AT&T and T-Mobile argue unlocked phones are bad for their customers – here’s why

The FCC wants to require all mobile carriers to unlock mobile phones within 60 days of activation. But neither AT&T nor T-Mobile are on board with that idea.

In June, FCC Chairwoman Jessica Rosenworcel announced the proposal, arguing that unlocking phones within just two months would give people more freedom and flexibility to switch their existing phones to another compatible carrier. After floating that concept, the FCC invited interested parties to offer their feedback, prompting two of the largest carriers in the US to give the measure a thumbs down.

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On October 4, AT&T met virtually with people from the FCC’s Wireless Telecommunications Bureau and Office of Economics. In a follow-up letter sent to the FCC on October 7 as spotted by Ars Technica, AT&T outlined its opposition to the plan.

Requiring carriers to unlock phones before they’re paid off would hurt consumers by increasing prices and reducing the incentive to finance their devices on flexible terms, the company said. AT&T also contended that unlocking phones so soon after activation would lead to greater fraud.

“Locking a handset purchased under those terms until it is paid off is not anti-consumer, as it enables providers to make devices more affordable to all consumers, who overwhelmingly elect to purchase their phones in this way,” AT&T said. “The proposed rules would limit those options, making handsets less affordable for consumers, especially those in low-income households. They are also likely to exacerbate handset arbitrage, fraud, and trafficking.”

Further arguing its case, AT&T cited the highly competitive nature of the wireless market but said that the proposed unlocking rules would fail to foster greater competition and therefore would not benefit consumers. The company also questioned the power of the FCC to impose such a rule, claiming that the agency could be overstepping its authority.

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“If the FCC does anything in this space, it should take into consideration maintaining existing contractual arrangements between customers and providers, ensure that providers have at least 180 days to detect fraud before unlocking a device, and include at least a 24-month period for providers to implement any new rules,” AT&T concluded.

In its own letter to the FCC on October 17 following a meeting with the same two FCC departments, T-Mobile offered similar reasons for opposing the plan. The carrier disupted the idea that its current unlocking policies harm consumers and instead maintained that such policies allow it to provide mobile broadband on phones that are free or heavily discounted.

Further, its existing policies help guard against theft and fraud, the company said. And like AT&T, T-Mobile contended that the FCC may lack the authority to adopt the proposed rule.

“If the Commission mandates a uniform unlocking policy, it is consumers—not providers—who stand to lose the most,” the carrier argued. “T-Mobile noted that consumers risk losing access to the benefits of free or heavily subsidized handsets because the proposal would force providers to reduce the lineup of their most compelling handset offers…A handset unlocking mandate would also leave providers little choice but to limit their handset offers to lower cost and often lesser performing handsets.”

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What about Verizon? The third major US carrier already automatically unlocks phones after 60 days of activation, so Verizon is backing the FCC’s proposed unlocking rule. In an October 2 letter to the FCC following a September meeting, the company said it reiterated its support for the proposal as a way to limit fraud and enable device subsidies.

Verizon contended that a 60-day locking period for postpaid customers is the minimum needed to help thwart fraud and theft. However, a longer 180-day locking period for prepaid subscribers is necessary for providers to continue to offer subsidies to make phones more affordable, the company added.

“Regardless of the locking period the Commission adopts, we explained that a uniform unlocking policy that applies to all providers is paramount; the record is replete with evidence that uniformity will benefit both consumers and competition,” Verizon said. “Therefore, any handset locking rule applicable to providers for a specified period should be applied uniformly to all wireless providers.”

Several consumer groups have also voiced their support for the proposal. In an October 18 letter to the FCC, representatives from the groups called the plan a way to increase consumer choice, lower costs, and improve competition in the wireless market.

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“Handset locking practices limit consumer freedom and lessen competition by creating an artificial technological barrier to switching providers,” the representatives argued. “The 60-day automatic unlocking requirement proposed by the FCC is a simple solution to these issues. It balances the need to allow wireless providers to detect and deter fraud with the imperative to protect consumer choice.”

With all these groups and companies chiming in, the FCC now must decide if and how to implement the new policy. But it also faces several questions. Would the rule apply to existing contracts or just future contracts? How would it affect the incentives and discounts offered by carriers for both postpaid and prepaid service plans? And how would the requirement impact smaller carriers and resellers?