Can Phone Unlocking Spur Healthy Wireless Competition?

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Wireless carriers like Verizon (NYSE:VZ) and AT&T (NYSE:T) received some news earlier this week that is likely to have them looking over their shoulders. On Tuesday, the White House filed a petition with the Federal Communications Commission (FCC) to require all wireless carriers to unlock mobile devices so that users can easily switch between carriers. The move is in direct response to complaints following the January decision by the Library of Congress to make the practice illegal after an exemption to the Digital Millennium Copyright Act expired.

The January decision led to an outpouring of complaints from online activists who collected over 114,000 signatures in a petition to overturn the decision by the Library of Congress. And the Obama administration didn’t seem to disagree — a statement in March said that consumers should be allowed to own unlocked phones with the FCC following in support.

The argument against unlocked mobile devices by carriers like Verizon and AT&T  is that it potentially allows for users to take copyrighted software between carriers, but, in the petition to the FCC, the National Telecommunications and Information Administration made it clear that unlocked devices would increase competition between wireless providers while giving consumers increased choice and leverage. Additionally, unlocked phones would shift the process of changing networks onto companies rather than consumers.

George Slover, senior policy counsel for Consumers Union, was pleased with the announcement. “This proposal is encouraging because it seeks to expand unlocking capabilities to more consumers and more wireless devices — including tablets — something Consumers Union has also called for,” he said. “Consumers need a solution to this problem, and we hope that lawmakers and regulators can work to solve this important consumer issue.”

Reps. Bob Goodlatte (R-Va.), John Conyers (D-Mich.), Howard Coble (R-N.C.), Mel Watt (D-N.C.), and Jason Chaffetz (R-Utah) explained, “This is an issue of consumer choice and flexibility, plain and simple. We are appreciative of the support of groups like NTIA and we will all continue working to see that this issue of significant importance to most Americans is addressed.”

If phone unlocking were to become commonplace, companies like Verizon and AT&T would have an increasingly hard time keeping customers loyal as competing wireless providers could increasingly outbid them. Of course, this would simply mean ultimately cheaper prices for consumers who have complained that the wireless industry is the home to an oligopoly between Verizon, AT&T, and Sprint (NYSE:S) leading to a lack of healthy competition.

But while the White House’s petition has been seen positively by the majority of onlookers, D.C.-based public interest group Public Knowledge believes it doesn’t go far enough. “While new rules along the lines of those suggested by the petition can do a lot to alleviate the unlocking problem, we still face a copyright system that requires agencies and industries entirely unrelated to copyright to jump through hoops just to reach commonsense results,” it said in a statement. “This doesn’t just suggest that FCC rules need to change; it suggest that copyright law must change as well.”

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