits and {[ ]} to retain TracFone employees.
310
304
Id.
305
Data Roaming Order, 26 FCC Rcd at 5448-53, paras. 74-87; see also T-Mobile-Sprint Order, 34 FCC Rcd at
10710, para. 297 (finding roaming conditions unnecessary because general roaming policies, rules, and dispute
resolution process provide adequate protection).
306
Senators’ July 21, 2021 Ex Parte Letter at 1, 3.
307
Application at 13; see also Letter from William H. Johnson, Senior Vice President, Verizon, to Marlene H.
Dortch, Secretary, FCC, GN Docket No. 21-112, at 2 (filed Sept. 22, 2021) (Verizon Sept. 22, 2021 Ex Parte
Letter).
308
Applicants’ Dec. 28, 2020 Joint Reply at 17.
309
Verizon May 14, 2021 RFI Response at 20; Applicants’ May 18, 2021 Ex Parte Letter at 7.
310
Verizon May 14, 2021 RFI Response at 4; Applicants’ Feb. 11, 2021 Ex Parte Letter at 5; VZ-CA-011022, at
VZ-CA-011117, n.386 (Joint Applicants’ Post-Hearing Reply Brief (CONFIDENTIAL VERSION) before The
Public Utilities Commission of the State of California, Nov. 5, 2020) ({[
”]}); VZ-VZ-0000325 (Verizon, “Labor” worksheet, Synergy Total); VZ-VZ-0001450 (Verizon,
“Delta” worksheet,Salary Related True-Up and Retention Bonus Sept Version Total-May Version Total); VZ-VZ-
0001451 (Verizon, “Delta” worksheet, Salary Related True-Up and Retention Bonus Sept Version Total-May
Version Total); VZ-VZ-0000326, at VZ-VZ-0000327 (Verizon, “Sycamore Model Delta Review”); VZ-DOJHSR-
002396, at VZ-DOJHSR-002407 (Verizon, “Acquisition Case Non-Network Synergies”).
Federal Communications Commission FCC 21-121
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105. Several commenters support approval of this transaction based on the commitment that
Verizon has expressed regarding workplace diversity and retaining TracFone employees.
311
Specifically,
the National Urban League, National Action Network, and the National Coalition of Black Civic
Participation support the transaction.
312
The National Urban League supports Verizon’s diversity related
commitment, along with Verizon’s other merger commitments, as conditions to the transaction. Verizon
states that the company is committed to fostering an inclusive environment with diversity in its employees
and in its suppliers.
313
Verizon states that it will extend its diversity, equity and inclusion policies,
programs, and practices to TracFone employees upon the close of the transaction.
314
106. CWA argues that further information from the Applicants is required in order for the
public to assess the impact of the transaction on the labor markets.
315
CWA raises a specific concern
about monopsony power of employers and its subsequent effect on wage suppression in highly
concentrated labor markets.
316
CWA further urges the Commission to ensure no employee of Verizon or
TracFone loses a job or faces reduced benefits or wages as a result of this transaction.
317
The Applicants
counter that CWA’s concern about labor market monopsony power is general and that its claim of
concentrated labor markets ignores the fact that the wireless job growth and wireless job wages are more
than 50% higher than the average job.
318
In response, CWA expresses skepticism of these data
319
and
presents another study in which researchers find that the lowest wage decile of all telecommunications
workers have seen real wage declines of 12% since the 1970s.
320
CWA also argues that TracFone relies
almost exclusively on third-party contractors who will face a high risk of job loss and downward pressure
311
See, e.g., MANA Sept. 27, 2021 Ex Parte Letter; MMTC et. al. Oct. 1, 2021 Ex Parte Letter at 1; NLGBTCC
Oct. 6, 2021 Ex Parte Letter at 1; National Urban League et al. Sept. 23, 2021 Ex Parte Letter at 2-3; OCA Sept. 24,
2021 Ex Parte Letter at 2.
312
National Urban League et al. Sept. 23, 2021 Ex Parte Letter at 2-3.
313
Verizon Sept. 22, 2021 Ex Parte Letter at 1.
314
Id.
315
CWA Dec. 18, 2020 Comments at 4; CWA Jan. 21, 2021 Ex Parte Letter at 11-12; Letter from Brian Thorn,
Senior Researcher, Communications Workers of America, et al., to Marlene H. Dortch, Secretary, FCC, GN Docket
No. 21-112, at 2 (filed Feb. 16, 2021) (CWA Feb. 16, 2021 Ex Parte Letter).
316
CWA Jan. 21, 2021 Ex Parte Letter at 10-12. CWA further references studies where researchers predict that the
merger between T-Mobile and Sprint would lead to a decline in weekly earnings for retail wireless workers by 1-3%
on average, and by as much as 7% in the most affected labor markets. CWA Mar. 12, 2021 Comments at 19-20.
See Adil Abdela and Marshall Steinbaum, Economic Policy Institute and the Roosevelt Institute, Labor market
impact of the proposed Sprint-T-Mobile merger (Dec. 17, 2018), https://files.epi.org/pdf/159194.pdf
; see also Press
Release, Economic Policy Institute, Sprint-T-Mobile merger would escalate market power in the industry, worsen
wireless retail workers’ wages (Dec. 17, 2018),
https://www.epi.org/press/sprint-t-mobile-merger-market-power-
wages/.
317
CWA Dec. 18, 2020 Comments at 5; CWA Jan. 21, 2021 Ex Parte Letter at 12.
318
Applicants’ Feb. 11, 2021 Ex Parte Letter at 5; see also CTIA, The Wireless Industry: An American Success
Story, https://www.ctia.org/the-wireless-industry/wireless-industry
(last visited Nov. 16, 2021) (noting that the
wireless industry supports 4.7 million jobs, and every wireless job creates an additional 7.7 jobs throughout the
broader economy).
319
CWA Mar. 12, 2021 Comments at 19-21.
320
Id. at 19; see also John Schitt and Jori Kandra, Economic Policy Institute, Decades of slow wage growth for
telecommunications workers (Oct. 5, 2020), https://files.epi.org/pdf/209752.pdf
.
Federal Communications Commission FCC 21-121
42
on wages.
321
The Applicants counter by reiterating their commitment to retaining TracFone employees
and integrating their knowledge of the prepaid segment into Verizon with no workforce reductions.
322
107. Verizon claims that TracFone has a {[
]}.
323
Verizon estimates a {[ ]} in call center operating expenses during 2021-
2025 through merger synergies.
324
Verizon also estimates the impact of the transaction on labor costs and
expects {[ ]} to retain
TracFone employees over the next five years.
325
Verizon outlines a specific retention plan targeting {[
]} for the transaction.
326
Verizon provides further details of
compensation commitments to TracFone employees {[
]}.
327
108. We find that extrapolating job loss estimates from the T-Mobile/Sprint merger is
inappropriate for this transaction given the significant difference in the type and scale of the two mergers.
While we agree with CWA that the transaction has the potential to eliminate some jobs, the impact is
likely to be insignificant because the number of employees potentially impacted is likely to be {[
]}.
328
We agree with CWA with regards to the potential reduction in call center jobs that are
321
CWA Mar. 12, 2021 Comments at 20-21.
322
Applicants’ May 18, 2021 Ex Parte Letter at 7.
323
VZ-VZ-0000560 (Verizon, “Human Resources”) {
]}.
324
VZ-DOJHSR-000661, at VZ-DOJHSR-000666 (Verizon, “Sycamore: Acquisition Financials”).
325
VZ-VZ-0000325 (Verizon, “Labor” worksheet, Synergy Total); VZ-VZ-0001450 (Verizon, “Delta” worksheet,
Salary Related True-Up and Retention Bonus Sept Version Total-May Version Total); VZ-VZ-0001451 (Verizon,
“Delta” worksheet, Salary Related True-Up and Retention Bonus Sept Version Total-May Version Total); VZ- VZ-
0000326, at VZ-0000327 (Verizon, “Sycamore Model Delta Review”); VZ-DOJHSR-002396, at VZ-DOJHSR-
002407 (Verizon, “Acquisition Case Non-Network Synergies”). Across these internal documents, Verizon budgets
{[
]}.
326
VZ-VZ-0000326, at VZ-VZ-0000327 (Verizon, “Sycamore Model Delta Review”). Verizon identifies {[
]}.
327
VZ-DOJHSR-002085, at VZ-DOJHSR-002092 (Verizon, “Appendix: Summary of Key Terms”) {[“
]}.
328
VZ-VZ-0000325 (Verizon, “Labor” worksheet, Synergy Total); VZ-VZ-0001450 (Verizon, “Delta” worksheet,
Salary Related True-Up and Retention Bonus Sept Version Total-May Version Total); VZ-VZ-0001451 (Verizon,
“Delta” worksheet, Salary Related True-Up and Retention Bonus Sept Version Total-May Version Total); VZ-VZ-
0000560 (Verizon, “Human Resources”); VZ-VZ-0000326, at VZ-VZ-0000327 (Verizon, “Sycamore Model Delta
Review”); VZ-DOJHSR-002396, at VZ-DOJHSR-002407 (Verizon, “Acquisition Case Non-Network Synergies”);
VZ-DOJHSR-002085, at VZ-DOJHSR-002092 (Verizon, “Appendix: Summary of Key Terms”).
Federal Communications Commission FCC 21-121
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currently outsourced to third-party vendors by TracFone. However, the record indicates that the majority
of the TracFone call center agents are currently located in {[ ]} and the estimated call
center work {[ ]} is a small fraction of the telecommunications workforce.
329
The
transaction likely will have limited impacts on telecommunications workers in the United States.
Consequently, we decline to impose any additional job-related conditions to our approval of the
transaction.
109. Finally, we note that Verizon filed in the FCC record a letter committing to extending its
diversity and inclusion policies, practices, and programs to all TracFone employees.
330
We acknowledge
and applaud Verizon’s commitment to diversity and inclusion, which aligns with the Commission’s own
continuing effort to advance digital equity for all,
331
including people of color, persons with disabilities,
persons who live in rural or Tribal areas, and others who are or have been historically underserved,
marginalized, or adversely affected by persistent poverty or inequality.
332
C. Customer Migration and Transition
110. Our analysis of the record indicates that without certain conditions to address customer
migration and transition, TracFone customers face an uncertain transition period, lack meaningful
information to make informed choices, and could also be without compatible devices upon the transition.
As described in more detail below, in order to address these and other concerns, we accept Verizon’s
commitments as conditions to our approval to mitigate unforeseen risks that may be contrary to the public
interest benefits.
111. Migration and Transition Plans. The Applicants state that Verizon already serves as the
underlying facilities-based provider for “almost 64 percent, or 13.3 million, of TracFone’s more than 20
million customers,” and that the “remaining 36 percent (approximately 7.6 million customers) are spread
out across the networks of T-Mobile (19 percent), AT&T Mobility (16 percent), and other carriers (one
percent).”
333
Verizon notes that it will not need to migrate TracFone customers already on Verizon’s
network,
334
and it maintains that Verizon will operate as an MVNO for the remaining customers on
AT&T, T-Mobile, and other networks until those customers are migrated to Verizon’s network.
