In today’s hyper-connected world, it’s hard to imagine a regulation designed to protect consumers that instead fuels billions of dollars in international crime. Yet, that’s the reality of the Federal Communications Commission’s nearly 2-decade-old phone unlocking rule imposed on Verizon as part of its C-Block spectrum license.
This rule, adopted in 2007, requires Verizon to automatically unlock customers’ phones after 60 days for use on other networks. While it may seem benign on paper, this regulation has become a tool exploited by sophisticated criminal enterprises globally.
Organized crime rings exploit the unlocking mandate to traffic stolen or fraudulently obtained subsidized phones internationally. These criminals acquire heavily discounted U.S. phones illicitly and resell them abroad for huge profits. This illicit trade costs Verizon and its customers hundreds of millions of dollars yearly and drains law enforcement resources that could be better spent tackling more pressing crimes.
Meanwhile, consumers — especially seniors, lower-income families and typical workers — are caught in the crossfire. They face fewer options, more limited access to subsidized devices and higher costs as carriers try to mitigate the damage wrought by phone trafficking.
The origins and continued existence of the unlocking rule illustrate a classic case of regulatory overreach gone wrong. The mandate was never the result of broad policy debate or consumer advocacy. Instead, it was imposed through a misguided “open access” rule driven by a big tech company at a time when smartphones were emerging, and the app economy didn’t exist. The FCC acknowledged even then that this rule was a regulatory experiment that could harm consumers and should be revisited.
The jury is in. These mandates have lined the pockets of international criminal rings at the expense of American consumers and companies. They have also consumed agency resources and generated regulatory battles that have done little to improve competition or consumer welfare.
Today, nearly 20 years later, the harm caused by these outdated regulations is clear. Verizon bears the unique burden of this unlocking rule, limiting its ability to compete fairly in a vibrant wireless marketplace. The unlocking mandate no longer fits today’s realities; it hampers innovation, reduces consumer choice, and, most troublingly, enables a massive criminal enterprise. Clearing these outdated regulations will allow carriers to offer better subsidies and deals, increasing consumer access to affordable devices without fear of theft and fraud inflating prices.
Thankfully, the FCC is starting to push back. The FCC commissioners deserve credit for recognizing this regulatory error and taking steps to correct it. Verizon has petitioned the FCC to waive the unlocking rule. This is a critical first step to scrapping burdensome, anti-consumer regulations. Law enforcement supports the action; advocates for consumers and markets do, too.
Moreover, removing this rule will empower law enforcement to crack down on international trafficking rings more effectively, protecting consumers and honest businesses alike.
The directive to federal agencies to remove outdated and counterproductive regulations provides a perfect backdrop for this reform. It’s time for the FCC to clear the regulatory underbrush, adopt policies grounded in today’s technology and market realities, and finally rectify a mistake born from a questionable regulatory experiment.
Wireless consumers, honest businesses and law enforcement deserve a regulatory environment that promotes innovation, competition and security, not one that enables criminals and burdens consumers with unnecessary rules.