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Daniel Hanley: Federal Communications Commission Must Block Verizon’s Acquisition of TracFone

Verizon sees an opportunity to acquire and neutralize an important competitor, but the FCC should stop that.



The author of this Expert Opinion is Daniel Hanley, a policy analyst at the Open Markets Institute

In late July, Democratic senators sent a letter to the Federal Communications Commission urging the agency to investigate the acquisition of TracFone, the largest prepaid carrier, by Verizon, the second-largest wireless phone carrier in the U.S. The FCC should use its broad merger review authority to block it outright.

With prepaid service, consumers pay for a set amount of cellular usage upfront rather than receive a bill at the end of the month. While such a service may seem like a relic of the 1990s, more than 74 million Americans rely on the service as a low-cost and accessible alternative to traditional cellular plans provided by Verizon, AT&T, and T-Mobile.

Verizon is one of the most dominant telecommunications companies in the U.S., occupying 30% of the entire cellular market. Up until now, the company has focused on its traditional postpaid service and almost entirely ignored the prepaid cellular market. Verizon now sees an opportunity to use its financial firepower to acquire an important competitor with its attempted acquisition of TracFone.

A staggering potential windfall for Verizon

The potential windfall for Verizon is staggering. If this deal were to be approved, the FCC would anoint Verizon as the largest wireless prepaid service operator in the United States and the company would obtain an additional 21 million customers. The merger would also allow Verizon to acquire the fourth-largest wireless company by subscribership in the U.S. The acquisition of TracFone by Verizon will also add $8.1 billion in revenue for Verizon and an additional 90,000 retail locations. Such a position will only continue the wave of consolidation in the cellular service sector and fortify Verizon’s market power as one of the largest wireless communications providers in the country.

The Federal Trade Commission and the Department of Justice review almost all mergers in the United States. However, the communications industry is so important that Congress also gave the FCC the authority to review and deny mergers and acquisitions in the sector. Unlike the legal standard set in the Clayton Act, which structures the merger litigation of the DOJ and the FTC, the FCC reviews mergers in the communications field under a “public interest standard.” The public interest standard is highly deferential to the FCC’s interpretation. As such, the FCC has broad discretion and can consider a range of factors when analyzing a merger under its jurisdiction. The Supreme Court has stated that the standard “no doubt leaves wide discretion and calls for imaginative interpretation” and that the agency has “comprehensive powers to promote and realize the vast potentialities” of communications technologies.

A merger of this magnitude will undoubtedly cause the traditional litany of harms derived from mergers, such as an increase in the barriers to entry for the communications sector and increased potential collusion between firms as a result of increased concentration. However, even a moderate review of the facts would show that Verizon’s acquisition of TracFone is not in the public interest and that the FCC should block the merger.

The FCC should not allow Verizon to acquire a critical competitor

First, as with most mergers by corporate monopolies, Verizon does not need to acquire TracFone to accomplish its operational goals. The FCC should not allow Verizon to use its dominant financial position to acquire (and subsequently neutralize) a critical competitor and market participant and forgo operational investments and other necessary market research to expand its network. Instead, the FCC can force the corporation to use its vast finances to develop its own rival prepaid network by blocking the merger.

Such a circumstance would increase competition in the industry and benefit consumers. Additionally, such a course of action would facilitate the kind of business conduct and investments in internal expansion the antitrust laws and other antimonopoly policies actively encourage, while increasing market competition and firm rivalry. The Supreme Court has consistently praised and encouraged growth from internal operations rather than acquisition. In Philadelphia National Bank, the Supreme Court stated, “[S]urely one premise of an antimerger statute…is that corporate growth by internal expansion is socially preferable to growth by acquisition.”

Second, prepaid providers like TracFone provide critical competitive pressure to larger carriers like Verizon. Prepaid carriers like TracFone often rent the communications infrastructure from postpaid carriers like Verizon to provide their service. Thus, rather than focusing on expanding and maintaining network infrastructure, renting it provides prepaid carriers the ability to provide lower-cost service, more tailored service, and a better customer experience overall.

Third, mergers like Verizon’s acquisition of TracFone are harmful to consumers. In this case, potential price increases are not only likely, but they would also be exceptionally harmful. Concerning TracFone specifically, the company provides a critical service to vulnerable sectors of the population that are extremely sensitive to price increases – particularly low-income consumers and people of color who live within the geographic area which TracFone serves.

Importantly, TracFone participates in the federal Lifeline Program, a crucial government program that provides low-income individuals subsidies to afford phone service. If Verizon were allowed to acquire TracFone, Verizon would obtain full control of TracFone’s 21 million customers consisting of a population it has historically ignored. Moreover, because of the increased market concentration, which would thus deprive customers of one less carrier to switch to, Verizon would face significantly fewer incentives to keep its prices low for such a vulnerable population.