335
For
TracFone customers outside Verizon’s network footprint, the Applicants state that they are pursuing
agreements with at least one MNO.
112. Verizon estimates that “the transition period to migrate all of TracFone’s customers onto
Verizon’s network” will last about {[ ]}.
336
Verizon explains that during this period, TracFone
will allow new TracFone subscribers to {[ ]} for a period that is
{[ ]} but which Verizon anticipates will be {[ ]}.
337
329
VZ-VZ-0000560 (Verizon, “Human Resources”).
330
Verizon Sept. 22, 2021 Ex Parte Letter at 2.
331
Section 1 of the Communications Act of 1934, as amended, provides that the FCC “regulat[es] interstate and
foreign commerce in communication by wire and radio so as to make [such service] available, so far as possible, to
all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or
sex.” 47 U.S.C. § 151.
332
See, e.g., Schools and Libraries Universal Support Mechanism, Notice of Proposed Rulemaking, CC Docket No.
02-6, FCC 21-107, para. 8 (rel. Oct. 1, 2021).
333
Application at 4.
334
Verizon May 14, 2021 RFI Response at 41.
335
Application at 6.
336
Verizon May 14, 2021 RFI Response at 42.
337
Id. at 42.
Federal Communications Commission FCC 21-121
44
113. Verizon maintains that, during the transition period, it will continue to serve TracFone
customers not on Verizon’s network over the same network serving them today through existing MVNO
arrangements.
338
It claims that “TracFone’s contracts with its underlying network partners” (serving over
95% of TracFone customers relying on non-Verizon networks) ensure that there will be an “orderly
transition period.”
339
The record shows that, except under very limited circumstances, TracFone’s reseller
agreements with AT&T, T-Mobile, and US Cellular ensure “a smooth glide path for TracFone customers,
even in the event that TracFone’s corporate ownership changes and TracFone and/or the MNOs seek to
terminate their contractual relationships.”
340
114. Some TracFone customers will remain outside Verizon’s network footprint post-
transaction. Internal documents show that there are approximately {[ ]} TracFone customers
outside Verizon’s network footprint.
341
Most of these customers—about {[
]}, and the remaining are spread throughout the United States.
342
For Puerto Rico customers,
TracFone represents that it has a “preliminary agreement” to extend its wholesale network service
contract with Claro for {[ ]}.
343
TracFone maintains that, by extending its agreement with
Claro, it has “ensured that it can continue to provide service in Puerto Rico without interruption.”
344
115. Commitments Recommended by Commenters. As discussed above, certain public interest
commenters initially objected to the transaction, but withdrew their objections after securing Verizon’s
initial August 11 commitments, which included—with respect to transition—agreeing to negotiate in
good faith with other MNOs to avoid service disruption to a significant number of TracFone customers
and increasing the range of cost-effective 5G devices.
345
The Open Technology Institute at New America
and Common Cause (OTI and Common Cause), however, remained skeptical of the “potential loopholes”
in Verizon’s August 11 commitments.
346
For example, they argue that the commitments do not address
the possibility that Verizon may “raise rates or abandon prepaid customers.”
347
They also are concerned
about “whether AT&T and T-Mobile would continue supporting TracFone service on their networks”
under Verizon ownership.
348
Finally, they recommend that the Commission “appoint an ombudsman or
compliance officer . . . to proactively monitor the conditions, ensure that low-income consumers are not
being harmed, and facilitate consumer complaints about potential violations . . . .”
349
116. Other commenters also express concern about customer transition. Mobile X states that
“Verizon has pledged to migrate” customers to its own network, but “it has acknowledged the likelihood
338
Verizon July 2, 2021 Supplemental RFI Response at 3.
339
Id. at 2; see also Application at 4.
340
América Móvil and TracFone July 7, 2021 Supplemental RFI Response at 2.
341
VZ-VZ-0000551, VZ-VZ-0000557.
342
VZ-VZ-0000551, VZ-VZ-0000557.
343
América Móvil and TracFone July 7, 2021 Supplemental RFI Response at 2.
344
Id.
345
Public Interest Groups Aug. 11, 2021 Ex Parte Letter at 1-2; Verizon Aug. 11, 2021 Ex Parte Letter at 1-2. The
Public Interest Groups’ withdrawal was contingent on the Commission accepting those commitments as binding and
enforceable commitments. Public Interest Groups Aug. 11, 2021 Ex Parte Letter at 2.
346
OTI-Common Cause Aug. 23, 2021 Ex Parte Letter at 3.
347
Id.
348
Id.
349
Id. at 2.
Federal Communications Commission FCC 21-121
45
of extraordinary churn . . . given the need for many such customers to purchase new handsets.”
350
One
commenter worries that Verizon will eliminate the non-Lifeline “low cost service” that he has used for
“over 10 years.”
351
The American Antitrust Institute states that the post-transaction customer migration
could result in Verizon’s “diverting subscribers of rival MVNOs to its new TracFone brand (at higher
prices).”
352
And as discussed above, five U.S. Senators seek commitments such as making 5G networks
and equipment available to Lifeline and prepaid customers; maintaining subscribers’ existing packages,
and “[m]arketing to, and providing customer service for, Lifeline and prepaid customers, including non-
English speaking customers, at least at the same level as TracFone provides today.”
353
117. Verizon’s Customer Migration and Transition Commitments. Verizon states that it plans
to “encourage a gradual and orderly migration,” and to “not ‘flash cut’ customers currently receiving
service on non-Verizon networks at closing.”
354
Verizon asserts that its “goal [post-transaction] is to
maintain and grow TracFone’s customer base”
355
and to “provide incentives for customers riding on other
networks to choose to migrate to Verizon.”
356
But Verizon also states that, “[g]iven the high level of
competition for, and customer churn among, prepaid customers, some current TracFone customers will
opt to take service from other companies rather than accept promotions to migrate to Verizon’s
network.”
357
118. Verizon has made certain commitments to facilitate customer transition and migration
over a three-year period, summarized here.
358
Verizon will maintain TracFone’s existing MVNO
agreements to serve customers outside Verizon’s network coverage for at least three years.
359
Verizon
will negotiate in good faith to extend the terms of TracFone’s existing MVNO agreements to at least three
years from the transaction closing if doing so would be necessary to avoid service disruption to TracFone
customers. Nothing in this commitment requires Verizon to modify the rates, terms, or conditions of any
agreement it assumes from TracFone. Before requiring TracFone customers to transition to Verizon’s
network, Verizon will send at least two toll-free text messages, e-mails, or voicemail notifications,
separated by at least two weeks, to all transitioning customers, unless prohibited by law, containing
specific information. Verizon will also maintain an exclusive, toll-free customer service line and a
dedicated website for at least three years after closing, subject to certain specifications. For at least three
years after closing, and before any TracFone customer is required to transition to Verizon’s network,
Verizon will offer at no cost a compatible device with comparable functionality and/or a SIM card
replacement to that customer if the customer’s existing device
360
is not compatible with the Verizon
350
Mobile X Mar. 1, 2021 Ex Parte Letter at 1. For this reason, Mobile X proposes that approval of the transaction
be conditioned on “Verizon’s divestiture of TracFone subscribers who currently are served by third-party networks.
Doing so would curb the potentially costly disruptions to these consumers by allowing them to remain on the AT&T
and T-Mobile networks.” Id. at 2.
351
Glenn Wegner Comments, GN Docket No. 21-112, at 1 (rec. July 20, 2021) (Wegner Comments).
352
AAI Apr. 2, 2021 Ex Parte Reply at 8.
353
Senators’ July 21, 2021 Ex Parte Letter at 3.
354
Verizon May 14, 2021 RFI Response at 40.
355
Id. at 51.
356
Id. at 41.
357
Id.
358
Verizon Nov. 18, 2021 Commitment Letter.
359
Nothing in this commitment is intended to conflict with or limit Verizon’s commitment above to continue service
for existing and new Lifeline customers for at least seven years after the transaction closes via its own network or
through MVNO agreements.
360
“Existing device” refers to the customer’s device as of the closing date.
Federal Communications Commission FCC 21-121
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network. Finally, for at least three years after the close of the transaction, Verizon will maintain existing
TracFone rate plans and allow existing and new customers to continue on those plans.
119. We find that TracFone customers should have a reasonable amount of time to learn about
and complete their migration process, whether they remain on Verizon’s network or an alternative
wireless provider. They should also have an easily-accessible method to review information on the
transaction, including their options. The three-year transition period and other Verizon commitments,
which we accept as conditions to our approval, will ensure that customers have adequate time to consider
their options, including any migration offers from Verizon, and to complete the migration process,
without incurring unnecessary or unexpected changes or charges in their rate plans, or diminished service.
120. We likewise find Verizon’s commitments with respect to customer outreach, marketing,
and notification necessary to inform customers of their transition options. To avoid undue interruption to
TracFone customers’ service during the transition process, the transition period must include an
opportunity for TracFone customers on non-Verizon networks to receive direct communication from
Verizon to inform them of the transaction, convey options, and provide a sufficient amount of time for
those customers to consider these options, including switching to another wireless provider by the end of
the transition period. We find that a three-year transition period will provide sufficient time for customers
to become sufficiently informed and choose their preferred path forward based on publicly available
information. We also find that a three-year transition period will mitigate issues with fixed-duration
customer plans (e.g., one-year plans). The conditions ensure that such customers will have sufficient
notice of upcoming changes to their service, and sufficient opportunity to consider these changes. We
therefore find that Verizon’s commitments, which we accept as conditions of approval, are essential to
provide a stable, orderly, and streamlined migration to the benefit of TracFone’s customers.
121. Finally, given the importance of ensuring that Verizon complies with its commitments,
we agree with OTI and Common Cause that a monitor is required to ensure that customers are not harmed
by the transaction. Accordingly, we accept Verizon’s commitment to pay for and retain both an internal
company compliance officer and an independent, external compliance officer to monitor compliance, as
described in more detail below.
361
D. Handset Unlocking
122. The Applicants contend that prepaid wireless providers lock handsets for a limited period
of time because the practice “enables device discounts that help price-sensitive consumers access critical
communications service, while ensuring a period of service fees to allow recovery of the devices’ real,
undiscounted costs.”
362
The Applicants acknowledge that Verizon’s 700 MHz C Block license
requirements prohibit C Block licensees—including Verizon—from “locking” handsets that use 700 MHz
C Block frequencies, or otherwise block or restrict customers’ use of applications on those devices.
363
In
361
A simultaneous provision for both a company compliance officer and an independent compliance officer has
been part of the conditions in prior transactions that the Commission has approved. See, e.g., Charter-Time Warner
Cable Order, 31 FCC Rcd 6327, 6553-57 (Appx. B: Conditions, IX.: Compliance Program and Reporting); AT&T-
DIRECTV Order, 30 FCC Rcd 9131, 9279, para. 398, 9297-9300 (Appx. B: Conditions, VII.: Compliance Program
and Reporting); Independent Compliance Officer Identified in Accordance with Charter-Time Warner-Bright House
Merger Condition, Public Notice, 31 FCC Rcd 8996 (WCB 2016); Independent Compliance Officer Identified in
Accordance with AT&T-DIRECTV Merger Condition, MB Docket No. 14-90, Public Notice, 30 FCC Rcd 11556
(MB 2015).
