SciTechTalk: FCC, wireless carriers in tussle over locked phones

Last week the head of the Federal Communications Commission held a regulatory (and metaphorical) gun to the head of American wireless providers, telling them to allow customers to unlock their phones or face new rules forcing them to do so.

As threats go, it may have been mostly symbolic, since locked phones -- phones that work only on the network of the mobile provider from which the customer purchased them -- may be going away anyway, as much from market pressures as anything else.

Wireless providers lock their phones to recover the cost of the heavily subsidized handsets -- discounted by several hundred dollars -- that customers obtain in return for agreeing to a contract, usually one to three years, priced so the carrier eventually recovers the full cost of the phone.

The intention of a locked phone is to deter people from signing a contract with one carrier to get the discounted price, then breaking the contract to go with another carrier -- or selling the phone for a profit. (Do an eBay search for any high-end smartphone, then add "unlocked" to your search terms, to see the results increase significantly.)

The problem for consumers has been that even at the end of a contract, with the carrier having recovered the subsidy on the phone, their device remains locked to that carrier, at the same monthly cost, preventing them from seeking a better rate with another company.

Many consumers have turned to third parties for help, and a burgeoning "unlocking" market has emerged offering ways around carrier-created locks.

There has also been an upsurge in "factory unlocked" phones that consumers can purchase and then negotiate with a carrier of their choice for the best monthly phone plan rate.

The leader in this new marketing strategy has been Google with its line of Nexus phones. Although earlier Nexus phones were offered through carriers -- and were locked -- the newest model, the Nexus 5, and it's predecessor the Nexus 4 could be purchased through the Google Play store in an unlocked, "ready for any carrier" state.

Still, there are plenty of people who own locked phones and would like the ability to pursue options an unlocked phone would give them.

Some have argued it should be the responsibility of carriers to automatically unlock a phone at the end of a consumer's contract, or at least inform consumers unlocking is available.

Enter the FCC and its new chairman Tom Wheeler.

The FCC has spent months working with the wireless industry trade group CTIA which, while agreeing on a basic right for consumers to unlock a device when a contract ends, have balked at notifying them when a phone is eligible or doing it automatically.

The impasse is what led Wheeler to act last week, writing a letter to the CTIA urging the industry to adopt new unlocking policies.

"Enough time has passed, and it is now time for the industry to act voluntarily or for the FCC to regulate," Wheeler wrote. "Absent the consumer's right to be informed about eligibility, any voluntary program would be a hollow shell."

The FCC desires a clear policy that would set in place a process for notifying customers when they are eligible and allow unlocking of devices on request at no extra charge once a contract has been fulfilled, he wrote.

With both market pressures and possible regulation both bearing down on the wireless industry, the permanently locked smartphone may soon be yesterday's technology.