prepaid wireless – Techdirt (original) (raw)

Unions, Consumer Groups Wimp Out On Verizon Tracfone Merger

from the surely-THIS-time-will-be-different dept

Last September Verizon announced it would be spending $6.2 billion to buy Tracfone, a prepaid wireless phone provider heavily used by lower income families. Given Verizon’s reputation and the US telecom industry’s long history of empty pre-merger promises, unions and consumer groups rightfully balked.

They warned Verizon’s track record indicated this would likely end in the consolidation harming the sector, and many low-income customers inevitably paying more money than ever for wireless service. They also pointed to the fact that Verizon just got busted exploiting a Covid broadband relief program to upsell users to more expensive plans. In short, they warned that a company like Verizon probably wouldn’t be a particularly good steward of a service that catered predominately to low-income Americans. They were correct.

Apparently that was then, and this is now. Unions and several consumer groups appear to now have done a complete 180, announcing they now support the deal after Verizon pinky swore it would behave responsibly:

“The CWA, Public Knowledge, and the Benton Institute for Broadband and Society had initially criticized Verizon?s proposed purchase of Tracfone, suggesting that the deal could harm Tracfone?s low-income customer base. But the groups announced Thursday that they would be withdrawing their opposition in response to the new concessions.”

Note that only Benton and Public Knowledge were willing to bend on this. Other consumer groups, like the Open Technology Institute and others, tell me they continue to oppose the deal as currently structured.

Verizon lays out the promises in a press release. In short, they promise to continue offering the FCC’s “Lifeline” program to Tracfone subscribers (a measly $9.25 per month subsidy for low-income Americans Verizon has previously attempted to undermine) for at least three years. The company pinky swears it will ensure these users have access to discounted 5G service, and that they’ll actively market discounted broadband options (instead of hiding them and making them hard to find and sign up for, something really common in telecom merger promises of this type).

The problem, of course, is that this is….Verizon. And this is the United States, where “feckless” doesn’t even begin to describe the country’s state and federal regulatory attitude when it comes to holding telecom giants accountable.

Verizon has a long, long, long parade of promises it hasn’t lived up to. The company took billions from Pennsylvania taxpayers in the 90s for fiber networks it then failed to deploy. You can also ask New York City, New Jersey, and much of the eastern seaboard what Verizon promises are worth. And that’s before you get to the U.S. telecom industry’s 30 year history of merger promises that, time after time after time, wind up being worth absolutely nothing. That this endless wave of mergers has been harmful isn’t some errant opinion, it’s documented history.

The impact of mindless telecom consolidation is everywhere, hugely negative, and generally obvious to the majority of US wireless, broadband, and cable TV subscribers. It has consistently and inevitably resulted in higher prices, worse products, and terrible customer service. And the Verizon Tracfone deal promises to usher forth a whole lot more of it:

“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 other assumption here is that Verizon will make a promise, then the FCC will follow up consistently to ensure the company is keeping it. But history isn’t kind on that subject, either. Telecom companies generally fail to adhere to promises even if they’re the ones creating the merger conditions. And years later, assuming underfunded and understaffed U.S. regulators even act in the first place, any penalty for missing deadlines (or outright lying) is usually little more than a light wrist slap. The idea that this deal will somehow be any different is just silly.

Verizon’s promises aren’t actually worth anything, and I’m surprised some consumer groups and unions folded so easily here. Buckling seems to make Biden FCC approval more likely, leading to even greater consolidation. Verizon will either ignore the restrictions and face few real FCC penalties under future industry-cozy administrations (President Scott Baio!) or will simply wait for the three-year limits to expire before finding creative ways to nickel and dime low-income consumers. You can set your watch by it, and this bipartisan sport we play where we pretend otherwise is just wholly bizarre.

Filed Under: competition, lifeline, mergers, mobile phones, mvno, prepaid wireless
Companies: tracfone, verizon

Verizon Buys Tracfone As U.S. Wireless Gets Even More Consolidated

from the merge-ALL-the-things dept

Fri, Sep 18th 2020 06:28am - Karl Bode

As economists and experts had warned, the recent $26 billion Sprint T-Mobile merger effectively decimated the prepaid space. T-Mobile had already laid off around 6,000 employees at its Metro Prepaid division, with more layoffs expected. Many of the “mobile virtual network operators” that operated on Sprint’s network now face an uncertain future, with growing resentment in the space among prepaid vendors, who say T-Mobile is already using its greater size and leverage to erode commissions and to renegotiate their contracts for the worse. Many prepaid vendors are calling for help that most certainly won’t be coming any time soon from the Trump Federal Trade Commission (FTC) and Department of Justice?s Antitrust Division.

With that as backdrop, another major effort at wireless consolidation has emerged with Verizon’s announced purchase of Tracfone, one of the biggest prepaid vendors in the U.S. The $6.2 billion deal will, Verizon insists, result in “exciting and compelling” products in the years to come:

Yes, if there’s one word that American consumers have come to associate with major telecom mergers, it’s “excitement.”

