Verizon: It's time for a '​​thorough analysis' of phone unlocking

Verizon charged the FCC with "piecemeal policy making" and "asymmetric regulation" that has resulted in a "haphazard" approach to the process of phone unlocking in the US. And the company is calling on the agency to straighten things out.

"Now is the time to undertake a thorough analysis of this issue. The commission should assess the costs and benefits of an unlocking policy, whether it enhances consumer welfare and, if so, whether it should be applied uniformly," Verizon wrote in a new filing to the FCC.

Recently, some public interest groups called on the FCC to impose phone unlocking requirements on T-Mobile as a condition of its proposed purchase of mobile virtual network operator (MVNO) operator Mint Mobile.

Verizon itself faces phone unlocking requirements stemming from its acquisition of 700MHz spectrum in 2021 and its acquisition of prepaid provider TracFone the same year. 

The argument for locking

In its FCC filing, Verizon argued that in some cases phone locks can benefit consumers.

"An unlocking requirement may discourage a carrier from deeply discounting a phone because it cannot recoup its subsidy if a customer immediately moves to another carrier," the company wrote.

Ostensibly, phone locks are intended to allow wireless providers to offer phones at a low cost to consumers with the knowledge that the operator will be able to recoup the cost of the phone through monthly bills. If the customer were able to immediately switch to another provider, they would essentially be getting a phone for free.

But locks can also be used by providers as a way to prevent wireless customers from switching to another provider.

Roughly a decade ago, phone locks were prevalent in the US until the FCC in 2014 pushed the wireless industry to implement a clear process for unlocking a phone from a provider's network, thereby allowing customers to take their phone to another provider.

However, the FCC has in some cases imposed specific phone unlocking requirements. For example, Verizon must unlock certain devices 60 days after activation as a condition of its acquisition of TracFone.

Verizon told the FCC this week that those kinds of requirements can backfire. "Unlike the postpaid context, in which consumers with strong credit profiles obtain devices at low upfront costs on credit, prepaid consumers may depend on providers offering heavily subsidized devices to lower upfront device costs," the operator wrote.

"And providers rely on device locks to sustain their ability to offer such subsidies," Verizon added. "Device locking periods, in fact, may greatly benefit low-income consumers because they make devices more affordable, lowering the barrier to entry to mobile service."

In its filing, Verizon said it takes no position on T-Mobile's proposed purchase of Mint Mobile. Instead, Verizon urged the FCC "to conduct a thorough analysis of its unlocking policy and base its policies on a fully developed record."

The argument for unlocking

"Consumer advocates have long argued that mobile phones should come unlocked by default, allowing users to more easily make choices about the device and service they purchase, as they can for most products," wrote New America's Open Technology Institute and Public Knowledge, two public interest groups, in a recent filing to the FCC. The groups noted that regulators in the UK and Canada have imposed restrictions on phone locking as a result.

In their filing, New America's Open Technology Institute and Public Knowledge urged the FCC to require T-Mobile to unlock its phones 60 days after activation, as a condition of its proposed $1.3 billion purchase of Mint Mobile, which is fronted by actor Ryan Reynolds.

The FCC is still reviewing T-Mobile's proposed purchase of Mint Mobile. T-Mobile officials have said they expect the deal to close sometime in the first quarter of 2024. That represents a delay from the company's original plan to close the deal by the end of 2023.

In October, the FCC fired a battery of questions at T-Mobile regarding the company's proposed purchase of Mint Mobile.

New America's Open Technology Institute and Public Knowledge argued for phone unlocking conditions on T-Mobile to counter declining numbers of MVNOs. "The ongoing loss of independent MVNOs is steadily undermining competition and consumer choice in the market for mobile data service," the groups wrote.

In a filing last year, Verizon argued that T-Mobile "has much more restrictive locking policies that limit consumers' ability to switch carriers or devices."

Specifically, Verizon noted that T-Mobile locks its postpaid customers' handsets until the devices are fully paid off, which can take up to two years. "Prepaid customers must wait 365 days after the device is activated on T-Mobile's network, and customers are limited to two device unlocks per twelve months," Verizon added.

Meanwhile, Verizon generally unlocks its phones after 60 days.