Before the end of the year, the FCC and the wireless carriers will likely announce that mobile phones will be "unlocked," meaning customers theoretically can use them on a different carrier's network.
But is that truly a gift to consumers, or a lump of coal?
Consumer advocates, elected officials and regulators will cheer the news as a windfall to Americans who want more choice and flexibility when it comes to their phones, the most important device they carry.
As John Simpson with Consumer Watchdog, told me, "Everyone likes this idea. … It's more consumer choice."
But hang on. What will we really gain here, other than a feel-good moment of watching an industry bend to a regulator's demand?
A prediction: There won't be a rush of people taking their beloved devices to different carriers.
Some background: The "locked" cellphone became an issue in 2007 when Apple (AAPL) began to sell the iPhone. Then, the iPhone was locked, meaning it worked only on AT&T's network. Tech-savvy people who wanted to use their iPhones on a different carrier would "jailbreak" the phone. Sometimes they succeeded, other times the tinkering rendered the phone useless — an iBrick, as they were called.
This is how the mobile phone industry generally works — carriers subsidize the phones and set up long-term contracts to recover the costs.
But now? Most carriers offer the iPhone today and there are more than 200 unlocked phones on the market.
Still, it's America. The standard two-year contract subsidizing the cost of the phone can feel like a constraint on our personal freedom: "It's my phone. I should be able to do with it what I like!"
The unlocking deal being worked out in Washington would allow customers to change carriers once their contract expires. It is currently illegal for consumers to unlock phones on their own.
But the deal faces some hurdles. The biggest sticking point is whether the carriers should be required to notify their customers they are free to go.
Here are a few things to consider before celebrating the unlocking news:
1. There isn't a stampede to change carriers.
Carriers are already creating shorter-term contracts. But still, the industry churn rate — the number of people changing carriers — is about 2 percent. OK, that number may go up if it becomes easier to switch carriers and T-Mobile is trying to woo competitors' customers with its "Uncarrier" campaign. But thanks to the marketing wizardry of Apple, Samsung and other hardware firms, what consumers often want to do is change their devices, not their carriers, as soon as their contracts expire.
2. There is nowhere to go.
Mobile phones are often made with technology tailored to the carrier. That means that there are only a few permutations possible in switching carriers with the same phone. A T-Mobile subscriber can move to AT&T and supposedly vice versa. It gets trickier moving to Sprint and Verizon. You might have voice and not data service. This may be something carriers and handset manufacturers will fix, but right now, switching is not seamless.
"I think this whole thing has been oversold," said Jot ï»¿Carpenter, vice president of government affairs for CTIA — The Wireless Association, a lobbying group that represents the wireless industry. "Unlocked doesn't mean interoperable. It is only valuable if you have somewhere to take it."
3. It's typically a bad deal for a consumer to keep their current phone beyond the contract, since the price of the phone is built into the monthly bill. Once the contract expires, carriers don't currently offer a lower monthly rate. This means you are still paying for a phone that you've already, effectively, paid for. Currently, the major carriers don't have a tailored plan for those who bring their own phone. Again, that may change. If people hold on to their phones longer, carriers may see new markets to reach.
4. The more cost-sensitive consumer may lose out.
There may be pluses for the consumer on a tight budget. The availability of unlocked phones could help the resale market, for example, where phones are usually cheaper. And Simpson, of Consumer Watchdog, says it could be valuable for consumers to know the true cost of their phone and the costs of those long-term contracts. Even if, he said, "it may mean higher initial costs."
That's OK for some. But many people can't fork over $600 for a smartphone at Christmas and then shop for carrier plans.
This switch could also raise costs in the prepaid phone market, which is about 30 percent of the U.S. mobile phone market. That could hurt some consumers, especially those with lower incomes who tend to take advantage of these types of phones.
So go ahead and cheer the unlocking of phones if you must. But it's a solution to a problem we don't have.
Contact Michelle Quinn at 510-394-4196 and m[email protected]. Follow her at twitter.com/michellequinn.