Believe it or not, it was illegal, until very recently, for you to unlock your smartphone and take it from one carrier to another.
Yes, illegal in the traditional sense. Thanks to a quirky interpretation of the Digital Millennium Copyright Act (DMCA), those who unlocked their phones, even as recently as a year ago could wind up behind bars for an unfathomable five years. That’s a long time for something as innocuous as using your property the way you want to use it.
But in 2014, President Barack Obama signed a bill into law turning would-be criminals back into law-abiding citizens. Now, you’re able to unlock your phone—i.e., take a phone you bought from Verizon and use AT&T as your new carrier—without having to worry about ending up at Riker’s Island. Unlocking phones now applies to all four of the nation’s biggest carriers, T-Mobile, Sprint, Verizon, and AT&T.
Before you get too excited, it’s important to remember that when you sign up for a contract, which is usually done to take advantage of subsidized pricing on expensive new tech toys, you can’t just immediately hop over to a new provider; you still have to honor that two-year contract.
But once that’s been done, you’re no longer bound to your existing carrier. You’re an American, and you deserve choice, right? Now you have it.
Uncharted Territory For The Industry
As you might imagine, the legality of phone unlocking has been of particular interest to wireless providers for a long time. It’s no secret that they’ve been lobbying against it for years. The original iPhone, you may recall, made its exclusive debut on the AT&T network, which helped convince millions of Americans to jump ship from their provider just to get their hands on the hottest new phone. It was proof that compelling hardware could buoy an otherwise unremarkable wireless carrier, and it provided AT&T, and others in the industry, with a solid reason for doing everything they could to keep customers tethered to a single network.
But that was in 2007. By 2010, when the network’s iPhone exclusivity was ending, AT&T faced hard times. That was according to Reuters, which reported that AT&T was facing its hardest year since 2004, thanks to worried investors driving the company’s stock down by 1.8%. Strong phone sales had helped AT&T grow for years, but Verizon’s acquisition of the iPhone would see that 3-year winning streak come to an abrupt end.
And that was just the beginning. These days, you can’t throw a stone without hitting a wireless carrier that offers the iPhone. That’s been bad for AT&T, but very, very good for the American consumer.
This little piece of phone locking legislation is set to be another watershed moment for wireless carriers. While the dreaded two-year contract and timed hardware exclusives probably aren’t going anywhere, at least for the foreseeable future, there’s little doubt that AT&T, Verizon, and all the others will still have to rethink their business models.
Where AT&T used to count on the desirability of Apple’s hardware, they may now have to take a good long look in the mirror and find new ways to motivate customers to make the switch. Faster and more reliable service? Cheaper prices? There are certainly plenty of options.
What we’re waiting on now is a better understanding of how this legislation will affect competition and stock prices moving forward. Whereas AT&T’s loss of iPhone exclusivity was an upset for just one company, making phone unlocking legal once more is a shift that will level the playing field for customers across the industry.
Whatever happens, it’s probably not going to take place overnight. The ability to unlock a phone and bring it to a rival network was never what you’d call a mainstream practice. But as the word gets out, who knows what might happen? While modern smartphones seem locked in a perpetual cycle of obsolescence and replacement, we may even see customers make a shift toward keeping their phones for longer, so as to take advantage of the freedom this legislation provides.
Why Would I Want To Unlock My Phone?
In the world of car insurance, there’s no shortage of vendors seeking your hard-earned dollars. If you call multiple insurance companies, you’ll get different quotes from each of them as they attempt to low-ball the others.
Same goes for the world of the mobile phone. In addition to the “big four,” thanks to the rise of multiple virtual network operators (MVNOs), customers now have more choice than ever over who their cell carrier should be.
Basically, these MVNOs lease infrastructure from the big four. As such, they’re generally able to offer comparable (if not better) packages than the cellular kingpins, at more affordable prices. Some experts suggest there are more than 34 million customers who use these kinds of services in the United States.
In addition to being able to move your mobile device from one carrier to another, you might decide to unlock your smartphone if you’re traveling overseas. That way, you can get another SIM card and use the device in foreign countries without having to incur the outrageous expenses associated with traditional use.
Just listen to what Bill Menezes, a research analyst at Gartner, has to say on the matter: “Not only does it increase your flexibility in changing carriers, but also it allows you to more easily do things like buy a prepaid international SIM when you’re traveling abroad, or even switch from a postpaid to a prepaid service if that works better for you.”
So How Do You Do It?
Prior to moving forward with unlocking your mobile device, you’ll have to make sure you’re all caught up with your bills and you’ve paid off your device in full. Carriers will not help you unlock your phone if you owe them money—you’ll have to pay up first.
You’ll also want to make sure you ask your carrier to unlock your phone while you’re still a current customer. Otherwise, you might have to pay a fee to be able to transfer it to a new provider.
Now that they’re legally mandated to help you out, major mobile carriers are doing just that—making it pretty easy for your to figure out what you need to do to unlock your phone. In fact, most carriers even have step-by-step guides on their websites.
It’s worth understanding some stipulations, though. For example, AT&T explicitly says it cannot unlock devices from other carriers. But, other than that, when you unlock your phone, an otherwise limited device becomes extremely versatile, and you’re able to use it in more ways than before.
What’s good for the consumer might not sound like a win for wireless carriers, but the price of progress is often steep for companies that remain committed to outdated business models. But increased competition? Well, that’s good for everybody.
The Future of the Mobile Market
I wish there were some tidy takeaway here about what the future holds for AT&T, Verizon, and the rest of the mobile market. AT&T has consistently increased dividends (at a rate of just shy of 5% per year) for the last 30 years, and Verizon has roughly matched them for a still-respectable nine years, at 3% per year. Still, change is in the air.
With phone unlocking finally legal again, and with the FCC’s recent announcement that it wants to hold both wired and wireless carriers accountable for net neutrality standards, the industry really is entering uncharted territory. Together, these proposed pieces of legislation will dramatically change the status quo for some of our incumbent carriers, and may open the doors further to increased competition from Google and, if the years-old rumors pan out, possibly even Apple.
#####
For more information on our new writer, Daniel Faris, please click here.
