FCC Made a Good Call in Approving Verizon/TracFone Merger

Hours after my November 22 blog post, the FCC released its order approving the Verizon/TracFone merger. The Commission reached a strongly supportable conclusion, which is contained in paragraph 150 of its order:

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. 

Notably, Commissioner Brendan Carr concurred in the result; but his statement accompanying the Verizon/TracFone Order also pointed to the agency's 2008 "mobile telephony/broadband services" market definition that it applied in evaluating the merger. Commissioner Carr cited to his thoughtful statement accompanying the 2019 T-Mobile/Sprint Order on the need for the FCC to update its framework for assessing competition and the likely effects of mergers in today's broadband services market. Insights from that prior statement, part of which are quoted below, are even more relevant as we approach 2022 than they were in 2019:

Instead of formally updating our view of competition to reflect 5G, we conduct our initial screen using the market definition of "mobile telephony/broadband services." The Commission created that market definition in November 2008—more than two years before any of the nationwide wireless providers had deployed 4G LTE. Even at that time, we saw how faster wireless service would combine the markets for talk, text, and low-data uses on phones with the market for high-data uses on computers and non-voice devices. The new market definition recognized how "mobile broadband services" (enabled by upgraded 3G and 4G networks) would break down previously siloed industries. And so when we reviewed a transaction between wireless companies in 2008, we took the opportunity to update our market definition, "conclud[ing] that there are risks associated with defining product markets too narrowly, since doing so may thwart this and future pro-competitive deals that take place in the context of rapidly evolving markets and services."

 

The Commission shows no such prescience in defining the relevant market here. Rather, it applies the same definition that both the FCC and antitrust authorities have been using for a decade. By sticking with a pre-4G market definition, we miss an essential feature of 5G: the blurring of wired and wireless networks and the enhanced competition that results. While our legacy market definition may track FCCs and antitrust authorities past, it prevents the expert agency Congress created to regulate telecommunications from helping our sister agencies modernize their approach to this technology.