It sounds like the issue should have been resolved by now, but alas, seventeen years after the launch of the original iPhone and we’re still arguing about carrier lock down.
IT-Mobile and AT&T this week responded to a proposed FCC rule that would require carriers to unlock phones within 60 days of going live—even if they’re under contract and haven’t been paid.
In their responses, the carriers argued that unlocking calls quickly would be harmful to consumers because locking the phone to a particular carrier is what makes it possible to provide cheap calls to consumers. Advocacy groups say the new policy will give consumers more choice and lower their costs.
The FCC specifically sued T-Mobile for locking prepaid devices sold under its Metro brand from its network for up to a year after purchase.
Carriers argue that it’s a good thing. “IT-Mobile estimates that its prepaid customers, for example, will see subsidies reduced by 40 to 70 percent on both its low-end and high-end devices,” the carrier said in response to the FCC’s public request for comment on its notice. Proposed rule. “The handset unlocking mandate will also leave providers with little choice but to reduce their handset supply to reduce costs and offer less efficient handsets.”
The FCC has considered how the proposed rule would affect subsidies, but still believes, especially for prepaid customers, that locking devices is a risk. From Ars Technica:
The FCC accepted Verizon’s contention “that carriers may rely on handset locks to maintain their ability to provide handset subsidies and that such subsidies may be more important in prepaid areas.” But the FCC noted that public interest groups “argue that locked phones tied to prepaid plans could hurt low-income customers because they may not have the resources to switch service providers or buy new phones.”
Verizon, interestingly, is not strongly opposed to this new system because it already activates the devices 60 days after the purchase due to the requirements placed on it after buying the new spectrum. It would probably benefit Verizon in some way as customers of other networks would have an easier time switching to their network. Even when the phone is financed and fully paid for, carriers often still impose a waiting period before the device can be unlocked.
“You bought your phone, you should be able to take it to any carrier you want,” FCC Chair Jessica Rosenworcel said when the FCC proposed the rule. “Some providers are already working in this way. Some don’t. In fact, some have recently extended the time their customers have to wait until they can unlock their device 100 percent.”
If you’ll remember, people were surprised when the original iPhone was released back in 2007 with a starting price of $499. To get sales, major carriers like Verizon and AT&T started subsidizing the cost of the phone, allowing customers to pay a low price upfront and finance the rest, usually in monthly installments over a 2-year period.
It’s easy enough to understand, but over the years the business model has caused a lot of confusion and confusion among customers who constantly feel trapped or cheated out of deals they’ve agreed to. I know—my parents still don’t understand that the iPhones they bought last year aren’t “free,” and that switching to another carrier for cheaper service would require an expensive purchase of their phone.
In addition, carriers like Verizon often require that customers who pick up one of these “free” device gifts sign up for a premium monthly service plan. If you look at Verizon’s website right now, the carrier advertises that “you can get the iPhone 15 Pro Max from us,” but in print notes that you have to choose the Ultimate Ultimate plan to get the deal. It’s the same situation at AT&T. The device is financed over 36 months at 0 percent interest, which seems good, but you have to choose a service pricing plan, and again, carriers like to keep devices locked even after they’re paid off. The FCC is instead proposing a onerous requirement in the opening to eliminate some of these conflicts.
Locking a financed device from the network until it’s paid off probably makes sense in that it doesn’t allow the customer to take the phone elsewhere and skip the payments. Perhaps a parallel would be car dealerships that install GPS trackers on machines purchased with loans. You can still drive the car to Mexico and stop paying, but it’s not a good idea for your credit or your ability to get another car loan in the future. The same applies to phones—if you fire AT&T or T-Mobile you’ll run out of other options. It doesn’t appear that locking the device is in place to prevent loan cancellation.
Perhaps the financing of the device should be reduced to the cost of the service, so that consumers can better understand the real price they are paying and not be forced into a premium system in order to get the financing. There has to be a better solution than the current system that leaves many consumers confused about how much they are actually paying and that the phone is far from “free.” Locking a device only adds friction and keeps consumers paying for service that costs more than they might need, but it makes sense on the carrier’s part to prevent customers from going elsewhere.
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