362
Verizon May 14, 2021 RFI Response at 58; see also Letter from William H. Johnson, Senior Vice President,
Verizon, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-112, at 1-2 (filed Nov. 3, 2021) (Verizon Nov.
3, 2021 Ex Parte Letter).
363
Verizon Nov. 3, 2021 Ex Parte Letter at 1-2; see also 47 CFR § 27.16(e); Service Rules for the 698-746, 747-762
and 777-792 MHz Bands, WT Docket No. 06-150, Second Report and Order, 22 FCC Rcd 15289, 15358-74, paras.
189-230 (2007).
Federal Communications Commission FCC 21-121
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2019, Verizon obtained a limited waiver of the locking prohibition that permits it to implement a
temporary, 60-day lock on the handsets.
364
Under the waiver, Verizon must automatically unlock its
handsets after the 60-day period.
365
TracFone is not bound by similarly narrow unlocking requirements.
Instead, pursuant to an Enforcement Bureau 2015 settlement, TracFone implements a 12-month handset
locking policy.
366
The Applicants state that TracFone’s policy permits it to “offer subsidized devices by
accounting for revenues anticipated by its 12-month device locking policy,” “protect its investment in
these devices,” and “stem the risk of loss through arbitrage.”
367
123. The Applicants recognize the locking period asymmetry between Verizon and TracFone
for certain subsidized devices. They contend that “after closing, customers acquiring TracFone devices
that operate on the C Block will be subject to a greatly reduced—from one year to 60 days—locking
period.”
368
They clarify that for customers “using Apple devices, unlocking will happen automatically.”
369
But because non-Apple TracFone devices “will not be capable of unlocking automatically, Verizon will
need some temporary relief from the C Block unlocking obligations for TracFone customer devices that
include 700 MHz C Block frequencies.”
370
124. To that end, Verizon commits to certain unlocking obligations. Within 30 days of the
close of the transaction, Verizon will extend its 60-day unlocking policy to all 700 MHz C Block devices
purchased from TracFone after closing and activated on the Verizon network, subject to a two-year
waiver of the automatic unlocking requirement to allow manual unlocking for those TracFone devices
that do not have automatic unlocking capabilities currently. Within 30 days after closing, Verizon will
notify all TracFone customers of its new unlocking policies. In addition, beginning 30 days after closing,
Verizon will notify TracFone customers of its unlocking policies upon activation of a new 700 MHz C
Block device that will operate on the Verizon network. For 700 MHz C Block TracFone devices that
operate on the Verizon network and are capable of unlocking automatically (e.g., Apple devices), they
will unlock automatically 60 days after activation. For 700 MHz C Block TracFone devices that operate
on the Verizon network and lack an automatic unlocking capability, Verizon will provide customers with
manual means to unlock the device 60 days after activation. When the 60-day period expires, Verizon
will provide clear and easy to follow instructions to those customers as to how they can manually unlock
their devices. No later than 24 months after closing, any new 700 MHz C Block TracFone device that
Verizon offers and that operates on Verizon’s network will be capable of automatically unlocking.
Finally, Verizon will report the total number of locked TracFone devices and, of that number, the total
number of devices that have the ability to automatically unlock within 60 days of closing and again on the
first and second anniversary of the closing. No commenter has raised concerns with respect to handset
unlocking.
125. We find Verizon’s unlocking commitments to be in the public interest and grant a further
limited waiver of Verizon’s 700 MHz C Block license requirements on our own motion. Generally, the
Commission may waive its rules with a showing of good cause.
371
The Commission may exercise its
364
See Service Rules for the 698-746, 747-762 and 777-792 MHz Bands, WT Docket No. 06-150, Order, 34 FCC
Rcd 5134, 5136-39, paras. 8-15 (WTB 2019) (Verizon Handset Unlocking Partial Waiver Order).
365
Verizon Handset Unlocking Partial Waiver Order, 34 FCC Rcd at 5137, para. 11.
366
See TracFone Wireless, Inc., File No.: EB-IHD-15-00018098, Order and Consent Decree, 30 FCC Rcd 6938 (EB
2015).
367
Verizon May 14, 2021 RFI Response at 59.
368
Id.; see also Verizon Nov. 3, 2021 Ex Parte Letter at 1.
369
Verizon Nov. 3, 2021 Ex Parte Letter at 3.
370
Verizon May 14, 2021 RFI Response at 59; see also Verizon Nov. 3, 2021 Ex Parte Letter at 3.
371
47 CFR § 1.3.
Federal Communications Commission FCC 21-121
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discretion to waive a rule where the particular facts make strict compliance inconsistent with the public
interest.
372
The Commission may also take into account considerations of hardship, equity, or more
effective implementation of overall policy on an individual basis.
373
WTB has already determined that a
limited waiver of the handset unlocking rule is in the public interest and allowed Verizon to automatically
unlock devices 60 days after device activation.
374
Here, we grant a further limited waiver: for 24 months
after closing, Verizon may unlock those TracFone devices that lack automatic unlocking capability by
providing manual unlocking means to customers seeking to unlock their devices. The reduced unlocking
period for TracFone devices (from 12 months to 60 days) will reduce barriers to migrating between
wireless providers. At the end of the 60 days from activation for devices purchased from TracFone after
closing and activated on the Verizon network, customers with non-Apple TracFone devices that lack
automatic unlocking capability will be able to unlock their devices manually. We are further persuaded
by Verizon’s statement that, due to contractual obligations and the supply chain cycle, TracFone requires
24 months to bring its devices into compliance with Verizon’s automatic unlocking obligations. We
therefore find Verizon’s commitments, in addition to our further limited waiver, to be in the public
interest.
E. Handset Accessibility
126. In support of the Applicants’ assertion that the transaction will generate substantial public
interest benefits, they state that Verizon will deliver to TracFone customers a wider variety of devices,
including “low cost flip phones with app store capabilities.”
375
Two commenters express concern,
however, that the proposed transaction may affect the availability of accessible feature phones for people
who are blind. The American Council of the Blind (ACB) asks that we consider the accessibility of
“wireless handsets, especially basic and feature phones.”
376
The National Federation of the Blind (NFB)
highlights that the 2020 Biennial Report to Congress on accessibility noted that accessibility gaps
continue to exist, including with respect to “the availability of accessible mobile phones with low-end
features, functions, and prices for people who are blind . . . .”
377
NFB urges the Commission to condition
transaction approval upon Verizon making “accessible any mobile devices scheduled for release
following the acquisition.”
378
127. In the Joint Reply, the Applicants represent that they “recognize the critical importance of
making mobile services accessible to people with disabilities.”
379
They note that “all of the mobile
372
Northeast Cellular Telephone Co., L.P. et al. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990) (Northeast Cellular).
373
WAIT Radio v. FCC, 418 F.2d 1153, 1159 (D.C. Cir. 1969); Northeast Cellular, 897 F.2d at 1166.
374
Verizon Handset Unlocking Partial Waiver Order, 34 FCC Rcd at 5137, para. 11.
375
Application at 12 (stating that the “transaction will allow Verizon to expand the portfolio of Verizon compatible
devices available to TracFone, such as more low-cost devices”).
376
American Council of the Blind Comments, GN Docket No. 21-112, at 1 (Dec. 16, 2020) (ACB Dec. 16, 2020
Comments). Feature phones are “used with wireless services and include (1) phones used primarily or exclusively
for voice communications and (2) phones used for voice communications and text messaging, with little or no
computing capabilities.” Implementation of Sections 716 and 717 of the Communications Act of 1934, as Enacted
by the Twenty-First Century Communications and Video Accessibility Act of 2010, Biennial Report to Congress as
Required by the Twenty-First Century Communications and Video Accessibility Act of 2010, 35 FCC Rcd 11227,
11234, para. 16 (CGB 2020) (2020 Biennial Report to Congress).
377
2020 Biennial Report to Congress, 35 FCC Rcd at 11229, para. 3; see also Letter from John G. Paré Jr.,
Executive Director, National Federation of the Blind, to Marlene H. Dortch, Secretary, FCC, GN Docket No. 21-
112, at 2 (filed Mar. 2, 2021) (NFB Mar. 2, 2021 Ex Parte Letter).
378
NFB Dec. 18, 2020 Comments at 2; see also NFB Mar. 2, 2021 Ex Parte Letter at 2 (requesting that “Verizon’s
acquisition of TracFone be approved only if Verizon be required to make accessible any mobile devices scheduled
for release following the acquisition.”).
379
Applicants’ Dec. 28, 2020 Joint Reply at 19.
Federal Communications Commission FCC 21-121
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phones that Verizon and TracFone offer are hearing aid compatible”
380
and that “TracFone already
employs numerous accessibility features in its devices, including for individuals who are hard of hearing,
visually impaired, or otherwise disabled.”
381
For its current and future business plans, Verizon provides to
handset manufacturers a set of requirements “intended to make the devices that Verizon offers usable and
effective for everyone, including the visually impaired.”
382
In response to a specific request for
information from the Commission, as set out in the footnote below,
383
the Applicants introduced into the
record a list of current low-cost feature phones that are for sale on the Verizon website and stated that
these phones are accessible to people who are blind or visually impaired.
384
128. We agree with commenters that handsets must continue to be accessible post-
transaction.
385
Based on our review of the record, we find that this transaction does not appear likely to
adversely affect handset accessibility. Sections 255, 716, and 718 of the Communications Act govern
accessibility requirements, including for handsets,
386
and the Applicants must comply with these sections.
VIII. REMEDIES
129. The Commission’s review of a proposed transaction entails a thorough examination of
the potential public interest harms and any verifiable, transaction-specific benefits, including any
commitments made by the Applicants to further the public interest. As part of this process, the
Commission may impose additional remedial conditions to address potential harms likely to result from
the proposed transaction or to help ensure the realization of any promised potential benefits.
387
If, on
balance, after taking into consideration these additional remedial conditions, the potential benefits
380
Id.
381
Id. at 20.
382
Id.
383
Verizon Apr. 14, 2021 Information Request at 3, Question 11.e (requesting Verizon to “[p]rovide a list of all
Company devices that are accessible and (1) operable by people without vision; (2) operable by people with low
vision and limited or no hearing; (3) operable by people with visual acuity between 20/70 and 20/200, without
relying on audio output; and (4) operable by people with little or no color perception”).
384
Verizon May 14, 2021 RFI Response at 60, Exhibit 11e (listing devices that Verizon currently offers its
customers).
385
ACB Dec. 16, 2020 Comments at 1 (explaining the continued importance of feature phones to people who are
blind, especially during the pandemic).
386
47 U.S.C. § 255 (requiring providers of telecommunications service and manufacturers of telecommunications
equipment or customer premises equipment to ensure that such
services and equipment are accessible to and usable
by individuals with disabilities, if readily achievable); 47 U.S.C. § 617 (requiring providers of advanced
communications services and equipment to ensure that their services and equipment are accessible to and usable by
individuals with disabilities, unless doing so is not achievable); 47 U.S.C. § 619 (requiring mobile phone service
providers and manufacturers to make Internet browsers built into mobile phones accessible to and usable by people
who are blind or have a visual impairment, unless doing so is not achievable); see generally 2020 Biennial Report to
Congress, 35 FCC Rcd 11227.
