Introduction and Summary

The Information Technology and Innovation Foundation appreciates the opportunity to comment on the use of handset unlocking requirements to promote consumer choice and wireless competition.[1] The Commission should establish a uniform rule of no unlocking requirements.

The Proposed Rule Incorrectly Accounts for Costs and Benefits

The NPRM’s tentative conclusions in favor a uniform 60-day unlocking requirement overstate the benefits of the Commission’s proposal relative to its costs.[2] The case for mandatory unlocking apparently assumes that the Commission can remove a certain type of contractual arrangement from the market and affect nothing else. But that is not an available option. The choice is not between the status quo and the status quo with universally unlocked phones. Banning contracts that discount phones in exchange for a requirement to stay with a given carrier will affect both sides of that deal.

Devices are tied to a carrier are usually so because the carrier is subsidizing the price of the device. This bargained-for exchange is beneficial to consumers who may be more price sensitive and thus willing to forgo some future flexibility in exchange for more money in their pockets at the time of purchase. Mandatory unlocking denies consumers this choice. Even though installment plans and other discounts may persist without the ability to purchase a locked device, they will necessarily be on different terms since profit seeking carriers will not trade the same consumer benefit for a smaller benefit to themselves.

Furthermore, allowing carrier-specific deals does not eliminate consumers’ choice of buying an unlocked device if they value flexibility more highly. The Commission’s proposal, therefore, strictly reduces consumer choice at the expense of those consumers who would be most sensitive to higher upfront prices—an inequitable result. That outcome is not in the consumers’ or the public’s interest.

The Commission Should Create a Level Playing Field of No Unlocking Requirements

ITIF agrees that the Commission should establish a uniform rule regarding device unlocking.[3] The Commission has created a competitive imbalance by inappropriately applying this requirement piecemeal through merger conditions.[4] Since the requirement is bad policy to begin with, the Commission should stop applying it through extraneous merger conditions and waive any instances of it that now exist. Consumers benefit most when they can compare the quality of offerings of competing wireless providers on the providers’ own merits rather than having that comparison distorted by asymmetric regulation. The Commission should not be picking winners and losers in the wireless marketplace; regardless of the rules, they should apply equally to all similarly situated actors.

Conclusion

The NPRM’s proposal purports to increase consumer choice, but it would actually make some consumer choices illegal. These unintended consequences would undermine the public interest. The Commission should instead allow consumers and wireless carriers to form mutually beneficial agreements of their choosing.

Thank you for your consideration.

Joe Kane
Director of Broadband and Spectrum Policy

Endnotes