Verizon promises to give Tracfone Wireless users 3 years of subsidized service including a 5G program
Nearly 11 months ago, Verizon announced that it would acquire the largest MVNO in the U.S., Tracfone. An MVNO is a mobile virtual network operator. Instead of spending billions to build towers and networks, an MVNO purchases wireless service from a carrier that owns its own towers and cell sites and sells it to the public at a higher price. Ka-Ching!
The deal has yet to close and America Movil will receive $3.125 billion in cash and $3.125 billion in shares of Verizon stock. In addition, Verizon could be on the hook for an additional $650 million should Tracfone achieve certain performance goals. If the transaction closes, Verizon will add 21 million subscribers and 90,000 retail locations in the states.
Verizon promises to continue supporting Tracfone's low-income subscribers for three years after the deal closes
Some of Tracfone's subscribers are low-income Lifeline users. The latter is a federally subsidized program that pays eligible mobile subscribers as much as $9.25 a month toward their recurring bill. Eligible Lifeline recipients can use that $9.25 toward phone service or the internet but not both. The money comes from the Universal Service Fund (USF) which is managed by the FCC.
Verizon is waiting to close on its $6.5 billion purchase of Tracfone
Today, Verizon said that it will continue to provide Tracfone users with the Lifeline subsidy program for three years after the merger closes. The nation's largest carrier also promises to offer a subsidized 5G program for low-income Tracfone users. Over 1.7 million depend on the Lifeline program for phone or internet service according to the Communication Workers of America (CWA).
Several organizations including the CWA criticized Verizon's offer to buy Tracfone questioning whether an acquisition by Verizon could hurt Tracfone's low-income, rural base. Verizon could pull Lifeline support for Tracfone users following the closing of the deal which was the worry. But the aforementioned concession announced by Verizon has many of the objectors ready to turn their nays into yays.
Groups like the CWA, Public Knowledge, and the Benton Institute for Broadband and Society say that they are considering withdrawing their opposition to Verizon's acquisition. CWA researcher Brian Thorn, commenting on Verizon's commitments, said, "These commitments ensure TracFone customers will continue to have access to Lifeline, an essential program for millions of families. Today’s success would not have been possible without the support of our allies and an FCC interested in protecting the interests of customers over corporations."
Some Democratic senators say that they are happy with the commitment made today by Verizon
Senate Democrats also called on Verizon to protect Tracfone's low-income subscribers earlier this year. These lawmakers applauded the promise that Verizon made today as Senators Sens. Richard Blumenthal (D-CT), Ron Wyden (D-OR), Ed Markey (D-MA), and others, penned a letter that said, "These commitments should now be a floor and a starting place for the FCC's review of the acquisition and negotiations with Verizon. As important as the terms of these commitments are, the conditions must be made legally binding, vigilantly monitored, and vigorously enforced to ensure the company makes good on these promises."
Back in July, Verizon had promised to the FCC that it would deliver 5G service to Tracfone customers if the regulatory agency would approve the merger. Before Verizon promised three years of Lifeline service to Tracfone users following the closing of the acquisition, regulators, organizations and others had every reason to wonder whether Big Red would continue to support Tracfone's low-income users. That is because Verizon offers Lifeline's subsidized service in parts of only four states.
But now that Verizon has made its commitment to Lifeline and Tracfone, there is no reason not to believe that Verizon has the best interest of Tracfone's low-income subscribers in mind and plans on giving them three additional years of subsidized phone or internet service.
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