387
Applications of Cellco Partnership d/b/a Verizon Wireless and SpectrumCo LLC and Cox TMI, LLC for Consent
to Assign AWS-1 Licenses, et al., WT Docket No. 12-4, et al., Memorandum Opinion and Order and Declaratory
Ruling, 27 FCC Rcd 10698, 10739-40, para. 111 (2012); AT&T-Centennial Order, 24 FCC Rcd 13915, 13929, para.
30. Regarding remedying harms, the Commission has held that it will impose conditions only to remedy harms that
arise from the transaction (i.e., transaction-specific harms) and that are related to the Commission’s responsibilities
under the Communications Act and related statutes. Applications of AT&T Inc. and Cellco Partnership d/b/a
Verizon Wireless for Consent to Assign or Transfer Control of Licenses and Authorizations and Modify a Spectrum
Leasing Arrangement, WT Docket No. 09-104, Memorandum Opinion and Order, 25 FCC Rcd 8704, 8747, para.
101 (2010).
Federal Communications Commission FCC 21-121
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associated with the proposed transaction outweigh any remaining potential harms, the Commission will
find that the proposed transaction serves the public interest.
130. Verizon has made numerous commitments to address any public interest harms and
ensure the realization of certain public interest benefits. We find that, in light of Verizon’s commitments,
which we accept and make conditions to our approval, the public interest benefits of the proposed
transaction outweigh the public interest harms, such that overall, the proposed transaction is in the public
interest. The commitments contained in this Order and in Appendix B, which we accept and make
conditions, along with the conditions detailed in Appendix C (compliance program and reporting
conditions), comprise the conditions of our approval (Conditions).
A. Lifeline
131. We find above that the transaction as proposed has the potential to cause some public
interest harms, particularly to Lifeline customers and particularly in areas where TracFone’s resale
services are outside Verizon’s network. We thus find it necessary to impose as conditions the
commitments Verizon has made regarding the Lifeline program to mitigate these potential harms and to
ensure that Lifeline subscribers experience the asserted public interest benefits.
132. Verizon, directly or through its affiliates, will continue offering Lifeline services for at
least seven years from the close of the transaction over the same service area where TracFone currently
offers Lifeline service. Verizon will ensure that all of Verizon/TracFone’s Lifeline service offerings will
meet or exceed the Lifeline MSS in place throughout this time period. Verizon will ensure continued
service for existing and new Lifeline customers for the entirety of that period either via its own network
or through MVNO agreements. Verizon may seek a waiver of this commitment in areas where it does not
have its own network if it is unable to extend a necessary MVNO agreement under commercially
reasonable terms. Before any TracFone Lifeline customer is required to transition to Verizon’s network,
Verizon will offer at no cost a compatible device with comparable functionality and/or SIM replacement
to that customer if the customer’s existing device
388
is not compatible with the Verizon network.
133. We also accept Verizon’s commitment that it will continue to offer and advertise existing
TracFone Lifeline rate plans for at least three years after the transaction closes unless the plan no longer
meets Lifeline MSS standards. Verizon may substitute better terms for any existing plan provided that
the monthly price and any co-pays do not increase. Nothing in these commitments prevents Verizon from
offering additional Lifeline plans with different terms. In addition, we accept Verizon’s commitment that
it will continue to offer and advertise and will not add new co-pays to TracFone’s existing Lifeline plans
that currently are offered at no cost to prepaid customers for at least three years after the transaction
closes. In the event the Commission increases the Lifeline MSS, Verizon must offer at least one plan in
compliance with these new requirements at no cost to Lifeline eligible consumers for at least three years.
Nothing in this commitment prevents Verizon from seeking a waiver of the commitment to offer a no-cost
plan should an increase in Lifeline MSS significantly raise compliance costs. Further, this commitment
does not prevent Verizon from pursuing compensation through state or federal device reimbursement
programs as long as no unrecovered costs are passed on to Verizon’s Lifeline subscribers.
134. Within six months after the transaction closes, Verizon will make available to existing
and new Lifeline prepaid customers the lowest cost plan that includes 5G service and meets Lifeline MSS
that is offered by any of its subsidiaries or affiliates and will offer a range of cost-effective 5G devices to
existing and new Lifeline customers for a minimum of seven years after the close of the transaction.
Within six months, Verizon will furnish to WTB a list of devices that currently meet these criteria, which
shall be used for comparison during the length of this commitment.
135. Consistent with its commitment, we also require Verizon, for at least seven years after the
close of the transaction, to maintain marketing and advertising expenditures for Lifeline at levels that
388
“Existing device” refers to the customer’s device as of the closing date.
Federal Communications Commission FCC 21-121
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equal or exceed the average of TracFone’s marketing and advertising expenditures for the three calendar
years before the Applicants filed the application for consent to transfer control. During this time period,
Verizon will market and advertise through similar channels as TracFone. Verizon will maintain a new,
dedicated website with information about the Lifeline program, how to apply for Lifeline, and a list of its
Lifeline plans and instructions for obtaining any necessary replacement devices and/or SIM cards. A link
to the new, dedicated Lifeline website will appear on the home page of the Verizon.com and TracFone
websites. The website also will be clearly accessible in each language that TracFone has used in its own
marketing and advertising. The Verizon.com home page will contain a link to “TracFone” under the
“Shop” category that directly links to the home page of TracFone’s website (containing the information
detailed in these commitments). The search function on Verizon’s home page will also lead to a
“Lifeline” page that includes the details of TracFone’s offerings, including a link to the dedicated Lifeline
customer service line and the new, dedicated Lifeline website. Verizon will maintain a dedicated
customer service line for Lifeline customers, staffed by trained customer service agents able to address
customer inquiries concerning how to apply for Lifeline, Lifeline offerings, and transition issues,
including instructions for obtaining any necessary replacement devices and/or SIM cards. The telephone
number for this customer service line will be displayed on the home page of TracFone’s website and on
Verizon’s new, dedicated Lifeline website. Verizon will target Lifeline advertisements to Lifeline
eligible subscribers, using the same languages, similar advertising and outreach media, and grassroot
efforts that TracFone used.
B. Assumption of Liability
136. Without prejudicing contractual indemnification rights between Verizon and América
Móvil, we make a condition of our approval that Verizon and its successors, assigns, and transferees will
assume liability for any forfeitures, restitution, or other obligations that may be imposed by the
Commission or USAC on TracFone and its subsidiaries, and any successors or assigns, unless such
liability has been resolved by TracFone prior to the closing of the transaction, and to comply with any
agreements with the Commission or USAC, including following any compliance plans, or other
obligations, agreed to by TracFone, its subsidiaries, or any successors or assigns.
C. Customer Migration and Transition
137. The record indicates that TracFone customers face an uncertain transition period and may
also lack compatible devices upon transition. Verizon makes the following commitments to mitigate
these concerns, which we accept and impose as conditions to our approval. These conditions will
promote the public interest.
138. First, Verizon will maintain TracFone’s existing MVNO agreements to serve customers
outside Verizon’s network coverage (including Puerto Rico) for a minimum of three years after close of
the transaction. Nothing in this commitment is intended to conflict with or limit Verizon’s commitment
above to continue service for existing and new Lifeline customers for at least seven years after the
transaction closes via its own network or through MVNO agreements. Verizon will negotiate in good
faith to extend the terms of TracFone’s existing MVNO agreements to at least three years from the
transaction closing if doing so would be necessary to avoid service disruption to TracFone customers.
Verizon may seek a waiver of this condition if it is unable to negotiate an extension at commercially
reasonable terms. Nothing in this commitment requires Verizon to modify the rates, terms, or conditions
of any agreement it assumes from TracFone.
139. Second, before requiring any TracFone customers to transition to Verizon’s network,
Verizon will send at least two toll-free text messages, e-mails, or voicemail notifications, separated by at
least two weeks, to all transitioning customers, unless prohibited by law. The notification will provide
access to the following information: the migration date; a description of any steps the customer must take
to be transitioned; a statement that the current plan which the customer uses will remain available for at
least three years after the close of the transaction; and information concerning the toll-free phone and
dedicated website that are available for additional information on the transition.
Federal Communications Commission FCC 21-121
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140. Third, for at least three years after the close of the transaction, Verizon will maintain an
exclusive, toll-free customer service line for all TracFone customers, staffed by trained customer service
agents able to address customer inquiries regarding transition issues. The telephone number for this
customer service line will be displayed on the first page of TracFone’s home page (which will be directly
linked on Verizon’s home page, as discussed in the Lifeline commitments above). The telephone number
will also be displayed on any physical transition-related material.
141. Fourth, Verizon will conduct outreach, advertising, and displaying of all TracFone plans
on a dedicated website for three years after the close of the transaction. The website will: (a) clearly
indicate transition deadlines for those three years; (b) clearly explain that customers will be able to
maintain their current plans for three years and display the relevant expiration dates; (c) be clearly
accessible in each language that TracFone used to provide notifications prior to the transaction close;
(d) disclose availability of other network providers in a customer’s area; and (e) prominently display the
exclusive toll-free customer service line. Verizon will include a prominently-featured, easy-to-locate link
to the dedicated website on TracFone’s home page (which will be directly linked on Verizon’s home
page, as discussed in the Lifeline commitments above). Verizon and TracFone will also prominently
display the link to the dedicated website on all physical transition-related material.
142. Fifth, for at least three years after the close of the transaction, before any TracFone
customer is required to transition to Verizon’s network, Verizon will offer at no cost a compatible device
with comparable functionality and/or SIM replacement to that customer if the customer’s existing
device
389
is not compatible with the Verizon network.
143. Sixth, for at least three years after the close of the transaction, Verizon will maintain
existing TracFone rate plans and allow existing and new customers to continue on those plans.
D. Handset Unlocking
144. To comply with its 700 MHz C Block license obligations, within 30 days of the close of
the transaction, Verizon will extend its 60-day unlocking policy to all 700 MHz C Block devices
purchased from TracFone after closing and activated on the Verizon network, subject to a two-year
waiver of the automatic unlocking requirement to allow manual unlocking for those TracFone devices
that do not have automatic unlocking capabilities currently. Within 30 days after closing, Verizon will
notify all TracFone customers of its new unlocking policies. In addition, beginning 30 days after closing,
Verizon will notify TracFone customers of its unlocking policies upon activation of a new 700 MHz C
Block device that will operate on the Verizon network. For 700 MHz C Block TracFone devices that
operate on the Verizon network and are capable of unlocking automatically (e.g., Apple devices), they
will unlock automatically 60 days after activation. For 700 MHz C Block TracFone devices that operate
on the Verizon network and lack an automatic unlocking capability, Verizon will provide customers with
manual means to unlock the device 60 days after activation. When the 60-day period expires, Verizon
will provide clear and easy to follow instructions to those customers as to how they can manually unlock
their devices. No later than 24 months after closing, any new 700 MHz C Block TracFone device that
Verizon offers and that operates on Verizon’s network will be capable of automatically unlocking.
