Without provisions for equipment installment plans, this would likely end financing of phones by carriers (potentially pushing consumers to higher cost mechanisms, like credit cards or other traditional credit instruments). When locked, the phone is the collateral.
Free and clear phones should be unlocked immediately.
Markets exist where SIM locking has been prohibited for a long time (Wikipedia says Canada, Chile, China, Israel, and Singapore at least). Financing still exists in these countries.
The phone is absolutely not "collateral". The carrier does not take it back if you default (even if they could, they wouldn't be able to get anything of value for it). Unlocking is just an inconvenience that prevents enough people from churning that it lowers the risk of financing.
They'd still make you pay off the full amount before you could close off your account. Pretty standard in the US. Locking is just an evil way to add more friction.
People with nothing don’t care if they get sent to collections, hence the need to have some control over the device while monies are owed for it. Just like vehicle interlocks for subprime auto notes.
Until you pay off the collateral, it isn’t your ownership, simply permission to use while servicing the debt.
Then a lot of folks who finance phones on cheap or free installment plans currently won’t get phones, simple as that. If regulators are fine with that, that’s a reasonable position I suppose. Carriers aren’t a charity to take on aggressive credit risk in these financial consumer populations. Incentives->outcomes.
You can get a darn decent Android for 200$ unlocked, and if your really struggling a 50$ phone will get the job done.
No one will suffer if they can't get an iPhone.
A lot of folks also can't do math. I pay about $20 a month for my phone plan, and I paid $700 for my phone up front. AT&t isn't giving phones away, you end up on a more expensive plan that's around $80 or so and then they'll tack on 30 bucks for the phone.
If you're lucky the bill credits will cover the entire cost of the phone, but over two years you've still spent an addition 700$.
Most Americans can afford a $300 phone, and that's enough to buy a pretty solid Android phone or a used iPhone.
Carriers will just make people sign two-year contracts at a guaranteed rate, plus an early exit fee. This is how all kinds of predatory scams work; the carriers will do just fine and low-income people will continue to get the newest iPhone.
Yup, arguably in the wider scale, more accessible unlocked phones will become available on the used market, serving low-income people better. Right now there are many locked phones on the used market, both wasteful and difficult to navigate.
Currently the most used phones in the US are iphones.
If the actual cost is not hidden behind monthly payments anymore, but some users can not afford iphones, people might start to consider cheaper phone options.
Here in Europe they will actually ask you for a proof of employment/income before they sell you the cell phone plan. If you are unemployed then your only option is pre-paid sim, and those usually do not come with phones.
I believe he meant financing will become more expensive, which may actually increase the consumer cost over a fixed period (if the carriers are not willing to decrease the plan prices which are jacked up to compensate the contracts).
There's been kind of a silver lining consumer benefit, historically. In early years, SIM locking allowed carriers in Europe to subsidize device cost based on expected revenue, effectively offering financing outside of the financial system, and benefiting a set of customers who wouldn't otherwise have been eligible for normal credit.
Yes, because in Canada at least, if you terminate your contract, you have to pay out the phone. That's how it's done. Really, it's not a complicated solution.
And in EU, it is technically not prohibited, but haven't really been a thing for a long time.
One caveat: carriers do not really pay for your phones. Your phone bill would list two separate charges: service charge, for calls, internet use, etc., and then the monthly payment for your phone. If you add all those monthly payments over the whole contract period you get maybe 5-10% discount to the regular market price.
Yes but what is prohibited in Europe is to hide the cost of the phone in the payments of the cell plan. They must make clear exactly what part of your monthly payment is to pay off the phone and what part is the cell plan. That has basically blown up subsidised phones in Europe..
I ask this out of genuine curiosity - I’m not sure what happens in the US either, I don’t believe they brick carrier-locked phones that a customer stops paying for but I’m not sure. But I’ve enough experiences with enough people to know this is probably actually a fairly common scenario and I wonder what the consequences are. (A surprising amount of the time, there are no real consequences.)
