FCC wants telcos to unlock handsets after 60 days

Chairwoman Jessica Rosenworcel has proposed a new rule that would require operators to unlock customers' handsets after just 60 days, giving them the option to use that device on a rival network.

The FCC argues that it would give consumers more flexibility when switching service providers; increase competition by reducing consumers' switching costs; and reduce customer confusion by applying the same unlocking rules to all mobile service providers.

At the moment, devices are typically tied to an operator's network until the service plan expires – by which time the handset subsidy has been recouped (and then some) via the subscription fee. Or, devices are paid off incrementally via a separate instalment plan.

Therefore, unless a customer has paid the full price of the handset up front – unlikely in most cases given how expensive phones are these days – it's not clear at this point how the 60-day rule would work in practice.

It's possible that a customer might continue paying one carrier for their phone, and another carrier for network access. Or perhaps there might be levied an early termination fee that covers the outstanding balance on a handset before it can be unlocked.

The FCC is due to vote on the proposal at its next open meeting on 18 July, and in the meantime it will seek feedback on the practicalities and the potential impact the new rule could have.

"Real competition benefits from transparency and consistency," Rosenworcel said. "That is why we are proposing clear, nationwide mobile phone unlocking rules. When you buy a phone, you should have the freedom to decide when to change service to the carrier you want and not have the device you own stuck by practices that prevent you from making that choice."

The US mobile market is regularly criticised for not being competitive enough, with just three nationwide operators – AT&T, Verizon, and T-Mobile – serving a population of 335 million.

The market doesn't begin and end with these three. There are plenty of alternatives in the form of MVNOs (either pure-play or operated by cablecos), smaller regional players, and hyper-local providers.

However, that doesn't seem to be enough of a counterweight to the big three, and mobile prices in the US continue to be on the highside compared to global peers.

Smaller MNOs are struggling to stay in the fight. UScellular recently agreed to be bought by T-Mobile for $4.4 billion, and 5G newcomer Dish is in a rush to secure new sources of funding in an effort to keep the lights on.

Every two years, the FCC publishes the Communications Marketplace Report, which takes a look at how well or otherwise the market is functioning.

This includes using the Herfindahl-Hirschman Index (HHI) to measure market concentration – the higher the score, the more concentrated and therefore less competitive a market is. Its most recent report, based on data gathered in 2021, puts the HHI at 3,596. Before the T-Mobile-Sprint merger in 2018, the HHI was 3,106.

With UScellular bowing out of the market, and Dish still finding its feet, it's unlikely that the HHI has gone down since 2021. As such, it is easy to see why Rosenworcel is keen to find new ways to enhance the competitive landscape.