Finally, Verizon will report the total number of locked TracFone devices and, of that number, the total
number of devices that have the ability to automatically unlock within 60 days of closing and again on the
first and second anniversary of the closing.
E. Wholesale Service
145. As we note above, commenters argue that the acquisition of TracFone could increase
Verizon’s incentive post-transaction to increase wholesale prices or degrade wholesale service quality
389
“Existing device” refers to the customer’s device as of the closing date.
Federal Communications Commission FCC 21-121
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provided to MVNOs, particularly those offering prepaid service in competition with TracFone.
390
To
address and mitigate this vertical harm to low-cost prepaid MVNOs that compete with TracFone, Verizon
has committed to provide those MVNOs who have current contracts with Verizon an option to extend
their existing MVNO wholesale agreements, on the same terms and conditions, continuing on a month-to-
month basis until three years after the transaction closes. This option does not apply to MVNOs whose
agreements expire beyond three years after the transaction closes nor to any terms that would apply to the
provision of fixed wireless services.
391
In the event that the MVNO contract in question specifies
different terms from year to year, the MVNO may extend the contract based on the terms in effect during
the last year of the contract. We accept this commitment and make it a condition of our approval.
F. Compliance Officers and Reporting
146. These conditions serve an important role in securing the public interest benefits and
mitigating the potential public interest harms of this transaction. Accordingly, to ensure that Verizon
complies with the order’s conditions, we accept and make a condition of our approval Verizon’s
commitment to pay for and retain both an internal company compliance officer and an independent
compliance officer to monitor compliance with the commitments, as described in this order, for a period
of seven years and six months following the close of the transaction.
392
In addition, Verizon must submit
publicly available semi-annual reports to the Commission describing its compliance with these
commitments that includes certain information regarding Lifeline and non-Lifeline customers for seven
years, as specified below and in Appendix C.
393
The independent compliance officer must submit
compliance reports to the Commission after each semi-annual report that describe Verizon’s efforts to
meet these commitments as set forth in Appendix C.
394
Verizon also must report any material
noncompliance shortly after discovery of such noncompliance.
395
Further details on Verizon’s
compliance and reporting conditions are contained in Appendix C. Enforcement responsibilities remain
the sole province of the Commission.
147. Verizon’s reports will include: (1) the current number of Lifeline and non-Lifeline
prepaid subscribers as of the end of the reporting period; (2) data regarding TracFone customers that have
been transitioned to Verizon’s network from other networks, including the number of devices that have
successfully transferred, as of the end of the reporting period; (3) the availability of 5G for Lifeline
customers, including which geographic service areas have access to Verizon’s 5G network and the
number of Lifeline customers subscribing to a 5G service as of the end of the reporting period; and (4) all
states where TracFone offers a Lifeline-supported service and a state-by-state breakdown of amounts
spent on advertising and other marketing activities associated with Lifeline.
148. Verizon may file proprietary information with the Commission on a confidential basis,
making it available only to representatives of parties that have signed the relevant protective order (either
during the pendency of the proceeding or thereafter) provided that Verizon shall also file a public version
redacting the proprietary information to be available for review by the public.
390
See, e.g., AAI Apr. 2, 2021 Ex Parte Reply at 7-8; CWA Comments at 13; Public Knowledge et al. Oct. 16, 2020
Opposition at 12; Public Interest and Civil Rights Groups Apr. 6, 2021 Comments at 3.
391
For avoidance of doubt, an MVNO agreement provision that allows for negotiating a replacement agreement
under certain conditions does not constitute an expiration of that agreement.
392
See infra Appx. C (Compliance Program and Reporting).
393
See infra Appx. C (Reporting Requirements).
394
While these reports will be made publicly available, some of the information may include material that is
confidential and may be submitted for confidential treatment under Commission rules.
395
See infra Appx. C (Independent Compliance Officer and Company Obligation to Report Noncompliance).
Federal Communications Commission FCC 21-121
54
G. Enforcement
149. Any material failure to comply with any condition identified in the order, including
Appendices B and C, may result in the following: (1) an appropriate forfeiture penalty under applicable
law; (2) extension of the duration of any condition; and (3) any other appropriate sanctions and remedies
allowed under the Communications Laws, including, but not limited to, an award of damages for the
benefit of consumers for any harm incurred, issuance of cease-and-desist orders, modification of the
conditions, and issuance of an order requiring appropriate remedial action.
396
A violation of any of these
conditions will be a violation of the order.
IX. CONCLUSION
150. After carefully reviewing the record in this proceeding and performing a thorough and
extensive analysis, we find that the transaction will lower TracFone’s costs to provide service and
improve its ability to offer prepaid and Lifeline services. These benefits, combined with Verizon’s robust
commitments, which we accept as conditions of our approval, ensure that the proposed transaction will
serve the public interest, convenience, and necessity. Accordingly, we approve the transaction.
X. ORDERING CLAUSES
151. ACCORDINGLY, having reviewed the Application and the record in this matter, IT IS
ORDERED that, pursuant to sections 4(i) and (j), and 214 of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 154(i), 154(j), 214, the Application for Consent to Transfer Control of TracFone
Wireless, Inc.’s international section 214 authorization from América Móvil, S.A.B. de C.V. to Verizon
Communications Inc. is GRANTED to the extent specified in this Memorandum Opinion and Order and
subject to the conditions specified herein, including Appendices B and C.
152. IT IS FURTHER ORDERED that the conditions incorporated herein shall continue to
apply until they expire by their own terms as expressly stated or as otherwise provided in Appendices B
and C.
153. IT IS FURTHER ORDERED, pursuant to section 4(i) of the Communications Act of
1934, as amended, 47 U.S.C. § 154(i), and section 1.3 of the Commission’s rules, 47 CFR § 1.3, that
Verizon’s request for a partial temporary waiver of section 27.16(e) of the Commission’s rules, 47 CFR
§ 27.16(e), IS GRANTED to the extent specified herein.
154. IT IS FURTHER ORDERED that this Order SHALL BE EFFECTIVE upon release.
Petitions for reconsideration under section 1.106 of the Commission’s rules, 47 CFR § 1.106, may be
filed within thirty days of the release date of this Memorandum Opinion and Order.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
396
The enforcement and compliance programs established in these conditions are intended to supplement the
Commission’s usual enforcement and investigative powers, which remain fully applicable, and do not replace such
powers.
Federal Communications Commission FCC 21-121
APPENDIX A
Commenters
Filings in Opposition to the Petition for Streamlining and Replies
Communications Workers of America, Opposition Comments (rec. Nov. 19, 2020)
Public Knowledge, Open Technology Institute at New America Foundation, and the Benton
Institute for Broadband and Society, Opposition Comments, (rec. Oct. 16, 2020); Reply to
Applicants’ Response (rec. Oct. 30, 2020)
T-Mobile USA, Inc., Opposition Comments, (rec. Oct. 13, 2020), Reply to Applicants’ Response
(rec. Oct. 29, 2020)
Verizon Communications Inc., TracFone Wireless, Inc., and América Móvil, S.A.B. de C.V.,
Reply to Opposition Comments (rec. Oct. 23, 2020)
Comments and Reply Comments Filed on or Before March 30, 2020
American Council of the Blind, Comments (rec. Dec. 16, 2020)
Communication Workers of America, First Comments (rec. Dec. 18, 2020); Second Comments
(rec. Mar. 12, 2021)
National Federation of the Blind, Comments (rec. Dec. 18, 2021)
Next Century Cities, Comments (rec. Dec. 18, 2020)
Public Knowledge, Access Humboldt, Benton Institute for Broadband and Society, California Center for
Rural Policy, Next Century Cities, Open Technology Institute at New America, Tribal Digital
Networks, and, Joint Comments (rec. Dec. 18, 2020)
T-Mobile USA, Inc., Comments (rec. Dec. 18, 2020)
Verizon Communications Inc., América Móvil, S.A.B. de C.V., and TracFone Wireless, Inc., Joint Reply
(rec. Dec. 28, 2020)
Comments and Reply Comments Filed After March 30, 2020
Anthony Schettler, Comments (rec. Apr. 9, 2021)
American Antitrust Institute, Reply (rec. Apr. 2, 2021)
Communication Workers of America, First Comments (rec. Dec. 18, 2020); Reply Comments (rec. Mar. 2, 2021)
Glenn Wegner, Comment (rec. Jul. 20, 2021)
National Wireless Independent Dealer Association (rec. Aug. 27, 2021)
Open Technology Institute at New America, Comments (rec. Apr. 12, 2021)
Public Knowledge, Access Humboldt, Benton Institute for Broadband and Society, Next Century Cities,
and the Open Technology Institute at New America, Joint Comments (rec. Mar. 12, 2021)
The Leadership Conference on Civil and Human Rights, Comments (rec. Apr. 6, 2021)
Filers of Ex Parte Submissions and Letters
Attorneys General (17) Joint Ex Parte Filing from: Mark R. Herring, Attorney General of Virginia;
Aaron D. Ford, Attorney General of Nevada; Peter Neronha, Attorney General of Rhode Island; Ellen
F. Rosenblum, Attorney General of Oregon; Keith Ellison, Attorney General of Minnesota; Kathy
Jennings, Attorney General of Delaware; William Tong, Attorney General of Connecticut; Karl A.
Racine, Attorney General for the District of Columbia; Letitia James, Attorney General of New York;
Dana Nessel, Michigan Attorney General; Bob Ferguson, Washington State Attorney General; Maura
Healey, Massachusetts Attorney General; Tom Miller, Attorney General of Iowa; Thomas J.
Donovan, Jr., Vermont Attorney General; Josh Stein, North Carolina Attorney General; Tom Miller,
Attorney General of Iowa; Philip Weiser, Colorado Attorney General; and Hector Balderas, New
Mexico Attorney General
Asian Americans Advancing Justice (AAJC)
Free Press, American Civil Liberties Union (ACLU), Benton Institute for Broadband & Society, Center
for American, Progress, Center for Rural Strategies, Color of Change, Communications Workers of
America, Consumer Reports, Demand Progress, Electronic Frontier Foundation, EveryoneOn,
Federal Communications Commission FCC 21-121
56
Hispanic Technology & Telecommunications Partnership, LGBT Tech, Multicultural Media,
Telecom & Internet Council (MMTC), National Association of State Utility Consumer Advocates
(NASUCA), National Consumer Law Center, Next Century Cities, National Digital Inclusion
Alliance, National Hispanic Media Coalition, New America’s Open Technology Institute, The Pew
Charitable Trusts’ Broadband Research Initiative, Public Knowledge, The Greenlining Institute, The
Utility Reform Network (TURN), U.S. Hispanic Chamber of Commerce, Worth Rises (Joint Ex Parte
filing)
Communications Workers of America, Boost Mobile (Joint Ex Parte filing)
Common Cause, Access Humboldt, Access Now, Advocates for Basic Legal Equality, Asian Americans
Advancing Justice | Asian American Justice Center (AAJC), Center for Accessible Technology,
Center for Rural Strategies, Communications Workers of America, Free Press, Libraries Without
Borders, Media Justice, National Consumer Law Center (on behalf of its low-income clients),
National Council of Asian Pacific Americans, National Hispanic Media Coalition, New America’s
Open Technology Institute, Next Century Cities, Open Media, Public Citizen, Public Knowledge, The
Benton Institute for Broadband & Society, The Greenlining Institute, The Utility Reform Network
(TURN), United Church of Christ, OC Inc., (Joint Ex Parte filing)
Communications Workers of America and Public Knowledge (Joint Ex Parte filing)
Free Press
Hispanic Leadership Fund (HLC)
MANA–A National Latina Organization
Multicultural Media, Telecom and Internet Council (MMTC), National Black Caucus of State Legislators,
National Organization of Black Elected Legislative Women, U.S. Black Chambers, Inc., Rainbow
PUSH Coalition (Joint Letter)
Mobile X
National Asian/Pacific Islander American Chamber of Commerce and Entrepreneurship (National ACE)
National Caucus and Center on Black Aging (NCBA)
National Council of Asian Pacific Americans (NCAPA)
National Federation of the Blind
National Hispanic Council on Aging (NHCOA)
National LGBT Chamber of Commerce (NLGBTCC)
National Puerto Rican Chamber of Commerce
National Urban League, National Action Network, and the National Coalition of Black Civic
Participation (Joint Letter)
NTCH Inc.
