Last month, the Federal Communications Commission (FCC) waived a harmful and outmoded rule that required a single telephone carrier—Verizon—to unlock its handsets after 60 days, long before its competitors. When the rule was issued in 2007, the FCC intended to provide consumers with greater freedom in choosing their telephone carrier, but that rule backfired when it instead created a powerful playground for criminal activity. Waiving the handset unlocking rule was the right call, and the decision highlights why sound economic analysis should always be at the heart of regulatory decision-making.
The original decision was meant to promote greater competition and consumer choice. As a condition of winning 700 MHz of coveted C-Band spectrum in a 2007 auction, Verizon was required to automatically unlock its handsets after 60 days (far earlier than common contract periods of 12 to 24 months), giving consumers an opportunity to take their business elsewhere once they had their preferred device. Notably, similar requirements have been levied on T-Mobile as a condition of its acquisition of Mint Mobile, and in 2024 the FCC proposed extending handset unlocking requirements to AT&T to level the playing field.
But government mandates, in the name of promoting competition, ignore the economics behind why phones are locked into carrier-specific contracts in the first place. Locking arrangements are a form of financing. Carriers purchase expensive smartphones, then offer them to consumers through financed deals, spreading the high cost out over time. This allows consumers access to higher-end phones at a predictable monthly price. On the carrier’s side, locking the devices allows it to recoup its investment. This arrangement helps both consumer and carrier, especially as smartphones have become increasingly feature-rich over the past two decades. Mandating the 60-day unlocking rule, created in the same year as the original iPhone in 2007, blocks a mutually beneficial system. Simply asserting a decision is pro-consumer does not make it so.
Sidestepping economic reality has dire consequences. In Verizon’s case, the unlocking requirement made its handsets prime targets for thieves who resell the phones without a specific carrier attached—but the problem is much broader than just theft. Fraudulently obtained phones become immediately available to use on any carrier’s network, fueling broader criminal activity. According to a statement by the FCC, law enforcement has consistently traced phone thefts back to “transnational handset trafficking schemes,” finding them sold for profit in Russia, Cuba, and China. Outside of trafficking, these stolen phones are often used to commit fraud against consumers. That is why it is unsurprising that Tracfone reportedly experienced a 55 percent spike in fraud in 2021 after it was acquired by Verizon and had to adopt the 60-day unlocking policy. Meanwhile, the risk of stolen phones, either directly from consumers’ hands or through retail theft, is then recouped by carriers that must increase their prices to account for increased risk. This is a losing scenario for consumers.
The FCC is right to consider international ramifications, but the cost is even more personal for consumers. According to a 2021 report from the US Census Bureau, smartphones were the most common computing device in 90 percent of US homes. For many consumers, having their smartphone stolen would mean losing internet access. Along with it, consumers lose memories and photos, the ability to text and call loved ones, mobile wallets, and even access to two-factor authentication apps on their devices. Phone theft is an enormous setback in the modern age. Making theft and reselling more difficult for bad actors by simply waiving burdensome unlocking rules is therefore the pro-consumer decision.
The FCC’s decision is an example of how adherence to economic reality can correct well-intentioned but harmful policy. When the rule was originally proposed, it was unlikely anyone predicted it to boost phone theft and retail crime—industry players that commented in 2007 focused on whether open access requirements would be pro-competitive. But two decades later, the unforeseeable came to pass, prompting regulatory change. Sadly, correcting flawed policy is hard to do—regulation tends to be a “one-way ratchet.” That’s why new rules should be considered only when existing rules fail to cover real, provable harms instead of trying to preempt hypothetical risk. Simply believing regulation is pro-consumer doesn’t make it so.
Waiving the 60-day handset unlocking rule was ultimately the right decision, and the FCC should not consider any further impositions of similar rules. Regulating telephone carriers evenly means no one carrier’s phones will be easy pickings for transnational criminal rings. This is good for consumers, who otherwise pay higher prices to offset the risk of theft and who suffer great personal costs when their phones get stolen. The harms inadvertently caused by the 60-day unlocking rule offer compelling evidence that real pro-consumer regulators should pivot as new information comes to light.
Nate Karren is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, Follow Nate on X @NateKarrenOnX.