No, The FCC Should Not Mandate Phone Unlocking

By James Erwin

A little over two weeks ago, four House Republicans sent a letter to FCC Chairman Brendan Carr urging the agency to mandate phone unlocking for all carriers. On Thursday, five Republican Senators followed suit. A recent poll found that 85% of Americans support unlocking, but this indicates a market waiting to be served rather than a regulatory necessity.

Cellphone unlocking is when carriers, who often sell you your phone as part of coverage plan, “unlock” the phone at the expiration of the contract so that you can keep the device if you choose to switch to a different carrier. Customers dissatisfied with their carrier naturally want to keep their phone when the contract runs out even if they choose not to renew with the same provider, which explains the popularity of the policy.

The fear is that without regulation, the Big Three carriers will collude to lock all cellphones to their contracts indefinitely. If any one carrier were to offer unlocking, the other two would have to join in. It is therefore, in theory, in their interest to keep contracts locked. Carriers therefore must be required to offer this option.

But the theory is not bourn out in reality. Verizon was uniquely subject to an FCC unlocking order for several years. This was only just revoked, in large part because transnational criminal networks were deliberately stealing Verizon phones that they could easily switch to a different network. Verizon’s phones came with a guarantee from the FCC that it would be possible to quickly disappear onto the black market. If the Republican members of Congress making these requests of the FCC succeed, they will invite further criminal activity.

This request also ignores that AT&T, which was never subject to this order, offers unlocking on prepaid phones and has since 2012. Their policy has restrictions – phones must be fully paid off (so it is no longer the property of the company and belongs to the customer) and not all plans are eligible. Essentially, AT&T and its customers are exercising their right to freely enter into contracts, some of which allow unlocking. T-Mobile also allows unlocking under certain conditions.

This is a market demand being met on reasonable terms, without interference from the state. The FCC freeing up Verizon was good policy to combat crime and restore a level playing field to the market. The FCC should not reverse its decision just because people are clamoring for something already available for the right price under the right contract. Competition is delivering where regulation is unnecessary.

As usual, the Verizon waiver petition to free it from the unlocking order gave the FCC two options: Either the government can subject everyone to the same regulations, or they can simply repeal one and leave everyone unregulated. Since 85% of Americans desire unlocking, this would be a great opportunity for a smaller carrier looking to disrupt the big players to guarantee unlocking in all their contracts as a selling point. Perhaps Ryan Reynolds can offer it with those phone plans he hocks in those YouTube ads. Oh wait, he already does.

Both letters from Congressional Republicans are sadly solutions in search of a problem. The FCC would do better to simply leave carriers and customers alone.