OCA–Asian Pacific American Advocates
Open Technology Institute at New America
Open Technology Institute at New America and Common Cause (Joint Letter)
Public Knowledge
Public Knowledge, Access Humboldt, Benton Institute for Broadband & Society, California Center for
Rural Policy, Communications Workers of America (Joint Letter)
U.S. Senators Richard Blumenthal, Diane Feinstein, Edward J. Markey, Sheldon Whitehouse, and Ron
Wyden, Joint Letter to FCC Chairwoman Jessica Rosenworcel
United States Hispanic Chamber of Commerce (USHCC)
United States–Mexico Chamber of Commerce
Verizon Communications Inc.
Verizon Communications Inc., TracFone Wireless, Inc., and América Móvil, S.A.B. de C.V.
1300 I Street, NW
Suite 500 East
Washington, DC 20005
William H. Johnson
Senior Vice President
Federal Regulatory & Legal Affairs
November 18, 2021
VIA ELECTRONIC FILING
Marlene H. Dortch, Secretary
Federal Communications Commission
45 L Street, NE
Washington, DC 20554
Re:
Application for Consent to Transfer Control of International Section 214 Authorization,
GN Docket No. 21-112
Dear Ms. Dortch:
On November 16 and 17, 2021, representatives of Verizon met via teleconference with Commission staff
(see Attachment A for list of participants) to discuss the Verizon/TracFone transaction and potential commitments
regarding advancing Lifeline, facilitating a smooth customer transition to the Verizon network, and other issues. In
light of the record established in this proceeding and subject to the commitments set forth below, we request
grant of the application to transfer control of TracFone’s International Section 214 authorization in connection
with Verizon’s acquisition of TracFone.
1
A combined Verizon and TracFone will better serve existing and potential TracFone customers and inject
further competition into the prepaid segment for value-conscious customers, including Lifeline customers. The
commitments – including our commitment to participate in the Lifeline program for at least seven years – reflect
Verizon’s dedication to helping meet the communications needs of lower-income consumers with affordable
broadband options. Consumers will benefit as the number of facilities-based providers in the prepaid segment
effectively moves from two to three. And equipping TracFone with a network will lower TracFone’s costs, allowing
it to leverage owner’s economics to offer value-conscious consumers more competitive plans; make TracFone
more nimble in responding to consumer demands and competitive offers; and deliver a new level of device-buying
power to TracFone, resulting in better deals for TracFone’s customers.
While a combined Verizon and TracFone will benefit value-conscious prepaid consumers and serve the
public interest, Verizon recognized that some stakeholders expressed concern about certain aspects of the
transaction. Verizon worked with these stakeholders – including Public Knowledge, Access Humboldt, the Benton
Institute for Broadband and Society, the California Center for Rural Policy, and Communications Workers of
1
See Application for Consent to Transfer Control of International Section 214 Authorization, IBFS File No. ITC-T/C-
20200930-00173 (filed Sept. 30, 2020).
APPENDIX B
Verizon's Commitments
57
Marlene H. Dortch, Secretary
November
18, 2021
Page 2 of 8
America – to address their concerns through a series of commitments,
2
and we are pleased that the transaction
has garnered additional support from the National Urban League, National Action Network, and others.
3
Durin
g the recent calls, Commission staff expressed concern about certain aspects of the transaction. In
order to respond to these concerns and address them definitively, Verizon offers the following commitments:
Lifelin
e
:
• Term Length and Scope:
o Verizon, directly or through its affiliates, will continue to offer Lifeline services for at least seven years
from the close of the transaction over the same service area where TracFone currently offers Lifeline
service;
o All Verizon/TracFone’s Lifeline service offerings will meet or exceed the Lifeline minimum service
standards (MSS) in place throughout this time period. Verizon will ensure continued service for
existing and new Lifeline customers for the entirety of that period either via its own network or
through MVNO agreements. Verizon may seek a waiver of this commitment in areas where it does
not have its own network if it is unable to extend a necessary MVNO agreement under commercially
reasonable terms; and
o Before any TracFone Lifeline customer is required to transition to Verizon’s network, Verizon will
offer at no cost a compatible device with comparable functionality and/or SIM replacement to that
customer if the customer’s existing device
4
is not compatible with the Verizon network.
• Main
tain Existing Plans
:
o Verizon will continue to offer and advertise existing TracFone Lifeline rate plans for at least three
years after the transaction closes unless the plan no longer meets Lifeline MSS standards.
Verizon may substitute better terms for any existing plan provided that the monthly price and
any co-pays do not increase. Nothing in these commitments prevents Verizon from offering
additional Lifeline plans with different terms.
o Verizon will continue to offer and advertise and will not add new co-pays to TracFone’s existing
Lifeline plans that currently are offered at no cost to prepaid customers for at least three years after
the transaction closes.
In the event the Commission increases the Lifeline MSS, Verizon will offer at least one plan in
compliance with these new requirements at no cost to Lifeline eligible consumers for at least
three years after close of the transaction. Nothing in this commitment shall prevent Verizon
2
See Letter from Public Knowledge et al. (Aug. 11, 2021); see also Letter from Verizon (Aug. 11, 2021); Letter from
Verizon (Sept. 22, 2021).
3
Letter from National Urban League et al. (Sept. 23, 2021); see also Letter from United States-Mexico Chamber of
Commerce (Sept. 24, 2021); Letter from MANA, A National Latina Organization (Sept. 27, 2021); Letter from the
National Puerto Rican Chamber of Commerce (Sept. 28, 2021); Letter from United States Hispanic Chamber of
Commerce (Oct. 5, 2021); Letter from National LGBT Chamber of Commerce (Oct. 6, 2021); Letter from National
Hispanic Council on Aging (Oct. 13, 2021).
4
“Existing device” refers to the customer’s device as of the closing date.
58
Marlene H. Dortch, Secretary
November
18, 2021
Page 3 of 8
from seeking a waiver of the commitment to offer a no-cost plan should an increase in Lifeline
MSS significantly raise compliance costs. In addition, nothing in this commitment shall prevent
Verizon from pursuing compensation through state or federal device reimbursement programs
so long as no unrecovered costs are passed on to Verizon’s Lifeline subscribers.
• Lifelin
e Marketing and Advertising
:
o For at least seven years following the close of the transaction, Verizon will maintain marketing and
advertising expenditures for Lifeline at levels that equal or exceed the average of TracFone’s
marketing and advertising expenditures for the three calendar years before the Applicants filed the
application for consent to transfer control. During this period, Verizon will market and advertise
through similar channels as TracFone. Specifically:
Verizon will maintain a new, dedicated website with information about the Lifeline program, how
to apply for Lifeline, and a list of its Lifeline plans and instructions for obtaining any necessary
replacement devices and/or SIM cards. A link to the new, dedicated Lifeline website will appear
on the home page of the Verizon.com and TracFone websites. The website also will be clearly
accessible in each language that TracFone has used in its own marketing and advertising.
The Verizon.com home page will contain a link to “TracFone” under the “Shop” category that
directly links to the home page of TracFone’s website (containing the information detailed in
these commitments). The search function on Verizon’s home page will also lead to a “Lifeline”
page that includes the details of TracFone’s offerings, including a link to the dedicated Lifeline
customer service line and the new, dedicated Lifeline website.
Verizon will maintain a dedicated customer service line for Lifeline customers, staffed by trained
customer service agents able to address customer inquiries concerning how to apply for Lifeline,
Lifeline offerings, and transition issues, including instructions for obtaining any necessary
replacement devices and/or SIM cards. The telephone number for this customer service line will
be displayed on the home page of TracFone’s website and on Verizon’s new, dedicated Lifeline
website.
Verizon will target Lifeline advertisements to Lifeline eligible subscribers, using the same
languages, similar advertising and outreach media, and grassroot efforts that TracFone used.
Lifeline 5G Condition
: Within six months after the transaction closes, Verizon will make available to existing and
new Lifeline prepaid customers the lowest cost plan that includes 5G service and meets Lifeline MSS that is offered
by any of its subsidiaries or affiliates, and will offer a range of cost-effective 5G devices to existing and new Lifeline
customers for a minimum of seven years after the close of the transaction. Within six months of closing, Verizon
will furnish to the Wireless Telecommunications Bureau a list of devices that currently meet these criteria, which
shall be used for comparison during the length of this commitment.
Trac
Fone Liability
: Without prejudicing contractual indemnification rights between Verizon and América Móvil,
Verizon and its successors, assigns, and transferees will assume liability for any forfeitures, restitution, or other
obligations that may be imposed by the Commission or the Universal Service Administrative Company (USAC) on
TracFone and its subsidiaries, and any successors or assigns, unless such liability has been resolved by TracFone
prior to the closing of the transaction, and it will comply with any agreements with the Commission or USAC,
59
Marlene H. Dortch, Secretary
November
18, 2021
Page 4 of 8
including following any compliance plans, or other obligations, agreed to by TracFone, its subsidiaries, or any
successors or assigns.
Cust
omer Service and Transition Issues
:
• Service Condition:
o Verizon will maintain TracFone’s existing MVNO agreements to serve customers outside Verizon’s
network coverage (including Puerto Rico) for a minimum of three years after close of the transaction.
Nothing in this commitment is intended to conflict with or limit Verizon’s commitment above to
continue service for existing and new Lifeline customers for at least seven years after the transaction
closes via its own network or through MVNO agreements.
Verizon will negotiate in good faith to extend the terms of TracFone’s existing MVNO agreements
to at least three years from the transaction closing if doing so would be necessary to avoid
service disruption to TracFone customers. Verizon may seek a waiver of this condition if it is
unable to negotiate an extension at commercially reasonable terms. Nothing in this commitment
requires Verizon to modify the rates, terms, or conditions of any agreement it assumes from
TracFone.