The problem here, of course, is that the direct result of mindless M&A in the U.S. telecom space couldn’t be any more apparent. Less overall competitors means less effort to seriously compete on price. And the MVNO space had already been under relentless assault by companies like Verizon that have slowly but surely done their best to elbow out any smaller players that dare seriously compete on price with the major networks they must rely on to survive.

With the postpaid market saturated, wireless players are now forced to eek out growth wherever possible. In this case, via acquisitions, followed by only a superficial continued dedication to prepaid wireless lower-priced offerings. As part of the Tracfone deal, Verizon not only nabs 21 million Tracfone customers, but the company’s Net 10, Walmart FamilyMobile, SafeLink, Simple Mobile, Straight Talk Wireless, and Clearway prepaid brands as well.

Fewer major networks means less incentive than ever to negotiate on rates, roaming, or much of anything else. With Sprint (the most friendly company to MVNOs by a wide margin) now out of the picture, things have gotten more treacherous for smaller MVNOs than ever. Of course, if the U.S. stays close to its historical norm, in about five years U.S. wireless data (pre and postpaid alike) will be significantly higher, and everybody will be left standing around with a dumb look on their collective faces wondering what went wrong.

Filed Under: competition, mergers, mvnos, prepaid wireless, wireless
Companies: tracfone, verizon

T-Mobile Takes Out Some Handset Unlockers

from the the-only-confused-people-here-are-us dept

T-Mobile has won damages and an injunction (via Phone Scoop) against several companies that were taking bulk quantities of its prepaid handsets, unlocking them, and then reselling them. The company calls such activity “prepaid phone trafficking,” when it’s really just exploiting a poor business model. As in other suits filed by other operators, it sounds like T-Mobile based this one on copyright or trademark claims, saying “Consumers are harmed and may be misled about the source and origin of their mobile phones… Because the phones may still carry T-Mobile’s brand, consumers may believe they are purchasing handsets manufactured for T-Mobile and covered by original warranties.” That’s slightly counter-intuitive: T-Mobile says the unlockers made their money by buying handsets locked to the operator, then unlocking them so they could charge a higher price when they were resold. According to T-Mobile, the phones carried a higher price, weren’t sold in original packaging and didn’t come with manuals. They were also, presumably, accompanied by advertising playing up the fact that they could be used on any operator’s network. All of this combined would seem to make it pretty clear to buyers that they weren’t buying an original, “official” T-Mobile product. So where’s the basis for the confusion claims?

Filed Under: legality, mobile phones, prepaid wireless, unlocking
Companies: t-mobile

Why Are People Being Sent To Jail For Unlocking A Mobile Phone?

from the bad-news-all-around dept

For a few years, we’ve been covering the various lawsuits over mobile phone unlocking, mostly involving the company TracFone. TracFone focuses on the “prepaid” mobile phone market. That is, rather than selling long term contracts to people with various total minutes, it just sells phones with a certain number of minutes already on them that can then be re-upped at the buyer’s discretion. However, like typical mobile phone service providers, TracFone subsidizes the price of the phone in order to make it seem quite cheap (sometimes as low as 10or10 or 10or15). The idea is to hook people and make money on selling the minutes. However, there’s no requirement that people buy more minutes.

What’s happened, of course, is that people figured out a huge arbitrage opportunity. They buy TracFone phones on the cheap, unlock them, and then resell them for a higher price (often outside the country). The problem here is TracFone’s choice of a business model. It decided to subsidize the phones and it set up a business model that doesn’t require people to sign a long term contract or ever agree to buy more minutes. However, if you listen to TracFone tell the story, this is a case of felony interference of a business model, and anyone unlocking those phones must be stopped.

For a while it was abusing the DMCA for this purpose — using it to claim that the unlocking was circumvention of copy protection. Of course, that’s exactly how the DMCA is not supposed to be used — and that was made even more clear when the Library of Congress explicitly carved out an exemption for mobile phone unlocking, making it quite clear that this is perfectly legal. TracFone has whined about this, but it still doesn’t amount to much more than that the company just picked a bad business model.

However, the situation keeps getting more bizarre. Some folks involved in one of these arbitrage opportunities were eventually arrested for terrorism, after US officials assumed that anyone buying so many prepaid phones must be planning some sort of attack (don’t ask). This had companies in the space suddenly claiming that this action of unlocking prepaid phones was a national security threat (seriously). What’s scary is that some officials seem to believe it.

It turns out that TracFone actually is winning a bunch of the lawsuits it’s filing, using both questionable copyright and trademark claims. However, the real kicker is that one man is actually facing jailtime for this. It’s a little unclear from the wording in the article, as the jailtime may actually be as a result of him ignoring a judge’s order to stop the practice of reselling unlocked TracFones — but it’s still not clear why it’s illegal to unlock these phones that were legally purchased. The DMCA exemptions say that unlocking a phone is perfectly legal, and as long as the phone was legally purchased, it’s now the possession of the buyer, who should be allowed to tinker with the software and resell it without having to worry about lawsuits or (worse) jailtime. Yes, TracFone is upset that it wipes out their business model, but the law isn’t designed to protect their own poor choice of business models.

Filed Under: jailtime, legality, mobile phones, prepaid wireless, unlocking
Companies: tracfone