Wireless Bureau Waives Verizon's Handset-Unlocking Requirements

Industry officials told us that the waiver may not be the final word and could be an interim step while commissioners consider proposals in a NPRM. In July 2024, the agency unanimously approved an NPRM that proposed industry-wide handset-unlocking rules (see 2407180037), requiring all mobile wireless providers to unlock handsets 60 days after they’re activated, unless a carrier determines the handset “was purchased through fraud.”

The FCC said in a release Monday that Verizon’s unlocked handsets “have too often been effectively stolen and resold on the black market, commanding premium prices on the dark web, particularly in countries like Russia, China, and Cuba.” Carr added that “by waiving a regulation that incentivized bad actors to target one particular carrier’s handsets for theft, we now have a uniform industry standard that can help stem the flow of handsets into the black market.”

The order is “a profoundly anti-consumer decision that will do nothing but raise prices for mobile phone consumers,” emailed Michael Calabrese, director of the Wireless Future Program at New America. The order reverses the agency’s pending proposals “to protect consumers and lower prices by making the handset unlocking after 60 or more days an industrywide rule.” Since the FCC could have simply lengthened the waiting period, it’s “a complete fraud” for the agency to claim that allowing the carrier to lock its phones indefinitely “has anything to do with reducing phone theft and crime.” Calabrese noted that Canada and the U.K. require unlocking and haven’t reported “a surge in smartphone theft.”

NCTA said unlocking requirements could save consumers billions of dollars each year. The decision “delays these benefits” and underscores “the need for a clear, uniform framework so all wireless providers operate under the same rules,” the group said. It’s “more important than ever for the FCC to move forward … to adopt a common-sense approach” that addresses “reasonable fraud concerns."

The agency imposed handset-unlocking and other open-platform requirements on carriers buying licenses in the 700 MHz upper C-block auction in 2008 -- licenses that Verizon purchased to strengthen its low-band spectrum footprint at a time when those frequency ranges were a top focus for carriers (see 0803250101). Verizon also agreed to unlocking requirements as part of its acquisition of Tracfone.

Prior to approval of the NPRM, Verizon signed a letter calling for universal unlocking rules (see 2406250049). But the company shifted to being in favor of a waiver, citing the risk that unlocked handsets will be used in crimes, an argument supported by law enforcement groups (see 2507090030). Public interest groups, NCTA and others opposed the waiver.

Monday's order said Verizon established “special circumstances” that justify a waiver. The rule doesn’t “provide Verizon with sufficient time to deter handset fraud that uniquely impacts its business.” Verizon estimates it lost 784,703 devices to fraud across prepaid and postpaid offerings in 2023, “costing it hundreds of millions of dollars,” the bureau said. It noted that Verizon’s 2021 acquisition of Tracfone “significantly increased its exposure to the prepaid business model and associated types of fraud.”

Verizon will abide by the voluntary standards for unlocking services “in alignment with” CTIA’s Consumer Code for Wireless Service, the agency said.

Kathy Grillo, Verizon's senior vice president of public policy and government affairs, thanked Carr and the FCC “for acting decisively to crack down on device trafficking and fraud.” The waiver “will end bad actors' ability to exploit the FCC's unlocking rules to profit from easier access to expensive, heavily-subsidized devices in the U.S. that they traffic and sell to other parts of the world,” she said in an email. Verizon wants to work with the FCC, law enforcement and the rest of the industry "to create unlocking policies that prioritize consumer protection, deter fraud, and keep the market competitive."