• Customer Transition to Verizon Network
:
o Customer notification. Before requiring any TracFone customers to transition to Verizon’s network,
Verizon will send at least two toll-free text messages, emails, or voicemail notifications, separated by
at least two weeks, to all transitioning customers, unless prohibited by law. The notification will
provide access to the following information: the migration date; a description of any steps the
customer must take to be transitioned; a statement that the current plan which the customer uses
will remain available for at least three years after the close of the transaction; and information
concerning the toll-free phone number and dedicated website that are available for additional
information on the transition.
o Customer service line. For at least three years after the close of the transaction, Verizon will maintain
an exclusive, toll-free customer service line for all TracFone customers, staffed by trained customer
service agents able to address customer inquiries regarding transition issues. The telephone number
for this customer service line will be displayed on the first page of TracFone’s website (which will be
directly linked on Verizon’s home page, as discussed above). The telephone number will also be
displayed on any physical transition-related material.
o Dedicated website. Verizon will conduct outreach, advertising, and displaying of all TracFone plans on
a dedicated website for three years after the close of the transaction.
The website will: (a) clearly indicate transition deadlines for those three years; (b) clearly explain
that customers will be able to maintain their current plans for three years and display the
relevant expiration dates; (c) be clearly accessible in each language that TracFone used to
provide notifications prior to the transaction close; (d) disclose availability of other network
providers in a customer’s area; and (e) prominently display the exclusive toll-free customer
service line.
Verizon will include a prominently-featured, easy-to-locate link to the dedicated website on
TracFone’s home page (which will be directly linked on Verizon’s home page, as discussed
60
Marlene H. Dortch, Secretary
November
18, 2021
Page 5 of 8
above). Verizon and TracFone will also prominently display the link to the dedicated website on
all physical transition-related material.
o Replacement devices or SIMs. For at least three years after the close of the transaction, before any
TracFone customer is required to transition to Verizon’s network, Verizon will offer at no cost a
compatible device with comparable functionality and/or SIM replacement to that customer if the
customer’s existing device
5
is not compatible with the Verizon network.
• Rate Pl
ans
:
o For at least three years after the close of the transaction, Verizon will maintain existing TracFone rate
plans and allow new and existing customers to continue on those plans.
Handset Unlocking
: Within 30 days after closing, Verizon will extend its 700 MHz C block device 60-day unlocking
policy to all such devices purchased from TracFone after closing and activated on the Verizon network, subject to a
two-year waiver of the automatic unlocking requirement to allow manual unlocking for those TracFone devices
that do not have automatic unlocking capabilities currently.
o Within 30 days after closing, Verizon will notify all TracFone customers of its new unlocking policies.
In addition, beginning 30 days after closing, Verizon will notify TracFone customers of its unlocking
policies upon activation of a new 700 MHz C block device that will operate on the Verizon network.
o For 700 MHz C block TracFone devices that operate on the Verizon network and are capable of
unlocking automatically (e.g., Apple devices), they will unlock automatically 60 days after activation.
o For 700 MHz C block TracFone devices that operate on the Verizon network and lack an automatic
unlocking capability, Verizon will provide customers with manual means to unlock the device 60 days
after activation. When the 60-day period expires, Verizon will provide clear and easy to follow
instructions to those customers as to how they can manually unlock their devices.
o No later than 24 months after closing, any new 700 MHz C block TracFone device that Verizon offers
and that operates on Verizon’s network will be capable of automatically unlocking.
o Verizon will report the total number of locked TracFone devices and, of that number, the total
number of devices that have the ability to automatically unlock within 60 days of closing and again on
the first and second anniversary of the closing.
MVNO Agreements
: Verizon will provide those MVNOs who have current contracts with Verizon an option to
extend their existing MVNO wholesale agreements, on the same terms and conditions, continuing on a month-to-
month basis until three years after the transaction closes. This option does not apply to MVNOs whose
agreements expire beyond three years after the transaction closes nor to any terms that would apply to the
provision of fixed wireless services.
6
In the event that the MVNO contact in question specifies different terms from
year to year, the MVNO may extend the contract based on the terms in effect during the last year of the contract.
5
“Existing device” refers to the customer’s device as of the closing date.
6
For avoidance of doubt, an MVNO agreement provision that allows for negotiating a replacement agreement
under certain conditions does not constitute an expiration of that agreement.
61
Marlene H. Dortch, Secretary
November
18, 2021
Page 6 of 8
Reporting and Monitoring:
o Verizon will pay for and retain both an internal company compliance officer and an independent
compliance officer to monitor compliance with these commitments for a period of seven years and
six months after the close of the transaction.
o For a period of seven years after the close of the transaction, Verizon will submit a publicly-available
semi-annual report to the Commission describing its compliance with these commitments, including
the following information with respect to Lifeline and non- Lifeline customers:
The current number of Lifeline and non-Lifeline prepaid subscribers as of the end of the reporting
period;
Data regarding TracFone customers that have been transitioned to Verizon’s network from other
networks, including the number of devices that have successfully transferred, as of the end of
the reporting period;
The availability of 5G for Lifeline customers, including which geographic service areas have access
to Verizon’s 5G network and the number of Lifeline customers subscribing to a 5G service as of
the end of the reporting period; and
All states where TracFone offers a Lifeline-supported service and a state-by-state breakdown of
amounts spent on advertising and other marketing activities associated with Lifeline.
o Verizon may file proprietary information with the Commission on a confidential basis, making it
available only to representatives of parties that have signed the relevant protective order (either
during the pendency of the proceeding or thereafter) provided that Verizon shall also file a public
version redacting the proprietary information to be available for review by the public.
o The independent compliance officer will submit compliance reports to the Commission after each
semi-annual report, with a detailed description of Verizon’s efforts to meet these commitments. The
reports will be made publicly available; however, some of the information may include material that
is confidential which should not be routinely available for public inspection. Such confidential
material may be submitted for confidential treatment under Commission rules.
o Verizon will report any material noncompliance with these commitments within 15 calendar days of
discovery of noncompliance.
* * *
Base
d on the record in this proceeding and subject to the commitments set forth herein, the application
to transfer control of TracFone’s International Section 214 authorization to Verizon should be promptly granted.
62
Marlene H. Dortch, Secretary
November
18, 2021
Page 7 of 8
Pursuant to Section 1.106 of the Commission’s rules, a copy of this letter is being submitted in the record
of this proceeding. Please contact the undersigned with any questions.
Yours sincerely,
William H. Johnson
Senior Vice President, Verizon
cc: FCC P
articipants listed in Attachment A
63
Marlene H. Dortch, Secretary
November
18, 2021
Page 8 of 8
ATTACHMENT A
November 16, 2021 Teleconference Participants
FCC
Charles Mathias
Catherine Matraves
Monica DeLong
Stacy Ferraro
Garnet Hanly
Susannah Larson
Jessica Quinley
Joel Rabinovitz
Donald Stockdale
Aleks Yankelevich
Verizon
William Johnson
Tamara Preiss
Greg Romano
Katharine Saunders
Adam Krinsky, Wilkinson Barker Knauer, LLP
November 17, 2021 Teleconference Participants
FCC
Charles Mathias
Catherine Matraves
Monica DeLong
Stacy Ferraro
Garnet Hanly
Susannah Larson
Georgios Leris
Jessica Quinley
Joel Rabinovitz
Donald Stockdale
Aleks Yankelevich
Verizon
William Johnson
Tamara Preiss
Greg Romano
Katharine Saunders
Adam Krinsky, Wilkinson Barker Knauer, LLP
64
Federal Communications Commission FCC 21-121
65
APPENDIX C
I. COMPLIANCE PROGRAM AND REPORTING
1. Company Compliance Officer. Within thirty (30) calendar days after the Closing Date, the
Company
1
shall designate a senior corporate manager with the requisite corporate and organizational
authority to serve as a Company Compliance Officer and to discharge the Company’s duties with
respect to the Conditions specified in the Order, including Appendices B and C. The person
designated as the Company Compliance Officer shall be a senior executive within the Company’s
consumer group. In addition to the general knowledge of the Communications Laws necessary to
discharge his or her duties under this Order, the Compliance Officer shall have specific knowledge of
the Company’s operations referred to in these Conditions prior to assuming the duties required by this
Appendix C. This designation shall be reported in accordance with section I.5 below.
2. Company Implementation and Compliance Plan. The Company agrees that it shall, within
sixty (60) calendar days after the Closing Date, develop and implement an Implementation and
Compliance Plan designed to ensure its implementation of and compliance with the Conditions
specified in the Order, including Appendices B and C, establishing, inter alia, mechanisms to
provide, on an ongoing basis, adequate notice and training to all Company personnel involved with
the activities covered by the Conditions in the Order, including Appendices B and C. This
Implementation and Compliance Plan shall be filed in accordance with section I.5 below and
provided to the Independent Compliance Officer for review upon the Independent Compliance
Officer’s selection.
3. Independent Compliance Officer.
a. Within ninety (90) days of the Closing Date, an Independent Compliance Officer shall be
identified, whose selection is acceptable to the Company and approved by the
Commission’s Office of General Counsel. If the Company and the Commission’s Office
of General Counsel do not agree on the selection of an Independent Compliance Officer
within ninety (90) days, then the Commission’s Office of General Counsel shall select the
Independent Compliance Officer.
b. The Company shall engage the Independent Compliance Officer at its own expense to
perform the duties set forth herein, specifically, an evaluation of the adequacy of the
Company’s compliance with the Conditions
from the closing date until the condition to
provide Lifeline service terminates (“Independent Compliance Officer’s Duties”), and
shall designate the Commission as a third-party beneficiary to the engagement. The
terms of the engagement shall be subject to approval by the Commission’s Office of
General Counsel.
c. The Independent Compliance Officer and any persons retained by the Independent
Compliance Officer to effectuate this Appendix C may not (i) have had any employment
or familial relationships with the Company within the past two (2) years; (ii) have been
employed by or affiliated with any competitor of the Company within the past two (2)
years; (iii) have been an employee of the Commission within the past two (2) years; (iv)
have submitted any comments or otherwise participated in this transaction proceeding or
have been employed by or affiliated with any entity that has submitted any comments or
otherwise participated in this transaction proceeding within the past two (2) years; or (v)
have any conflict of interest related to the Independent Compliance Officer’s Duties that
could prevent him or her from performing his or her duties in a fair and unbiased manner.
In addition, for a minimum of two (2) years after the end of the Independent Compliance
1
The Company refers to (i) Verizon Communications Inc., (ii) any affiliate or subsidiary directly or indirectly
controlled by Verizon Communications, Inc., and (iv) any successor-in-interest.
