Verizon-Alltel merger: Approval expected; advocates concerned

As the country focuses on the presidential race tomorrow, the Federal Communications Commission (FCC) and Department of Justice (DOJ) may well be blessing the marriage of Verizon Wireless and Alltel. And the advocates at Consumers Union, the parent company of Consumer Reports, aren't happy about what they say is a rushed approval.

If it is indeed consummated on Election Day, as is widely expected, the merger will create the largest cell-phone carrier in the nation, eclipsing AT&T. And as we noted when the merger was announced in June, it does bring together the two carriers that have topped our Ratings of cell-phone carriers (available to subscribers) in recent years. Also, rural-based Alltel customers would get access to the larger Verizon Wireless network, which shares the same (CDMA) technology as Alltel.

But CU says they are issues that deserve closer study before the deal is announced:

• By reducing competition in cellular, CU says, the deal might facilitate developments such as the recent lock-step rise across the industry in a la carte text-messaging fees. Senator Herb Kohl, Chairman of the Senate Antitrust Subcommittee, recently wrote to the CEOs of all the major wireless companies complaining that carriers have doubled their text messaging charges (about 20 cents per message) in the past three years. This, Senator Kohl says, in spite of the average revenue per subscriber (ARPU) on text messages being significantly higher than those for voice calls. And, adds CU, of evidence that the costs of providing of text-messaging service are actually falling.
• CU says that Verizon and the other large carriers are using a step known as "in-market" exception to block smaller carriers from entering into roaming agreements with them in many markets—agreements that can also expand competition. With Alltel in its fold, Verizon will have even less incentive to enter roaming agreements with smaller carriers—effectively cutting them off.
• Verizon pledged in November 2007 that it "will provide customers the option to use, on its nationwide wireless network, wireless devices, software and applications not offered by the company," and they promised it would be available throughout the country by the end of 2008. With only few weeks to go in 2008, CU points out we're still waiting for those digital doors to open.

CU has petitioned the FCC to withhold approval of the merger until the carriers address these and other critical issues. Go to HearUsNow.org, CU's site for consumer issues in telecommunications, for more on CU's advocacy on this issue.

—Mike Gikas