Untethering financed smartphones from their carriers is a bad call, no matter how strongly United States Senators word their letters to the Federal Communications Commission (FCC). Five senators recently encouraged the FCC to unlock handsets after just 180 days, insisting such a rule will restore lost consumer freedom, allow for more affordable phones, and generally uphold competitive market principles. The economics tell a different story.
When the FCC first broached the idea of enforcing industry-wide short unlocking windows with a notice of proposed rulemaking in 2024, research on the big three providers—AT&T, T-Mobile, and Verizon—found that handset locking arrangements do not restrict consumer freedom. The data showed customers with locked phones switched providers far more frequently than those with handsets that unlocked after 60 days. If locking really took away consumers’ freedom, the data from earlier years should have shown the exact opposite.
As for unlocking mandates lowering phone prices, Congress errs again. Unlocking mandates don’t make expensive phones more accessible—locking arrangements do. The price of the phone doesn’t change whether the consumer or the carrier buys it from a manufacturer, but carriers often offer their phones to consumers with a steep discount. When consumers switch freely anyway, new carriers will often pay for consumers’ phones and switching costs, effectively compensating the original carrier for their lost revenue stream. With the promise of a return on their investment, carriers are willing to take an initial loss on the high upfront costs. Locking the phones to its network ensures a carrier can recoup its money over time until the device is paid off.
By purchasing the phones and offering them to consumers through discounts and monthly payments, carriers absorb expensive prices and get better phones into more hands more quickly. Handset locking arrangements are a win-win financing arrangement, pure and simple.
Congress is right about one thing, though: a uniform rule can restore competitive market principles. Government-imposed unlocking rules have been geared only to individual carriers—not industry-wide. Verizon was the first to be saddled with an unlocking mandate and carried it from 2007 to January of this year. 17 years later, T-Mobile also agreed to unlock phones early before it could acquire Mint Mobile. Although the FCC considered leveling the same requirement on AT&T, it hasn’t yet—that very proposed rulemaking from 2024 is the same one the five senators are writing letters about today. Now, T-Mobile stands on uneven ground, with Verizon and AT&T both conforming to industry standards. Uniformity is still not the norm.
This gives providers with an early-unlocking mandate a unique disadvantage as unlocked phones make prime targets for theft. After all, phones that readily work on any network can sell for more than phones that only work on one. For example, when Verizon acquired Tracphone, subjecting it to the same existing 60-day unlocking rule, Tracphone customers saw a 55 percent jump in handset theft. Rules that make one carrier more vulnerable than the rest create an uneven playing field.
If all carriers were free to meet industry standards, however, no one carrier’s phones would be forcibly unlocked earlier than the rest. Each could make that decision based on market forces and business strategy. The risk of theft artificially concentrated on one carrier’s consumers would disappear because there would be no regulatory incentive for phone thieves to target one carrier over another. All told, uneven rules harm competition—not the locking agreements Congress decries.
So the FCC has a choice to make.
The FCC can level the playing field for all either by weakening all carriers’ financing agreements, or by letting more carriers lock phones longer and offer better financing rates to customers. Both options make all carriers compete on even ground; only one option makes pricey phones more affordable. Thankfully, the agency seems to prefer the latter.
In January, the FCC waived Verizon’s early unlocking requirement. Then in June, a smaller, local carrier was also released from its early unlocking duties. Instead of government-imposed unlocking mandates, both carriers can now match their competitors.
The FCC has yet to conclude its proposed rulemaking from 2024, but its actions this year suggest that it will settle on a uniform rule to free any remaining carriers from their unlocking mandates. On a level playing field without handset unlocking rules, each carrier can more easily compete with one another, offer better smartphones at lower monthly prices, and better protect consumers from phone theft. Each of these outcomes on its own is a win for consumers. Altogether, they are even better.
The FCC should stay the course and resist calls for unlocking mandates. Sound economics delivers more wins for consumers than letters from Congress.
Nate Karren is a Policy Analyst with the American Consumer Institute, a nonprofit education and research organization. Follow Nate on X @NateKarrenOnX