In most businesses, once you have finished paying for something, you actually own it and have the right to use it in any way you see fit.

Until recently however that has not been true for customers of AT&T (NYSE:T), Verizon (NYSE:VZ), T-Mobile (NASDAQ:TMUS), and Sprint (NYSE:S). Customers of the four major wireless carriers who bought phones on contract plans, or paid in installment agreements, had those devices locked so they would not work on other carriers.

That seemed reasonable during the contract period as it would not be fair for a customer to take a phone he or she still owed money on to one carrier from another. What was unfair is that after the phone had been paid off or the contract had ended the major wireless providers in some cases still kept the phones locked.

The customer owned it free and clear but was not in some cases able to to take the phone to another carrier.

That policy ended with an agreement reached between the Federal Communications Commission and AT&T, Sprint, Verizon, T-Mobile as well as U.S. Cellular, a smaller carrier. Of course, implementation will take some time, but the new policy has been agreed to by the carriers and the FCC.

Carriers will soon have to unlock phones after a customer has paid off his or her contract. Source: Verizon

What the deal entails

Before this agreement had been reached policies varied wildly between the carriers and even within each carrier. Sometimes phones -- even contracted ones -- are shipped unlocked and, in some cases, the wireless providers are willing to unlock phones after they have been paid off by customer request.

The new rules, which are being called "voluntary," but were agreed to only after FCC Chairman Tom Wheeler threatened legal action to make the process uniform. The CTIA wireless association confirmed in a letter to the FCC that the five carriers will adopt the "voluntary industry principles" and that they will be applied both to mobile phones and cellular-enabled tablets. Each carrier will implement three out of the six standards specified in the agreement within three months. Within 12 months, the carriers must implement all six.

A written statement from Wheeler detailed the main provisions of the deal:

  • Consumers should have access to clear, concise, and readily accessible policies¬†regarding the unlocking of their phones
  • Carriers will provide customer notification or automatically unlock devices at the time of eligibility
  • Carriers will unlock devices within 48 hours or provide an explanation of denial
  • Carriers will unlock devices for deployed military personnel.

"The voluntary industry agreement announced today caps nine months of hard work by mobile wireless providers and FCC staff," he wrote. "It's a win for consumers because of the FCC's advocacy on their behalf and because of the industry's responsiveness."

A bit of caveat

Not all phones work with all wireless carriers. Currently there are two major technology standards but even within those two there are variants. This means that although you are free to take your phone between carriers, there are no guarantees that it will work even when the base network technology is the same.

CTIA attempted to lay this out in its letter.

"As CTIA's members continue to enhance their robust and competitive unlocking policies, it is important to highlight what unlocking means and does not mean for consumers," the association wrote. "In short, an unlocked phone is not a fully interoperable phone ... Accordingly, a device that works on one carrier's network may not be compatible with another carrier's network."

The letter also explained that an unlocked phone may work on another network but that all functionality may not.

The letter was an eloquent way to say, "we agreed to this deal, but we'll still find ways to keep consumers locked in."

A win for consumers

While the industry seems less than happy with this "voluntary" agreement, it's still good news for consumers. Even though your phone may not work on the network you hope to bring it to, you will at least have any easy process to unlock it should you want to try. This agreement should also make it easier to sell phones because an unlocked phone can, in many cases, be used with more than one wireless provider.

The wireless companies clearly did not want to do this but weren't willing to enter a court fight they were unlikely to win. It's a small victory for consumers and another strong sign that Wheeler's FCC is driven by its responsibilities to the public rather than the industry it regulates.