The Federal Communications Commission (“FCC” or “Commission”) yesterday adopted a Notice of Proposed Rulemaking (“NPRM”) that would compel all mobile service providers to unlock handsets 60 days after the handset is activated, unless within the 60-day period the provider determines the device was purchased through fraud. This requirement would apply to prepaid and postpaid handsets. The deadline for submitting comments is 30 days after the NPRM is published in the Federal Register; reply comments are due no later than 60 days after publication.

“Unlocking” refers to changing settings in a phone’s software to allow it to work with different mobile networks. Many mobile phones are currently sold with built-in software that prevents them from working on a different carrier’s network, and service providers have different policies regarding phone unlocking.  

The FCC asserts that imposing the unlocking requirement will facilitate competition and consumer choice by:

• increasing market transparency, as a uniform unlocking policy will reduce consumer confusion and make more information available to consumers;
• removing barriers to consumers’ ability to switch service providers;
• promoting competition among service providers; and
• reducing regulatory asymmetry, as all wireless service providers will be subject to the same requirements.

Acknowledging the possible burdens that mobile service providers and handset manufacturers may experience as a result of the new regulation, the Commission seeks comment on the following issues:

• how the proposed rule might affect the ability of wireless providers to continue offering discounts on handsets, particularly in connection with payment plans and minimum term commitments;
• what alternatives to unlocking would achieve consumer choice and competition;
• what specific language should be in the new rule;
• how would a carrier determine that a handset was purchased through fraud, thus entitling it to the unlocking exemption;
• what would be the economic impact of unlocking on small and rural wireless service providers, resellers, and handset manufacturers, g., would the unlocking requirement benefit smaller providers, resellers, and MVNOs by increasing the number of handsets available on the secondary market;
• would a universal unlocking requirement have other negative consequences on resellers, small and rural carriers;
• should the unlocking period be longer or shorter than 60 days;
• how would the unlocking rule impact existing service agreements;
• should the rule apply to already activated handsets;
• what factors should the FCC consider in order to balance the needs of service providers and consumers;
• how long should wireless providers have to comply with the new rule, and should there be a different transition period for smaller carriers and nationwide providers;
• should carriers be required to provide automatic unlocking for all new handsets they sell; and
• how should wireless providers be required to notify consumers about their unlocking policies.  

The CommLaw Group Can Help!

The CommLaw Group is happy to assist with analyzing the impact of the proposed handset unlocking requirements on your business and submitting comments in this proceeding. As the FCC’s final rule will have different impacts on handset suppliers, large and small carriers, as well as resellers, it is critical that all entities involved in mobile telecom service stay informed of the aspects of this moving target. Accordingly, if you would like additional regulatory updates tailored to the needs of your company, please contact one of our attorneys below, who will gladly provide additional information on signing up for these updates.

CONTACT US NOW, WE ARE STANDING BY TO GUIDE YOUR COMPANY’S COMPLIANCE EFFORTS

Michael Donahue — Tel: 703-714-1319 / E-mail: mpd@CommLawGroup.com
Ron Quirk – Tel: 703-714-1305 / E-mail: req@CommLawGroup.com
Christine McLaughlin – Tel: 703-714-1328 / E-mail: czm@CommLawGroup.com