A phone contract is on one's credit report. If they don't pay, the phone company will try to recover the debt like any other debt (via nagging, and then selling the debt to a collection agency). It's not fundamentally different from not paying the bill at the end of the month.
Is the phone really collateral in these financing agreements? They just want the guaranteed revenue stream from forcing you to stick with them for 2 years. I imagine it would be quite expensive to go retrieve the phone from someone's house after they stop paying, and they could do that even if it wasn't locked to a particular carrier.
I think the threshold for repossession of collateral is somewhere around cars; stop paying your car lease, they'll take the car; stop paying for your house, they'll kick you out of your house. But I don't think it's worth it for phones.
For me, never again encountering a locked phone would far outweigh the utility of being able to finance a phone. There should be no need to make a basically disposable item like a phone collateral: just buy it.
The phone is still collateral whether it’s locked or not. In fact, AT&T is the only one of the big 3 carrier that locks their devices that are financed. The other ones don’t bother.
If you terminate your cellular service with an installment plan it’s typical that you immediately owe the balance. Whether the phone is locked or not makes no difference on whether the company can collect on the debt.
Unlocking phones does not free the individual of contractual obligations...
Yes, there's room for abuse in the system.. and perhaps prepaid phones won't be as well subsidized.. but people getting contracts typically take a credit hit or require a hefty security deposit to offset the risk.
All Verizon phones are automatically unlocked after 60 days and Verizon has still been financing phones.
> When locked, the phone is the collateral
Not really. If someone cancels service without paying off the phone, the carrier doesn't reclaim the phone. It simply prevents the phone from being used with a different carrier. The person could sell the phone to another customer on the same network. Houses are collateral because it's hard to hide a home from creditors and you can't sell the home without discharging the lien on the home. There's no lien on your financed phone.
This change probably wouldn't change much for phone financing because phone companies are already running credit checks when handing out devices on payment plans, require higher-risk people to make down-payments on the phones, and once a person has done it once to you, it's easy to never offer it to them again. Once you've burned Verizon by canceling service and not paying off your phone, you've burned that bridge. Plus, Verizon would likely report it to the credit agencies where you'd have burned the bridge with the other carriers too.
This is a rule that would help prevent a lot of e-waste and make it easier for folks to switch carriers. There is the chance that someone will finance a phone and leave without paying it off, but there's always been a risk that someone would run up a phone bill and not pay it. Someone could go abroad and run up a large roaming bill and not pay it. Back when data plans were limited, someone could run up a bill into the thousands and just cancel service without paying.
Locked devices do serve a function for carriers. They make switching harder and they protect companies roaming revenues. If I have a locked phone, I have to pay Verizon $10/day to use my phone in Europe. If I have an unlocked phone, I can grab a European SIM for $30 and have cheap service for the month.
Verizon has been financing phones and offering similar discounts that T-Mobile and AT&T have been offering even though their devices will automatically unlock after 60 days. A locked phone is worth marginally less than a carrier-locked phone, but a locked phone can still be sold to other people, even if it isn't paid off. A locked phone can still be used even if the original purchaser has defaulted on the debt. These aren't bricked phones, just carrier locked devices.
If the issue were that they needed a form of collateral, carriers would want the ability to brick the devices rather than merely reduce the resale value of the device by 15%. Yea, if you finance an AT&T iPhone, default on the debt, and sell it to Gazelle, you'll get 86% of the price for your locked phone as you would for an unlocked one. If one could flip unlocked financed phones, it would be just as easy to flip locked financed phones - you'd just make 15% less per device.
So what is the lock preventing? It's not preventing someone who has found a way to defraud carrier financing. They can still sell the phones (which are legally their phones which the carrier has no lien on). They merely get a marginally lower resale price. No, the locks aren't necessary for equipment financing. No, the phones aren't collateral.
Free and clear phones should be unlocked immediately.