What Unlocked Phones Mean For Businesses

U.S. lawmakers pledge to change regulations that make it illegal to unlock cell phones. Is there an upside for the enterprise?



Mobile World Congress 2013: 9 Hot Gadgets (click image for larger view and for slideshow)

On Monday, both the White House and the FCC came out in favor of changing the laws that pertain to locked cell phones. The goal is to make it legal once again for device owners to unlock their cell phones. The response was provoked by a petition that scored more than 114,000 signatures demanding that the law be changed. This change would impact the enterprise, but perhaps not in the way you might think.

First, some backstory: Until January 26 of this year, it was legal for device owners to unlock their phones. It was legal thanks to an exemption made by the Library of Congress in the Digital Millennium Copyright Act. For whatever reason, the Library of Congress changed the exemption in October 2012 and the new locking rule went into effect two months ago. Currently, it is illegal to unlock your cell phone without carrier permission. Some carriers will allow you to unlock their phones under certain circumstances, as long as they know about it. It will continue to be illegal to unlock devices without carrier permission until the White House, FCC and Congress get around to changing the current law.

What is a locked phone? Wireless network operators typically subsidize the cost of phones for customers to reduce the out-of-pocket expense at the contract initiation. This is why the iPhone costs $199 instead of $649. The carrier then earns back the subsidy (for the iPhone, $450) throughout the length of the contract (typically two years). During the contract, the carrier doesn't want the subscriber using that device on any other network, so it is locked, with software, so it can't be used on other networks. That's why an AT&T-branded phone won't work on T-Mobile's network, a Sprint phone won't work on Verizon's network, and vice versa.

[ Feds are developing a government-wide approach to managing mobile devices and software. Read about it at Feds Pursue Uniform Approach To Device Management. ]

For most people, this is a non-issue. Most device owners (especially those in the U.S.) will never want or need to use their device on another network.

The key phrase in all of this is "device owners." Cell phones, tablets and smartphones that are under contract are not owned by the people who use them regularly. Thanks to the device subsidy, most phones are technically the property of the wireless network operator until the contract is completed. Anyone who purchases a new cellphone at the subsidized price is legally beholden to use that device on the network operator that sold it to them for the length of the contract. Only once the contract is completed does the subscriber actually own the phone.

But not everyone accepts device subsidies. Some customers choose to purchase phones for full price so they can avoid signing new contracts. It is these devices -- those that were purchased for full price or that are out-of-contract -- that the White House and FCC want to grant certain freedoms.

"The White House agrees with the 114,000+ of you who believe that consumers should be able to unlock their cell phones without risking criminal or other penalties," said the government in its official response on Monday.

"In fact, we believe the same principle should also apply to tablets, which are increasingly similar to smartphones. And if you have paid for your mobile device, and aren't bound by a service agreement or other obligation, you should be able to use it on another network. It's common sense, crucial for protecting consumer choice, and important for ensuring we continue to have the vibrant, competitive wireless market that delivers innovative products and solid service to meet consumers' needs. This is particularly important for secondhand or other mobile devices that you might buy or receive as a gift, and want to activate on the wireless network that meets your needs -- even if it isn't the one on which the device was first activated. All consumers deserve that flexibility," said the White House.

Where does the enterprise fit in all this? That depends a bit on who is purchasing the phones. If you're a BYOD shop, it will be the employees who may eventually be able to use their unlocked devices on other networks. If your business owns the devices, the real benefit is flexibility. Rather than being limited to a single carrier, which might not offer the best mix of plans and service in a given situation, the business may have several options.

For example, consider international travel. Tens of thousands of mobile industry watchers recently descended on Barcelona to attend Mobile World Congress. U.S. business employees who traveled with their on-contract work phones were likely forced to pay exorbitant roaming rates by the business' carrier. Because their devices were locked to the U.S. carrier, they had no choice. People with unlocked phones, however, could choose to subscribe to any local provider at dramatically reduced rates.

At the end of the day, unlocked cell phones will let people choose their own network and service that best suits them and their needs.

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