Hold the Phone: Assessing the Rights of Wireless Handset Owners and Carriers

Rob M. Frieden, Penn State University

Abstract

Most subscribers in the United States acquire a subsidized handset when they activate or renew wireless telephone service. In exchange for purchasing a handset below cost, these customers must commit to a two year service term, with substantial financial penalties for early termination, and they must accept carrier-imposed limitations on the use of their handsets. Wireless carriers typically lock subscriber access to one carrier and lock out or thwart unaffiliated providers from providing content, software and applications to wireless handsets.

Limitations on the use of wireless handsets juxtaposes with the Carterfone policy established by the Federal Communications Commission (“FCC”) forty years ago that requires all telephone companies to allow subscribers to attach any technically compatible device. Consumers take for granted the right to attach any device to a network that is “privately beneficial without being publicly harmful.” Only recently have some wireless subscribers come to understand the costs in not having complete freedom to use their handsets. Technically sophisticated users have resorted to “self help” strategies to override carrier locks at the risk of permanently disabling (“bricking”) the handset.

As wireless networking increasingly serves as a key medium for accessing a broad array of information, communications and entertainment services, the consequences of locked and restricted access becomes more significant. Despite offering common carrier regulated, voice telecommunications, wireless carriers emphasize “next generation” information services, including Internet access, and they seek to operate free of any significant FCC oversight including the duty to comply with the Carterfone policy and to provide a neutral conduit for accessing content.

This paper will examine whether wireless carriers have a legal obligation to comply with the Carterfone policy and more broadly what costs and benefits result from government-imposed rules requiring wireless carriers to operate neutral networks. The paper demonstrates that the FCC has applied the Carterfone device freedom and network access policies in a number of instances where the Commission identified the need to prevent network operators from requiring equipment upgrades or replacements that subscribers do not need, because less expensive options exist. The paper concludes that the rising importance of wireless networking and growing consumer disenchantment with carrier-imposed restrictions on handset versatility and wireless network access will trigger closer regulatory scrutiny of the public interest benefits accruing from implementation of a wireless Carterfone policy.