Additionally, cell phones are a critical and vital tool for the public, particularly during the pandemic. Indeed, 37% of Americans use the internet only via a mobile device. Low-income students as well are now heavily reliant on cell phones for online education during the COVID-19 pandemic. In a 2020 survey, between 29 and 43 percent of parents said their children will have to do their schoolwork and engage in online learning from a cell phone. Access to low-cost cell phones is thus imperative for a large fraction of children to remote learning, which some states are considering for the fall 2021 semester.

History does not bode for Verizon’s claims of consumer benefit

Verizon has asserted that “when TracFone’s customers become part of Verizon, they will benefit from the enhanced choices, better services, and new features that follow from Verizon’s investment while still enjoying the flexibility and control that they have come to value with TracFone’s prepaid plans” and that it “will not require any TracFone customers to move to a more expensive plan when the transaction closes.”

However, history does not bode well for Verizon and its claims that its acquisition will benefit consumers. The economist John Kwoka found that 80% of studied mergers led to higher prices and even reduced output. Other comprehensive studies have found that acquisitions cause “significantly increase[d] markups on average” and reveal “no evidence for efficiency gains.” As New York University business professor Melissa Schilling has stated, most mergers “do not create value for anyone, except perhaps the investment bankers that negotiated the deal.”

Concerning the communications industry specifically, when telecommunications giant AT&T was acquiring Time Warner, the corporation stated that “the evidence overwhelmingly showed that this merger is likely to enhance competition substantially, because it will enable the merged company to “reduce prices, offer innovative video products.” Judge Richard Leon, who oversaw the litigation challenging the merger, was ultimately persuaded by AT&T’s statements holding that AT&T’s acquisition of Time Warner would “lead to lower prices for consumers.” Despite these claims, subsequent evidence revealed that AT&T did raise prices on consumers.

Although Verizon has committed to supporting TracFone’s presence in the Lifeline program for three years, the company has made no concrete promises to keep their prices at current levels for TracFone customers or to increase customer incentives to move to a higher-cost plan after the transaction closes. Like most mergers, Verizon’s asserted efficiencies and promises to improve competition as a results of the merger are likely theoretical and dubious.

A worrisome wave of acquisitions by telecom giants

Lastly, due to certain aspects of the market, such as the high infrastructure costs of cell towers, prepaid phone carriers tend to reduce to one or two carriers in a geographic area. Even more worrisome is that there has been a wave of acquisitions by the telecommunications giants over the past decade. In the prepaid industry, AT&T acquired Cricket Wireless and T-Mobile acquired MetroPCS in 2013.

Other blockbuster mergers among the group are the acquisition of Sprint by T-Mobile and the acquisition of Time Warner by AT&T. All these mergers went unchallenged by the FCC. Moreover, since AT&T and T-Mobile have already acquired firms to enter the prepaid industry, Verizon is the last remaining national carrier that could enter this market and likely the only wireless carrier with the finances to do so meaningfully.

The FCC has clear discretion to block this merger. Given the harmful effects of similar mergers, the sheer number of acquisitions that have already taken place in the communications industry that the agency has previously failed to stop, and the potential harms that could result directly from this merger, the FCC should review Verizon’s acquisition of TracFone with extreme suspicion and block it outright. The agency has the authority and must use it.

Daniel A. Hanley is a policy analyst at the Open Markets Institute. You can follow him on Twitter @danielahanleyThis piece is exclusive to Broadband Breakfast. accepts commentary from informed observers of the broadband scene. Please send pieces to The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

Broadband Breakfast is a decade-old news organization based in Washington that is building a community of interest around broadband policy and internet technology, with a particular focus on better broadband infrastructure, the politics of privacy and the regulation of social media. Learn more about Broadband Breakfast.

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FTC Funding Request Harshly Criticized by Republican Lawmakers

The agency’s aggressive approach to antitrust under Chair Lina Khan has sparked controversy.



Screenshot of FTC Chair Lina Khan courtesy of the House Energy and Commerce Committee

WASHINGTON, April 19, 2023 — House Republicans expressed skepticism about the Federal Trade Commission’s requested budget increase during a Tuesday hearing, accusing the agency of overstepping its jurisdiction in pursuit of a progressive enforcement agenda.

The hearing of the Innovation, Data and Commerce Subcommittee showcased sharp partisan tension over Chair Lina Khan’s aggressive approach to antitrust — heightened by the fact that both Republican seats on the five-member agency remain vacant.

