5 State AGs: FCC Can't Legally Impose Handset Unlocking Mandate

The FCC lacks legal authority to impose handset unlocking rules on carriers and hasn’t done the economic work needed to justify a proposed 60-day unlocking mandate, the Phoenix Center said in reply comments about an NPRM commissioners approved 5-0 in July (see 2407180037). Republican attorneys general from five states said a mandate would be “a significant federal agency overreach.”

But Dish Wireless parent EchoStar pointed out that the main opposition comes from AT&T and T-Mobile, which, unlike Verizon, don’t face a broad unlocking requirement. Replies were due Monday in docket 24-186.

An unlocking mandate is a step “beyond the authority Congress granted to the FCC,” said AGs from Kansas, Arkansas, Georgia, Idaho and Montana. “Put simply, the FCC lacks the statutory authority to enact the proposed rule,” they added. The FCC relies on its authority under Title III of the Communications Act, the AGs said, but “none of the general provisions of Title III that the Commission cited provide statutory authority to disrupt consumers’ installment plans for handsets and mandate handset unlocking after a specific period of time.”

The AGs cite limits on how agencies interpret their legal authority under the U.S. Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo (see 2406280043).

Rules would be “an improper extra-jurisdictional reach beyond the four corners of the Communications Act,” the Phoenix Center said. The FCC's reliance on voluntary agreements with carriers suggests it “has doubts regarding its regulatory authority to regulate the mobile providers’ handset financial arrangements on an industry-wide basis,” the center said.

The proposed rules also lack “economic support,” Phoenix Center said. Central to the rules is the concern that locking handsets means high switching costs and discourages customers from switching providers and reducing competition, it said: “The NPRM contains no meaningful analysis of switching costs generally, provides no estimate of the costs imposed of unlocking a device or whether those costs are material, and no analysis of the likely consequences of its proposal when providers adjust terms and conditions in response to the new rules.”

EchoStar said "the most forceful opposition” to an unlocking rule comes from T-Mobile and AT&T, “who self-servingly argue that it will somehow undermine, rather than promote, competition in the wireless market." Meanwhile, commenters ranging “from cable providers and wireless carriers to public interest groups -- recognize the pro-consumer benefits of a uniform unlocking requirement, even though they may differ on the optimal implementation period,” EchoStar said. A uniform unlocking policy would also “foster a robust secondary market for devices, which will particularly benefit lower-income consumers,” the company said.

“There is overwhelming support in the record in this proceeding … on the importance of a uniform unlocking requirement and its benefits to competition and consumers,” Incompas said: “The current practice of locking phones, and the variation of unlocking policies among carriers, reduces wireless competition and consumer choice by making it more difficult for consumers to change carriers and also by reducing the number of devices available on the secondary market.”

Public Knowledge, Consumer Reports and the Open Technology Institute at New America called for a uniform unlocking policy and urged that the wireless industry take a mandate “in stride, without responding in ways that result in unaffordable devices or hurt consumers who need mobile devices the most.” A mandate is good for competition, the groups said. “Unlocking policies should not be an area for competition,” they said: “Carriers can shift their focus to competing … on pricing, service terms, device discounts, and more.”

Verizon must unlock handsets as a requirement for licenses it purchased in the 2008 700 MHz auction. T-Mobile faces limited requirements as a condition of buying Mint Mobile and Ultra Mobile. The national carriers clashed as they had in initial comments on whether the FCC should adopt a mandate (see 2409100048).

The record, Verizon said, “overwhelmingly demonstrates that allowing wireless providers to lock handsets for some uniform period, with mandatory automatic unlocking thereafter, provides substantial benefits to consumers and competition.”

AT&T noted that groups representing “diverse and low-income consumers,” also oppose uniform rules. “This clearly underscores that handset locking benefits low-income customers and that unlocking mandates are incompatible with the current model of subsidized and financed handset purchases,” AT&T said. “The NPRM," T-Mobile said, fails to identify any market failure -- and there is none.” T-Mobile and AT&T also questioned the FCC's legal authority to impose a mandate.