In the summer of 2024, the FCC appeared ready to make a major change to handset unlocking rules in the U.S. wireless market. The agency proposed a requirement that all mobile providers unlock smartphones within 60 days of activation, thus creating a single, clear standard across the industry. In a market where device locking is still widely used, this would have been a meaningful shift, but the FCC baulked and the proposal went nowhere.
The U.S. remains one of the few developed markets where carriers can lock phones for long periods of time. In most cases, devices are unlocked only after customers meet certain conditions, such as completing installment payments or waiting through prepaid lock periods that can last six months or longer. Verizon has historically been different. In 2007, it agreed to unlocking devices as a requirement for winning the LTE C-block spectrum. That situation improved slightly for Verizon in 2019, when the FCC allowed Verizon to lock phones for the first 60 days after activation to help prevent fraud. As a result, Verizon-sold phones, including those from Tracfone brands acquired in 2021, have automatically unlocked after 60 days.
This policy has put Verizon at a competitive disadvantage: while rivals could subsidize prepaid devices aggressively and rely on long lock periods to reduce churn, Verizon could not. Automatically unlocked phones limited Verizon’s ability to match competitors’ promotions, particularly in prepaid, where churn is structurally higher, and this has contributed to Verizon’s ongoing struggles to stabilize its prepaid base following the Tracfone acquisition.
This week, the FCC reversed course, and in doing so, handed Verizon a decisive win. In its latest ruling, the Commission granted Verizon relief from the 60-day automatic unlocking requirement, allowing Verizon to follow broader industry unlocking practices instead of being held to a unique rule that no longer reflected the market. The FCC agreed with Verizon that early unlocking had become a target for abuse – especially organized activity focused on activating phones only to unlock them quickly and resell them. The Commission also referenced evidence of coordinated activations occurring outside normal retail channels.
The implications are significant. Verizon can now adjust its prepaid promotions without taking on the same level of fraud risk. For the carrier, this removes a constraint that has limited its ability to compete more effectively in prepaid for several years.
Cable MVNOs will take the big hit in this outcome. Cable operators rely heavily on BYOD activations; according to the latest Circana Connected Intelligence Mobility survey, more than 40% of customers switching to Spectrum Mobile or Xfinity Mobile bring a used, unlocked phone with them. A universal 60-day unlocking rule would have increased the pool of unlocked devices and made it easier for the Cable MVNOs to attract value-seeking switchers, especially from Verizon. With the FCC stepping back, that growth opportunity is more limited.
The FCC ruling should also come somewhat as a relief for AT&T and T-Mobile, because – while it certainly will give Verizon the ammunition for more aggressive handset discounts – the FCC could have instead pushed all carriers toward earlier or automatic unlocking. That would have forced AT&T to automatically unlock phones once paid off instead of requiring customers to request it. It could also have shortened prepaid lock periods at T-Mobile. None of that happened, and existing practices remain in place. Nevertheless, both carriers should expect to a new level of prepaid competition from Verizon as this ruling mitigates the risk of loss of early deactivations whether they are generated from fraudulent arbitrage activity or genuine switching activity with ease of the unlocking process.
For consumers, the ruling means fewer near-term changes than expected. That said, the unlocked phone market remains active. The U.S. continues to offer attractive unlocked pricing, and a relatively weaker dollar supports cross-border resale activity for arbitrage seekers. According to Circana’s latest data, close to 20% of smartphones sold in the U.S. are purchased unlocked, showing that demand remains strong even without new regulation.
Overall, the FCC’s decision reinforces that device locking is still an important tool in the U.S. wireless market. Broad regulatory changes are unlikely to happen quickly. For Verizon, however, this ruling removes a long-standing disadvantage and gives the carrier more room to compete.
In this round of the unlocked wars, Verizon comes out ahead.