Khan, alongside Democratic Commissioners Rebecca Slaughter and Alvaro Bedoya, argued that the $160 million budget increase was necessary for maintaining existing enforcement efforts as well as “activating additional authorities that Congress has given us.”

But Republican lawmakers seemed unwilling to grant the requested funds, which would bring the agency’s total annual budget to $590 million.

“You seem to be squandering away the resources that we currently give you in favor of pursuing unprecedented progressive legal theories,” said Subcommittee Chair Gus Bilirakis, R-Fla.

“What is clearly needed — before Congress considers any new authorities or funding — are reforms, more guardrails and increased transparency to ensure you are accountable to the American people,” said Rep. Cathy McMorris Rodgers, R-Wash., chair of the Energy and Commerce Committee.

Rep. Frank Pallone, D-N.J., ranking member of the full committee, defended the funding request by saying the FTC has “one of the broadest purviews of any federal agency: fighting deceptive and unfair business practices and anti-competitive conduct across the entire economy.”

“Managing this portfolio with less than fourteen hundred employees is no small feat,” Pallone said, noting that the FTC currently has fewer employees than it did 45 years ago.

FTC highlights potential AI threats, other tech developments

FTC staff and Democratic lawmakers have been flagging concerns about understaffing at the agency for years, arguing that rapid technological and market changes have increased the scope and complexity of the agency’s role.

“The same lawyers who ensure that social media companies have robust privacy and data security programs are making sure labels on bed linens are correct,” testified former Chief Technologist Ashkan Soltani at a Senate hearing in 2021.

In their written testimony, commissioners detailed several emerging priorities related to technological developments — such as combatting online harms to children and protecting sensitive consumer data shared with health websites — and emphasized the corresponding need for increased resources.

The agency is also preparing to pursue violations related to artificial intelligence technologies, Khan said, as the “turbocharging of fraud and scams that could be enabled by these tools are a serious concern.”

But several tech-focused trade groups, including the Computer & Communications Industry Association, have signaled opposition to FTC expansion.

“The FTC can best carry out its mission if it heeds the committee’s call to return its focus to consumer needs and consumer fraud — rather than pursuing cases rooted in novel theories against American companies,” CCIA President Matt Schruers said after the hearing.

The Consumer Technology Association urged lawmakers to reject the requested budget increase in a letter sent Friday.

“In 2022, agency data shows consumers reported losing almost $8.8 billion to scams… Despite this mounting caseload of fraud, identity theft and related cases, the FTC appears more interested in attacking U.S. tech companies, to the detriment of consumers who have benefitted from an unparalleled explosion of innovative, online-based products and services,” CTA President Gary Shapiro wrote.

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Google CEO Promotes AI Regulation, GOP Urges TikTok Ban for Congress Members, States Join DOJ Antitrust Suit

Widespread AI applications could lead to a dramatic uptick in online disinformation, Pichai warned.



Photo of Google CEO Sundar Pichai by the World Economic Forum used with permission

April 18, 2023 — Google CEO Sundar Pichai on Sunday called for increased regulation of artificial intelligence, warning that the rapidly developing technology poses broad societal risks.

“The pace at which we can think and adapt as societal institutions compared to the pace at which the technology’s evolving — there seems to be a mismatch,” Pichai said in an interview with CBS News.

Watch Broadband Breakfast on April 26, 2023 – Should AI Be Regulated?
What are the risks associated with artificial intelligence deployment, and which concerns are just fearmongering?

Widespread AI applications could lead to a dramatic uptick in online disinformation, as it becomes increasingly easy to create and spread fake news, images and videos, Pichai warned.

Google recently released a series of recommendations for regulating AI, advocating for “a sectoral approach that builds on existing regulation” and cautioning against “over-reliance on human oversight as a solution to AI issues.”

But the directive also noted that “while self-regulation is vital, it is not enough.”

Pichai emphasized this point, calling for broad multisector collaboration to best determine the shape of AI regulation.

“The development of this needs to include not just engineers, but social scientists, ethicists, philosophers and so on,” he said. “And I think these are all things society needs to figure out as we move along — it’s not for a company to decide.”

Republicans call to ban members of Congress from personal TikTok use

A group of Republican lawmakers on Monday urged the House and Senate rules committees to ban members of Congress from using TikTok, citing national security risks and the need to “lead by example.”

Congress banned use of the app on government devices in late 2022, but several elected officials have maintained accounts on their personal devices.

In Monday’s letter, Republican lawmakers argued that the recent hearing featuring TikTok CEO Shou Zi Chew made it “blatantly clear to the public that the China-based app is mining data and potentially spying on American citizens.”

