Verizon is certainly happy after the Federal Communications Commission (FCC) opted to waive a requirement that the carrier unlock customers’ handsets 60 days after activation. Consumer advocacy groups? Not so much.
Here’s the TL;DR version. Last year, Verizon asked the FCC to waive the condition that it unlock phones 60 days after activation, a requirement that more or less dates back to Verizon’s acquisition of 700 MHz spectrum in 2007 and later extended to the prepaid TracFone MVNO business that Verizon acquired in 2021. Verizon, the only carrier subjected to the 60-day unlocking rule, argued that it lost hundreds of millions of dollars annually due to handset trafficking directly attributed to the unlocking mandate.
The FCC’s Wireless Telecommunications Bureau (WTB) agreed with Verizon, announcing on Monday that it would grant its waiver request.
Verizon Public Policy and Government Affairs SVP Kathy Grillo thanked the FCC and Chairman Brendan Carr for “acting decisively” to crack down on device trafficking and fraud.
“The FCC's action will end bad actors' ability to exploit the FCC's unlocking rules to profit from easier access to expensive, heavily subsidized devices in the U.S. that they traffic and sell to other parts of the world. Before today's decision, the FCC's rules have benefitted these international criminal gangs at the expense of legitimate American consumers,” Grillo said in a statement.
No doubt, Verizon is pleased to be on a more level playing field, as unlocked handsets make it easier for customers to jump ship and switch to another carrier. According to New Street Research (NSR), postpaid churn at Verizon rose by 14 basis points since 2018 while falling at AT&T and T-Mobile.
“Verizon has gone from having the lowest postpaid phone churn among the major MNOs to the highest,” NSR said in an October 7 report.
FCC: Verizon more vulnerable to handset trafficking
The WTB’s 16-page order waiving Verizon’s 60-day handset unlocking requirement allocates significant ink to the notion that criminal networks are specifically targeting Verizon’s handsets, stealing unlocked devices and reselling them on the black market, “particularly in countries like Russia, China and Cuba.” Verizon claims it lost about 784,703 devices to fraud across both prepaid and postpaid offerings in 2023.
“By waiving a regulation that incentivized bad actors to target one particular carrier’s handsets for theft, we now have a uniform industry standard that can help stem the flow of handsets into the black market,” Carr said in a statement.
But according to some consumer advocacy organizations, fraud can be addressed in ways that don’t involve locking handsets to a carrier’s network.
"There are ways to combat theft and fraud that do not require locking consumers and their handsets to particular carriers with digital locks. A 'more uniform' approach to the issue of handset unlocking would have been to make handset unlocking easier and faster across all carriers – not locking it down,” said Public Knowledge Legal Director John Bergmayer in a statement.
Michael Calabrese, director of the Wireless Future Project at New America’s Open Technology Institute, called the WTB’s decision “profoundly anti-consumer” and that it will do nothing but raise prices for mobile phone consumers.
“Since the FCC can increase the 60-day waiting period, it is false to claim that allowing mobile carriers to lock phones indefinitely has anything to do with reducing phone theft and crime. Both Canada and the UK require unlocking and a consumer’s choice to more easily switch among mobile providers, and neither has reported a surge in smartphone theft,” he told Fierce.
Calabrese added that if the full commission adopts the WTB’s view, “it would completely reverse the FCC’s pending proposal to protect consumers and lower prices by making the handset unlocking after 60 or more days an industrywide rule.”
Indeed, the FCC in 2024 put out a notice seeking comment on a proposal requiring all carriers to unlock phones within 60 days of activation; that proposal remains pending.
In its decision approving Verizon’s waiver, the WTB said the waiver will remain in effect “until such time as the commission decides on an appropriate industry-wide approach for the unlocking of handsets.” In the meantime, Verizon will comply CTIA's unlocking standards.
Cable companies weigh in
NCTA - The Internet & Television Association, which includes cable companies, has lobbied for a uniform policy of unlocking phones 180 days after activation.
In a statement this week, NCTA said that the unlocked phones deliver “clear pro-consumer benefits,” but that the WTB’s decision delays those advantages.
“It is more important than ever for the FCC to move forward with its rulemaking to adopt a common-sense approach like the one NCTA has proposed, which protects consumers while addressing reasonable fraud concerns,” NCTA concluded.