Seal The Deal On Verizon-TracFone, Say Public Interest Groups
Public Knowledge, Access Humboldt, the Benton Institute for Broadband and Society, the California Center for Rural Policy, and Communications Workers of America withdrew pricing and competition concerns for a proposed merger between Verizon and TracFone Wireless in a letter to the Federal Communications Commission. In an attempt to compete with the multi-brand strategies of AT&T and T-Mobile, Verizon proposes to acquire TracFone, a leading pre-paid mobile operator. This would bring 5G to TracFone’s 20 million customers, two-thirds of whom already use the Verizon network and other value-conscious customers. This post examines the proposed merger’s benefits, Verizon’s commitments, and competition in the US mobile market.
Customers are attracted to TracFone for flexibility, control, and the low cost of a pre-paid plan. They can stop and start plans with ease and maintain a budget. The preponderance of budget mobile brands like TracFone, Cricket, WalMart, Metro, Boost, and others is indicative of competition and the fact that consumers switch brands frequently. Indeed competition is so fierce in the saturated US mobile market that operators may spend as much as 25 percent of revenue to acquire new customers. Verizon agreed to honor the existing TracFone contracts for two years after the transaction closes and ensures that competitive international roaming plans are available as well as Spanish-language customer service.
In dynamic, evolving markets, the level of technology is more important than the number of sellers. Consider how the automobile meant the end of the horse and buggy. Therefore it may be more important that consumers can access next generation technologies like 5G rather than have multiple providers for 4G. When one operator upgrades, the others must follow. In practice, mobile operators are constantly upgrading their networks, lest they expire and lose customers. 5G is also a disruptive technology to cable and fiber, as delivering broadband via licensed spectrum has economic and security advantages over cable and fiber.
Within six months of the proposed merger’s approval, Verizon has pledged to make 5G service available to TracFone customers and offer an array of value-priced 5G-enabled devices. These two areas alone demonstrate how TracFone customers are better off with the merger; as a virtual operator, TracFone was never going to invest in 5G networks, and its ability to negotiate for advanced devices is limited. Moreover, there public interest is served by getting high speed 5G broadband to 20 million Americans in 6 months. By contrast, it can take years to bring wireline solutions to the home, a critical point as the nation continues to face the pandemic.