AAI Urges FCC to Deny Verizon’s Proposed Acquisition of Tracfone: Warns of “Big 3” Oligopoly in Pre-paid Wireless and Harm to Vulnerable Consumers

The American Antitrust Institute (AAI) submitted Reply Comments on April 2, 2021 in the Federal Commissions Commission proceeding regarding the Proposed Transfer of Control of Tracfone Wireless to Verizon Communications, Inc. AAI argues that Verizon’s acquisition of Tracfone raises significant concerns under the Commission’s public interest standard. The proposed transfer will eliminate the largest standalone rival (Tracfone) in the pre-paid wireless market and put it into the hands of Verizon, one of the “Big 3” facilities-based mobile network operators (MNOs). Verizon’s share of the pre-paid wireless market will increase substantially, while it continues to control the network access needed by smaller mobile virtual network operators (MVNOs) in order to resell pre-paid wireless services to consumers. The acquisition would cement an oligopoly in the pre-paid wireless market between Verizon, T-Mobile, and AT&T. These are very same companies that make up the Big 3 facilities-based MNO oligopoly created in the premium, post-paid market in the aftermath of the Sprint-T-Mobile merger only a year ago. 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. AAI’s urge the Commission to assess the proposed transfer in light of this bigger, troubling picture of a restructured wireless communications sector.

AAI’s Reply Comments spell out the concern that the proposed transfer will likely have harmful horizontal and vertical competitive effects in the market for pre-paid wireless service, leading to higher prices, lower quality, and less innovation. These effects would be felt by an important segment of consumers that have already been hard hit by the COVID-19 pandemic, economic downturn, and other disruptions. These concerns have been either ignored or downplayed in the Application, which waves away competitive issues and makes broad and unsupported claims of public interest benefits. Verizon’s motivation for acquiring Tracfone, namely, to secure its own “flanker” brand, only highlights this flaw, since the acquisition would enhance its incentives to extend its already considerable market power to the market for pre-paid wireless service. AAI therefore urges the Commission to deny Applicants’ proposed transfer in order to preserve competition in the market for pre-paid wireless service and protect the consumers who depend on it.