It seems that the problem was supposed to be solved by now, but unfortunately, seventeen years after the launch of the original iPhone, we are still debating carrier device locking.
This week, T-Mobile and AT&T responded to the proposed rule by the Federal Communications Commission (FCC) requiring service providers to unlock phones within 60 days of activation – even if they are under contract and their fees have not been paid yet.
In their response, the telecommunications companies argue that unlocking phones quickly would be harmful to consumers because carrier locking allows for cheaper phones to be offered to consumers. Advocacy groups say the new policy will give users more choices and lower their costs.
The FCC specifically called on T-Mobile to unlock prepaid devices sold under its Metro brand on its network for a year after purchase.
Carriers argue that it’s a good thing. “T-Mobile estimates that pre-paid customers, for example, will see a 40 to 70 percent reduction in support for both low-end and high-end devices,” the carrier said in response to the request from the FCC to comment on its proposed rule. “Authorizing phone unlocking would leave service providers with no choice but to limit their phone offerings at lower cost and provide lower-performing phone.”
The FCC looked into how the proposed rule would impact subsidies, but still believes, especially for prepaid customers, that device locking is harmful. From Ars Technica:
The FCC acknowledged Verizon’s argument “that service providers may rely on device locking to maintain their ability to offer phone subsidies and that such support may be particularly important in prepaid environments.” But the FCC pointed out that public interest groups “argue that locked phones tied to prepaid plans can harm low-income customers more than anything else, as they may not have the resources to switch service providers or buy new phones.”
Interestingly, Verizon does not strongly oppose this new rule as it already unlocks devices after 60 days of purchase due to requirements imposed on it after acquiring a new spectrum. This could benefit Verizon in a way where customers from other networks will have an easier time transitioning to its network. Even when phones are fully funded and paid off, telecommunications companies often impose a wait period before unlocking the device.
FCC Chairwoman Jessica Rosenworcel said when the FCC proposed the rule: “You bought your phone, you should be able to take it to any provider you want.” “Some service providers are already doing it this way. Others are not. In fact, some have recently increased the time their customers must wait before they can unlock their devices by up to 100 percent.
If you remember, people were alarmed when the original iPhone was released in 2007 starting at $499. To boost sales, major carriers like Verizon and AT&T started subsidizing the cost of the phone, allowing customers to pay a low upfront price and finance the rest, usually in monthly installments over two years.
Simple enough to understand, but over the years, the business model has caused a lot of confusion and panic among customers who always feel trapped or misled by the deals they agreed to. I know my parents still don’t understand that the iPhones they bought a year ago are not actually “free,” and that switching to another carrier for a cheaper service would require expensive phone purchases.
Furthermore, carriers like Verizon often require customers to subscribe to one of these “free” device offers in an advanced monthly service plan. Looking at Verizon’s website now, the carrier announces that you can “get the iPhone 15 Pro Max on us,” but in fine print, you must choose the Unlimited Ultimate plan to get the deal. It’s a similar situation with AT&T. The device is financed over 36 months at 0 percent interest, which sounds great, but you must choose a higher-priced service plan, and once again, telecoms want to keep the devices locked even after they are paid off. Instead, the FCC proposes a stringent requirement on unlocking to remove some of this friction.
Perhaps locking a financed device to a network until it is paid off makes sense because it does not allow the customer to take the phone elsewhere and bypass payments. Perhaps the natural result is car dealers installing GPS tracking devices in leased devices. You can still drive the car to Mexico and stop making payments, but this isn’t a good idea for your credit or ability to get another car loan in the future. The same applies to phones, if you copy AT&T or T-Mobile, other options will be depleted. Device locking does not seem to exist to prevent loan default.
It may be necessary to separate device financing from service costs, so that consumers better understand the actual price they are paying and are not forced into a premium plan to get financing. There should be a better solution than the current system that leaves many consumers not understanding the amount they are actually paying and that the phone is far from being “free.” Device locking leads to increased friction and makes consumers pay for a service at a higher cost than they may actually need, but it makes sense from the carrier’s side to prevent customers from going elsewhere.