Federal Communications Commission FCC 21-121
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Officer’s engagement, the Independent Compliance Officer shall not be employed by, or
have any business relationship with, the Company.
d. The Independent Compliance Officer shall have the power and authority to review and
evaluate the Company’s Implementation and Compliance Plan and any related materials
to the Plan, and recommend to the Company changes to address any perceived
deficiencies in the Plan. Any such recommendations shall be included in the Independent
Compliance Officer’s Compliance Reports.
e. The Independent Compliance Officer shall have the authority to engage in conversations
with Commission staff at any time and to convey any information learned. Such
conversations shall be presumed to be confidential under the Commission’s rules and also
shall not be divulged to the Company without approval of the Commission staff.
f. The Independent Compliance Officer shall prepare and submit, in accordance with the
filing and service requirements set forth in section I.5. herein, a Compliance Report
within sixty (60) days of receiving the Company’s semi-annual reports required under
these Conditions. Each such Compliance Report shall be limited to the Independent
Compliance Officer’s Duties and shall provide a detailed description of the Company’s
efforts during the relevant period to comply with the Conditions and will specifically
meet the reporting requirements for the Conditions set forth herein. The Independent
Compliance Officer shall provide a final copy of all Compliance Reports to the
Company’s Compliance Officer at least seven (7) days before the report is submitted to
the Commission, so that the Company may prepare a request for confidential treatment if
necessary.
g. The Company shall have thirty (30) days from submission of the Compliance Reports to
the Commission to comment on and/or object to the Compliance Report and must submit
such comments and/or objections in accordance with the filing and service requirements
set forth in section I.5. herein. The Company’s comments and/or objections shall be
accompanied by a statement explaining the basis for its response and shall comply with
section 1.16 of the Rules and be subscribed to as true under penalty of perjury in
substantially the form set forth therein.
2
h. If the Independent Compliance Officer in the reasonable exercise of the Independent
Compliance Officer’s Duties discovers or receives evidence that suggests to the
Independent Compliance Officer that the Company is materially violating or materially
failing to comply with a Condition, the Independent Compliance Officer shall promptly
bring that discovery and/or evidence to the attention of the Company and the
Commission’s Office of General Counsel.
i. The Independent Compliance Officer shall not have the authority to direct the Company
to make changes to the Implementation and Compliance Plan, the Company’s efforts to
comply with the Conditions specified in the Order, including Appendices B and C, or the
Company’s business practices or policies. The Commission (and its Bureaus and Offices
in their delegated authority) retains all rights to determine if a violation has occurred and
to take whatever action it deems appropriate. The Independent Compliance Officer also
shall not have the authority to review the business activities or management of the
Company that do not directly relate to the Independent Compliance Officer’s Duties and
shall not have the authority to participate in the business activities or management of the
Company. The Independent Compliance Officer’s powers shall be limited to those in this
compliance program and reporting section.
2
47 CFR § 1.16.
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j. The Company shall reasonably assist the Independent Compliance Officer in the
performance of the Independent Compliance Officer’s Duties set forth in this Order. The
Company shall take no action to interfere with or to impede the Independent Compliance
Officer’s accomplishment of his or her duties. The Independent Compliance Officer, and
any person retained by the Independent Compliance Officer, may, in connection with the
reasonable exercise of his or her responsibilities, subject to the Company’s privilege
rights, on reasonable notice to the Company during normal business hours, and in
coordination with the Company Compliance Officer:
i. Interview any Company personnel for any purpose reasonably related to the
Independent Compliance Officer’s duties; any such interview will be subject to
the reasonable convenience of such personnel and the Company will make such
personnel available;
ii. Have such access to the facilities of the Company as is reasonably required by
the Independent Compliance Officer’s duties;
iii. Have full and complete access to and inspect and copy any document, email,
contract, and any other information in the possession, custody, or control of the
Company reasonably related to the Independent Compliance Officer’s duties; and
iv. Require the Company to provide compilations of documents, data, or other
information reasonably related to the Independent Compliance Officer’s duties,
and to submit reports to the Independent Compliance Officer containing such
material, in such form as the Independent Compliance Officer may reasonably
direct.
k. Any objections by the Company to actions by the Independent Compliance Officer must
be conveyed in writing to the Commission’s Office of General Counsel and to the
Independent Compliance Officer within thirty (30) calendar days after the action giving
rise to the objection or else such objection may be considered waived at the discretion of
the Commission’s Office of General Counsel. Any such objections will be resolved by
the Commission’s Office of General Counsel within thirty (30) days. The Company need
not comply with any request or action of the Independent Compliance Officer that is
subject to an objection lodged with the Commission until the Office of the General
Counsel resolves the objection.
l. The Independent Compliance Officer may hire such persons on reasonable terms and
costs as are reasonably necessary to fulfill the Independent Compliance Officer’s duties,
with prior notice and subject to the approval of the Commission’s Office of General
Counsel. The Independent Compliance Officer shall serve at reasonable costs and
expense and any persons hired to assist the Independent Compliance Officer shall serve
at the cost and expense of the Company, on such terms and conditions as the
Commission’s Office of General Counsel reasonably approves, and shall be subject to the
execution of customary confidentiality agreements acceptable to the Company. The
compensation of the Independent Compliance Officer and any persons hired to assist the
Independent Compliance Officer shall be on reasonable and customary terms
commensurate with the individuals’ experience and responsibilities and consistent with
reasonable expense practices. The Independent Compliance Officer shall submit a
monthly expense report in reasonable detail to the Company and the Commission’s
Office of General Counsel, with the first such report to be submitted within thirty (30)
days after the selection of the Independent Compliance Officer, describing the total
amounts expended.
m. The Commission’s Office of General Counsel may at any time, on reasonable grounds,
require the Company to replace the Independent Compliance Officer with a substitute
Federal Communications Commission FCC 21-121
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Independent Compliance Officer selected by the same selection process as used in the
initial selection.
n. The Company may not refuse to pay the Independent Compliance Officer without first
receiving approval of the Commission’s Office of General Counsel. If the Company
determines that the Independent Compliance Officer has ceased to act or failed to act
diligently or in a cost-effective manner, it may submit a request to the Commission’s
Office of General Counsel proposing corrective actions to be taken by the Independent
Compliance Officer, including, without limitation, adjustments of amounts charged by
the Independent Compliance Officer or the selection of a substitute Independent
Compliance Officer.
o. The Independent Compliance Officer’s engagement will continue for six months
following termination of the condition to provide Lifeline services.
p. To the extent that this Condition permits or requires the Independent Compliance Officer
to make requests of, or otherwise communicate with the Company, the Independent
Compliance Officer shall first direct such communications—including, but not limited to,
any requests for documents, access to the facilities access, or access to the Company’s
personnel—to the Company’s Compliance Officer who shall be obligated to respond
within one business day.
q. Nothing in this Condition shall be construed to effectuate a waiver of any and all
privileges that apply, including but not limited to the attorney-client privilege or the work
product doctrine, and under no circumstances shall the Independent Compliance Officer
have the right to request documents or information protected by any applicable privilege.
Likewise, the Company shall not be required to provide any materials to the Independent
Compliance Officer before the Company’s counsel has been given a reasonable
opportunity to review those materials and withhold those materials deemed to be shielded
from disclosure under any applicable privileges. In the event that the Company has taken
reasonable steps to prevent the disclosure of privileged materials and in an inadvertent
production of privileged materials occur, the Company may request the privilege
document may be returned to the Company and the Independent Compliance Officer
permanently destroy and disregard that information. The Independent Compliance
Officer shall comply with any such request provided it is made by the Company, in
writing, within a reasonable time after the Company discovers the inadvertent production.
The Company shall have the right to have counsel present for any interview the
Independence Compliance Officer conducts with any Company personnel.
4. Reporting Requirements
a. The Company shall file with the Commission, in accordance with the filing and service
requirements set forth in section I.5. herein, publicly available semi-annual reports
describing its compliance with each of the Conditions herein including the information it
proposed in its commitments letter regarding both Lifeline and non-Lifeline customers.
This information will be separated out by Lifeline and non-Lifeline customers. The
reporting requirements herein are for a time period of seven years following the close of
the transaction. As described above in section I.3 above, the Independent Compliance
Officer will prepare and submit publicly available Compliance Reports within sixty (60)
days of receiving the Company’s semi-annual reports.
b. The Company shall report, in accordance with the filing and service requirements set
forth in section I.5. herein, any material noncompliance with the Conditions of this Order
within fifteen (15) calendar days after discovery of such noncompliance. Such reports
shall include a detailed explanation of: (i) each instance of material noncompliance; (ii)
the steps that the Company has taken or will take to remedy such noncompliance; (iii) the
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schedule on which such remedial actions will be taken; and (iv) the steps that the
Company has taken or will take to prevent the recurrence of any such noncompliance.
5. Confidentiality and Filing and Service Requirements. Any and all materials submitted to the
Commission by any party pursuant to these Conditions, unless otherwise provided in this Appendix
C, shall be filed in the appropriate docket with the Commission’s Secretary’s Office with an
electronic copy submitted via email to the addresses listed below. The Commission recognizes that
information submitted pursuant to these Conditions is likely to include material that is confidential
which should not be routinely available for public inspection pursuant to 5 U.S.C. § 552(b)(4); 18
U.S.C. § 1905; and 47 CFR § 0.457(d). Parties may request confidential treatment under 47 CFR §
0.459. Parties submitting such confidential material shall provide an explanation of why the material
should be considered confidential with both an unredacted (with confidential material marked) and a
redacted version of any submission to the Commission’s Secretary’s Office with electronic copies
submitted via email to the addresses listed below.
(a) Wireless Telecommunications Bureau:
Charles Mathias (or his successor)
With a copy submitted electronically to Charles.Mathi[email protected]
.
(b) Office of Economics and Analytics:
Catherine Matraves (or her successor)
With a copy submitted electronically to Catherine.Matraves@fcc.gov
.
(c) International Bureau:
David Krech (or his successor)
With a copy submitted electronically to David.Krech@fcc.gov
.
(d) Office of General Counsel:
Joel Rabinovitz (or his successor)
With a copy submitted electronically to Joel.Rabinovit[email protected]
.
(e) Enforcement Bureau
EnforcementBureauI[email protected]
(f) Independent Compliance Officer:
To be selected.
Federal Communications Commission FCC 21-121
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CONCURRING STATEMENT OF
COMMISSIONER BRENDAN CARR
Re: Application of Verizon Communications Inc. and América Móvil, S.A.B. de C.V. for Consent to
Transfer Control of International Section 214 Authorization, Memorandum Opinion and Order,
GN Docket No. 21-112
Approving this transaction promotes the public interest, and therefore I support the decision. So I
want to commend Chairwoman Rosenworcel and her team for their work on this proceeding. As I have
noted previously, I have concerns with the standards and frameworks that the agency applies in
transaction reviews.
1
Rather than relitigating those concerns here, I am voting to concur in the outcome
of today’s decision.
1
See Applications of T-Mobile US, Inc., and Sprint Corporation For Consent To Transfer Control of Licenses and
Authorizations, Memorandum Opinion and Order, Declaratory Ruling, and Order of Proposed Modification, 34 FCC
Rcd 10578 (2019) (Statement of Commissioner Brendan Carr); Remarks of Commissioner Brendan Carr at the
Phoenix Center’s 19th Annual U.S. Telecoms Symposium, Keeping Pace With Dynamic Industries (Dec. 3, 2019),
https://docs.fcc.gov/public/attachments/DOC-361147A1.pdf.
