Verizon—the only major US mobile carrier that routinely sells unlocked 4G LTE phones to consumers—last week asked for government permission to lock its phones for 60 days after purchase.
An unlocked phone can be used by a consumer on any carrier’s network (as long as the phone and network are compatible), while a locked phone can only be used with the carrier that applied the lock.
Verizon’s phones are unlocked because of open-access rules the Federal Communications Commission applied to 700MHz spectrum that Verizon bought at auction in 2008.
That could change if the FCC grants Verizon’s request to let the carrier lock phones for 60 days in order to deter fraud when people buy phones on payment plans that require little or no down payment.
Verizon: Fraud on the rise
Verizon says fraud is on the rise and that it’s affecting Verizon and its customers more than other carriers. That’s because, the company says, Verizon phones are unlocked at the time of purchase. Fraudsters often “use a stolen identity or other fraudulent means to obtain a new handset on an existing customer’s account or to open a new wireless service account, and then immediately turn around and sell the handset on the black market without ever paying for the device or the service,” Verizon told the FCC in its filing on Friday. About 7,000 Verizon customers are affected by such fraud each month, Verizon said in a blog post.
The 60-day waiting period would thwart fraud by giving Verizon time to collect and verify the first device payment. Verizon pledged to automatically unlock phones after the 60 days have passed unless there’s evidence of fraud.
Verizon told the FCC:
Verizon seeks to adopt a temporary, 60-day lock on the 4G LTE handsets it provides to ensure they are purchased by a bona fide customer. This targeted, 60-day period will enable Verizon to determine whether a new device was obtained by a legitimate customer who makes the first payment on that device and that the payment clears processing. Locking devices on a temporary basis while Verizon determines whether the device is associated with an actual customer will help Verizon reduce theft of these devices by making them less attractive for resale on the black market. Unlike other large US wireless carriers, however, Verizon will unlock the device automatically at the end of the 60-day period, regardless of whether the device has been fully paid off by that time. Thus, even after implementing this targeted approach, Verizon will continue to lead the wireless industry in platform and device openness.
By contrast, Verizon’s filing said, “AT&T will unlock a device 14 days after a request if the device is fully paid off and has been in active service for at least 60 days. T-Mobile and Sprint unlock devices automatically once they have been paid in full, but both companies require a mandatory waiting period after activation before a phone can be unlocked—50 days in the case of Sprint, and 40 days in the case of T-Mobile.”
Verizon: No negative impact
Verizon argued that the change would have “minimal, if any” effect on legitimate customers because few ever switch carriers within 60 days.
Verizon told the FCC:
Virtually all individuals who obtain new 4G LTE handsets from Verizon do so pursuant to a two-year device payment plan and stay with Verizon for that full two-year period in order to pay off their wireless device… Only a tiny fraction of legitimate customers seeks to end their new relationship with Verizon in the first 60 days after signing up for service, and those that do usually do so within the 14-day return period and return their phones to Verizon. Thus, any legitimate customers who seek to leave Verizon shortly after signing up would be able to do so, just as they may today.
Overseas travelers could be affected
Still, some customers might have legitimate reasons for wanting a phone to be unlocked less than 60 days after purchase. International travelers may want to use other carriers overseas even if they continue to pay for Verizon service each month, for example.
Verizon’s FCC filing did not say whether it intends to provide any method of unlocking its phones before the proposed 60-day waiting period is up. We contacted Verizon about this today and will update this story if we get an answer.
Verizon’s device-unlocking policy doesn’t address international travel. Verizon does sell international access directly, but locking phones would prevent customers from selecting a different carrier when they travel.
Verizon’s request to the FCC pertained only to 4G LTE phones. But Verizon would also have to follow the open-access rules for future 5G phones if they’re capable of connecting to the same 700MHz spectrum. We asked Verizon what its locking policy for 5G phones will be, and the company told us, “All of the phones currently in our pipeline will be able to attach to the C Block [700MHz] spectrum and will comply with our locking policy.”
Verizon’s existing anti-fraud effort
The phone fraud described by Verizon “was minimal in 2015,” but it has ramped up each year since because of rising retail phone prices and the fact that 4G LTE devices are compatible with overseas networks, Verizon said.
Verizon takes a few steps to combat fraud already, the company explained:
When a new or existing subscriber seeks a new handset, Verizon authenticates the purchaser by seeking identification and credit information. With the assistance of outside vendors, Verizon runs a credit check and a red-flags test to help ensure that the subscribers are who they claim to be and that they are likely to pay for the devices they have ordered. Additionally, Verizon employs a proprietary fraud-decision engine that evaluates over 140 different attributes associated with digital, telesales, and face-to-face transactions. For each transaction, the engine calculates and assigns a fraud risk score by examining different attributes such as the IP address, shipping-address mismatches, and credit card history.
Verizon noted that it “participates in the GSMA IMEI (International Mobile Equipment Identity) database, a centralized global database through which Verizon reports the IMEI of stolen phones, so that other carriers consulting the database will not activate them, thus helping to deter theft.”
But “relatively few foreign carriers” use the database, and “criminals are constantly devising new strategies and techniques to thwart fraud-detection mechanisms,” Verizon said. Verizon argues that a 60-day waiting period will be more effective.
A year ago, Verizon began locking phones prior to sale in order to prevent armed robberies of stores. But Verizon continued to unlock the phones for customers at the time of sale.
Observers tentatively give thumbs-up
Consumer advocates could oppose Verizon’s request. But advocates who talked to Ars tentatively said the proposal appears to be benign.
“We’re still reviewing the Verizon request, so can’t commit to either opposing it or not opposing it yet, but at first glance it seems like a reasonable security measure without too much practical downside,” Free Press VP of Policy Matt Wood told Ars.
Verizon’s explanation seems to be plausible, though there’s not enough information “to make a definitive statement one way or another about Verizon’s program,” Public Knowledge Senior VP Harold Feld told Ars.
“In general, I can say that, if there [was] a bunch of data out there that showed that customers were most likely to switch in the first 60 days, it might raise some concerns,” Feld said. “Absent such data, it seems like the explanation is plausible and that setting a time limit of 60 days significantly diminishes the likelihood of abuse.”
“At first glance, and absent any information to the contrary, what Verizon described here appears to be a reasonable action to address the very real problem of theft in a way that limits the likelihood of abuse for anti-competitive or anti-consumer purposes,” Feld also said.