New Rules for Unlocking Your Phone? Not So Fast details why the new cell phone unlocking regulations probably won’t impact carrier buyers much, but could affect resale prices

The Internet has been heralding the new cell phone unlocking regulations, which seemingly offer consumers greater freedom to move between networks with ease and without penalty. So, for example, if you buy an iPhone from AT&T and want to switch to T-Mobile, all you have to do is contact AT&T to have your device unlocked so you can make the switch. It’s a great idea in theory; unfortunately, in practice the regulations don’t give you as much control as it seems – or, at least, they’re largely conditional. Here, explains why the new unlocking rules won’t have much impact on your new device purchases but could affect resale prices.

Background: Unlocking phones is legal, illegal, then legal again

Unlocked cell phones are consumer-friendly because they’re not restricted to any one carrier. Traditionally, carriers have used locked phones as a means of customer retention – if you bought a phone from Verizon, for example, that phone would only work with Verizon.

In 2010, the U.S. Copyright Office made it legal for customers to unlock their own phones, provided the terms of their wireless contracts were met. There was no requirement that carriers made phone unlocking easy, however, forcing many to “jailbreak” their devices in order to unlock them. In 2012, the Library of Congress made that practice illegal, though it wasn’t without ambiguity. The latest legislation, the “Unlocking Consumer Choice and Wireless Competition Act,” made the act of unlocking phones clearly legal once again.

Some felt legal unlocking wasn’t enough; in large parts due to lobbying efforts led by Sina Khanifar, CTIA (a major wireless communications industry association) entered into an agreement with the FCC to provide six provisions for its members, which include all national wireless providers (Verizon, AT&T, T-Mobile, and Sprint) as well as other wireless network providers. Those provisions cover unlocking policy disclosure, standardized unlocking policies for prepaid and postpaid phones, unlocking notice policies, unlock request response times, and military deployment unlocking policies.

Though the CTIA provisions are consumer-friendly, there are several reasons why they probably won’t have much impact on how you buy smartphones and other mobile devices.

Compatibility issues

Different wireless carriers use different technologies; Verizon and Sprint require CDMA phones, for example, while AT&T and T-Mobile require GSM devices. A CDMA device will not work on a GSM network, and vice versa. So if you bought a phone from Verizon and want to switch to AT&T, you can’t do it. Moreover, different carriers also use different bandwidths and frequencies – so it’s possible a given CDMA phone might not work on a different CDMA network, for example.

With no guarantee of compatibility, switching carriers and keeping your device might not always be possible.

You still have to satisfy your contracts

If you buy a phone via postpaid plan, typically arranged so your initial purchased price is subsidized by your carrier and paid back over a two-year period, you must honor those contract terms before your phone can be unlocked.

When it comes to prepaid plans, the regulations allow carriers to require you to remain on their networks for up to one year before your devices are eligible for unlocking. Depending on individual carrier policies, this measure could mean you really don’t have a choice of providers for the first twelve months of phone use.

The regulations only apply to devices purchased on or after Feb. 11, 2015

If you bought a device before Feb. 11, 2015, it does not fall under the regulations and your wireless carrier has the option of rejecting your unlock request.

Carrier non-compliance

Even though CTIA made an agreement with the FCC, membership in CTIA is voluntary. Some, including Khanifar, charge that not all major carriers are adhering to the regulations. And with CTIA providing oversight, there doesn’t seem to be a clear path to force compliance. As some have noted, it’s like the fox is guarding the henhouse.

No guarantee of acceptance

Finally, the CTIA’s “Consumer Code for Wireless Service” provides no provisions for accepting unlocked phones. That is to say, it’s possible for carriers to refuse to provide service for phones purchased from a different provider, regardless of unlocking regulations. You can get your phone unlocked, but you might not necessarily be able to use it with a new carrier. One such example is Verizon’s BYOD Plan, which requires unused Verizon phones for activation.

With so many conditions and potential roadblocks, chance are most customers will simply remain with their original carriers and only switch when they buy new devices, as is commonly the case now.

Still, there are definite benefits to the new provisions: as phone unlocking becomes more common, it’s likely providers will develop increasingly-competitive programs to get your business. That means wider acceptance of unlocked phones and, potentially, greater cross-network compatibility. In addition, both buyers and sellers on the used device market stand to benefit.

Benefits to device resale market

There are several ways the resale market could benefit from the new regulations, including:

• The ability to sell unlocked devices means a greater pool of buyers
• The ability to buy unlocked devices means buyers have a greater selection of devices to choose from
• Potentially less confusion in the resale market: knowing whether a given device will work on your network might soon be as simple as knowing whether it uses CDMA or GSM technology

At the same time, there is the potential that new regulations could affect pricing due a shakeup in supply and demand: a certain used device might currently sell at a premium price because it’s in short supply on a given network but it’s value might falter because other carriers’ devices can now be used on that same network.

For example, let’s say used AT&T iPhones sell for high prices because there aren’t many available on the used market, but at the same time used T-Mobile iPhones sell at average prices because there are many on the market. Since T-Mobile phones could now, theoretically, be unlocked and used on AT&T, the price of used AT&T phones could even out because the supply is much greater. Of course, this scenario is pure speculation and how the new regulations ultimately affect the used device market remains to be seen.

For consumers, the best-case scenario is complete device-network compatibility and activation guarantee. Though the new regulations do not include those components, many consider them a step in the right direction. Regulations such as those endorsed by CTIA could pave the way for a future in which customers can buy or sell any device secure in the knowledge it will work on their preferred networks.