“It is troublesome that some members continue to disregard these clear warnings and are even encouraging their constituents to use TikTok to interface with their elected representatives – especially since some of these users are minors,” the letter continued.

TikTok is facing hostility from the other side of the aisle as well. On Thursday, Rep. Frank Pallone, D-N.J., sent Chew a list of questions about the app’s privacy and safety practices that House Democrats claimed were left unanswered at the March hearing.

Meanwhile, Montana lawmakers voted Friday to ban TikTok on all personal devices, becoming the first state to pass such legislation. The bill now awaits the signature of Gov. Greg Gianforte — who was one of several state leaders last year to mimic Congress in banning TikTok from government devices.

Nine additional states join DOJ’s antitrust lawsuit against Google

The Justice Department announced on Monday that nine additional states joined its antitrust lawsuit over Google’s alleged abuse of the digital advertising market.

The Attorneys General of Arizona, Illinois, Michigan, Minnesota, Nebraska, New Hampshire, North Carolina, Washington and West Virginia joined the existing coalition of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia.

“We look forward to litigating this important case alongside our state law enforcement partners to end Google’s long-running monopoly in digital advertising technology markets,” said Doha Mekki, principal deputy assistant attorney general of the Justice Department’s Antitrust Division.

The lawsuit alleges that Google monopolizes digital advertising technologies used for both buying and selling ads, said Jonathan Kanter, assistant attorney general of the Justice Department’s Antitrust Division, when the suit was filed in January.

“Our complaint sets forth detailed allegations explaining how Google engaged in 15 years of sustained conduct that had — and continues to have — the effect of driving out rivals, diminishing competition, inflating advertising costs, reducing revenues for news publishers and content creators, snuffing out innovation, and harming the exchange of information and ideas in the public sphere,” Kanter said.

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Panel Disagrees on Antitrust Bills’ Promotion of Competition

Panelists disagree on the effects of two antitrust bills intended to promote competition.



Photo of Adam Kovacevich of Chamber of Progress, Berin Szoka of TechFreedom, Cheyenne Hunt-Majer of Public Citizen, Sacha Haworth of Tech Oversight Project, Christine Bannan of Proton (left to right)

WASHINGTON, March 10, 2023 – In a fiery debate Thursday, panelists at Broadband Breakfast’s Big Tech and Speech Summit disagreed on the effect of bills intended to promote competition and innovation in the Big Tech platform space, particularly for search engines.  

One such innovation is new artificial intelligence technology being designed to pull everything a user searches for into a single page, said Cheyenne Hunt-Majer, big tech accountability advocate with Public Citizen. It is built to keep users on the site and will drastically change competition in the search engine space, she said, touting the advancement of two bills currently awaiting Senate vote.  

Photo of Adam Kovacevich of Chamber of Progress, Berin Szoka of TechFreedom, Cheyenne Hunt-Majer of Public Citizen, Sacha Haworth of Tech Oversight Project, Christine Bannan of Proton (left to right)

The first, the American Innovation and Choice Online Act, would prohibit tech companies from self-preferencing their own products on their platforms over third-party competition. The second, the Open App Markets Act, would prevent app stores from requiring private app developers to use the app stores’ in-app payment system. 

Hunt-Majer said she believes that the bills would benefit consumers by kindling more innovation in big tech. “Perfect should not be the enemy of change,” she said, claiming that Congress must start somewhere, even if the bills are not perfect. 

“We are seeing a jump ahead in a woefully unprepared system to face these issues and the issues it is going to pose for a healthy market of competition and innovation,” said Hunt-Majer. 

It is good for consumers to be able to find other ways to search that Google isn’t currently providing, agreed Christine Bannan, U.S. public policy manager at privacy-focused email service Proton. The fundamental goal of these bills is directly at odds with big companies, which suggests its importance to curb anti-competitive behavior, she said. 

No need to rewrite or draft new laws for competition

But while Berin Szoka, president of non-profit technology organization TechFreedom, said competition concerns are valid, the Federal Trade Commission is best equipped to deal with disputes without the need to rewrite or draft new laws. Congress must legislate carefully to avoid unintended consequences that fundamentally harm businesses and no legislation has done so to date, he said. 

Both bills have broad anti-discrimination provisions which will affect Big Tech partnerships, Szoka continued. 

Not all experts believe that AI will replace search engines, however. Google has already adopted specialized search results that directly answer search queries, such as math problems, instead of resulting in several links to related webpages, said Adam Kovacevich, CEO of Chamber of Progress, a center-left tech policy coalition.  

Kovacevich said he believes that some search queries demand direct answers while others demand a wide range of sources, answers, and opinions. He predicts that there will be a market for both AI and traditional search engines like Google. 

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