- The FCC is considering whether to require mobile phone carriers to unlock phones 60 days after activation
- It’s not on the FCC’s December agenda, but all five commissioners in July voted to move forward with the unlocking proposal
- MVNOs would be a big beneficiary of an easier switching environment
Verizon is using GenAI tools. T-Mobile is giving away free smart TVs. AT&T is offering its Bundle of 3.
They all kicked off the holiday shopping season touting great deals, but there’s one thing that could change the landscape significantly between now and next year’s Black Friday/Cyber Monday sales cycle: unlocked phones.
The FCC is looking at a proposal to require all mobile phone service providers to automatically unlock consumer handsets within 60 days of activation, meaning the phones could be taken to another service provider’s network if a consumer so chooses. Not only would it likely spur churn at the Big 3 wireless carriers, it would most certainly make it easier for consumers to switch to MVNOs, which use the networks of AT&T, T-Mobile and Verizon to sell wireless services under their own brands.
Currently, only Verizon is required to offer a 60-day unlocking policy because it was imposed as part of a spectrum purchase agreement. Verizon is on board with the FCC instructing its rivals to match its 60-day phone unlocking requirement. However, it’s arguing for a 180-day locking period on prepaid phones because, it says, prepaid customers rely heavily on up-front device subsidies, which are possible only because wireless providers can lock devices long enough to recover the subsidies.
AT&T and T-Mobile are very much opposed to a uniform unlocking policy and question the FCC’s legal authority to mandate it. They also say requiring unlocked handsets will lead to more fraud and eliminate their ability to offer promotional pricing and attractive financing, especially in the prepaid sector.
To hear the carriers tell it, handset fraud and trafficking cost the wireless industry hundreds of millions of dollars in losses annually. “The practice of locking handsets until they’re paid off reduces the incentive for criminal enterprises to acquire handsets for international trafficking to illegal marketplaces,” AT&T told the commission, explaining that stolen handsets often end up being sold in foreign countries, where they’re worth several hundred dollars more apiece if unlocked.
But some MVNO pioneers say fears about fraud and device discounts are hogwash.
Fraud is not a problem, said Peter Adderton, founder and CEO of MobileX, an MVNO that uses Verizon’s network. “It’s a red herring to get people sidetracked off the main issue,” he told Fierce.
Adderton also is a co-founder and now former chairman of the Boost Mobile MVNO in Australia, which just sold to Telstra for about $90 million. He introduced the Boost brand to the U.S. in 2001 via Nextel Communications, then sold it to Nextel in 2003. It’s now under the ownership of EchoStar, which is in favor of the FCC’s proposal to adopt a uniform unlocking policy for both postpaid and prepaid phones.
As to the claim that unlocked phones will increase the price of devices, Adderton said that’s bogus, as it’s baked into the cost of phones. He equates it to the perks, like “Netflix on us” or “Hulu on us” that usually require customers sign up for higher-end plans and data that Adderton argues they don’t really need.
“It’s laughable that somehow the carriers are like these Santa Clauses that are delivering all these gifts,” he said. “It’s designed to lock you in and you will pay for it.”
At MobileX, Adderton said he regularly hears from consumers who want to sign up for service but find out during the activation process that their device is locked to a carrier – even if it’s paid off. The vast majority of these consumers say they’re not able to get their carrier to unlock their device, which at the very least usually requires a phone call to the carrier.
“It’s an antiquated practice that was brought about by carriers coming up with ways to be able to keep customers on their network longer, to reduce churn and give them more revenue and a much better valuation on their subscribers,” Adderton said.
Technology marches on
Whitey Bluestein is another proponent of changing the phone unlocking requirement. He’s a 42-year veteran of the mobile and telecom industry and still has the RFP, circa 1996, that he sent out to wireless carriers with the intent to buy their last-mile services in bulk.
At the time, he was at MCI, which wasn’t a wireless carrier but it wanted to buy wholesale minutes from carriers and sell services to consumers using its own billing systems. It wasn’t called an MVNO back then, but that was the concept.
He’s now the head of the consulting firm Bluestein & Associates and he’s been lobbying – on his own dime and not for any specific clients – for the FCC to update the phone unlocking rules. That’s how strongly he feels about it.
His main beef: Smartphone technology has changed dramatically since the current unlocking standards were voluntarily adopted by the wireless industry, via CTIA, 11 years ago. Dual SIM and eSIM devices are now widely available to lower the costs of entry for new MVNO competitors and provide more flexibility to consumers in how they use their devices – so long as they’re unlocked.
“There’s no need for locking at this point,” he told Fierce, noting the requirement imposed on Verizon several years ago to unlock phones after 60 days. “As far as I can tell, Verizon is doing just fine. The sky is not going to fall if the unlocking rules are relaxed.”
The main purpose of phone locking rules are to “protect mobile carriers from losing customers to other service providers who offer better pricing, better service, better care, better coverage, better promotions, better commercials or celebrity spokespeople, for any reason whatsoever,” he told the commission.
Prospects of passing
Adderton said he thinks the phone unlocking proposal before the FCC had its best shot under the Democratic leadership of outgoing Chairwoman Jessica Rosenworcel. The incoming administration is the same one that approved the Sprint/T-Mobile merger, which Adderton fought hard against, and consumers weren’t the biggest winners there, he said.
To his point, 15 Democratic attorneys general recently wrote to the FCC urging it to adopt the handset unlocking rule, saying their offices consistently receive complaints from consumers who report they were misinformed or deceived about wireless device offers, including offers of “free” handsets that lock them into a particular service provider for an extended period of time.
Previously, five Republican attorneys general wrote to the FCC outlining their opposition to the unlocking proposal, saying it goes beyond the FCC’s statutory authority and could result in a significant reduction in device subsidization by wireless providers.
The unlocked phone item is not on the FCC’s December agenda, but all five commissioners in July voted to move forward with it, including Republican Brendan Carr, who is slated to be the next FCC chair, so it’s possible it will remain in some state of play after the Trump administration takes over in January.
Fierce reached out to Carr’s office for comment and will update this story if we hear back.
“I’m hoping that Brendan Carr looks at this and says, yeah, these phones should be unlocked. Consumers should be able to move when they want to move,” Adderton concluded.
