TracFone Settles Handset Unlocking Proceeding

On July 1, 2015, TracFone Wireless, Inc. reached a settlement with the FCC concerning an investigation into TracFone's handset locking and unlocking practices.

The FCC's Enforcement Bureau had been investigating whether TracFone had violated FCC rules by certifying its compliance with industry standards, namely the CTIA Consumer Code for Wireless Service,("CTIA Code") without fulfilling the CTIA Code's standard for handset unlocking (point 12 of the CTIA Code).  The FCC's order notes that since February 11, 2015,  the CTIA Code "requires carriers to unlock customer handsets and to properly disclose their unlocking policies to consumers."  The order then asserts that, even though TracFone represented in its FCC Form 481 filing that it would comply with the CTIA Code throughout 2015, TracFone did not yet have a process for unlocking handsets by the time the unlocking standards took effect.

Under the settlement, TracFone has entered into a consent decree, and has agreed to the following:

• By September 1, 2015:
  • TracFone will notify customers about its handset unlocking policy, and will begin alerting consumers of eligibility for unlocking by text message; and
  • TracFone will allow non-Lifeline customers to trade in certain old devices for cash.
• By May 1, 2016:
  • Lifeline customers will be able to trade in old devices for an upgrade credit for a new unlocked handset.
  • TracFone will provide new Lifeline customers with a handset that is capable of  being unlocked, and existing customers will be able to request a replacement unlocked handset.
• By December 21, 2016:
  • TracFone must provide only phones that are unlocked (for both Lifeline and non-Lifeline customers).

As part of the settlement, TracFone will also pay $400,000 per month to the Universal Service Fund until it provides unlockable handsets to new Lifeline customers (which must be no later than May 1, 2016); make available refunds, upgrade credits and replacement handsets through at least June 2018; and file reports with the FCC demonstrating its compliance with the consent decree.

Although unlocking a device disables software that is designed to prevent use on technologically compatible networks, as noted in the CTIA code, unlocking in itself does not guarantee interoperability.  It remains to be seen to what degree such interoperability issues affects customer retention as the CTIA Code is implemented by carriers.