Mobile carriers in the Caribbean like LIME (formally Cable and Wireless), Digicel and the Telecommunications Services of T&T (TSTT), typically sell handsets with a digital lock programmed into them that prevents mobile subscribers from using their cellphones on a different carrier’s network. This practice, referred to as “locking” handsets, represents a real barrier to consumer choice. It is also a real constraint to competition in the mobile market.
Mobile handsets are designed to run on compatible mobile networks. For example, in T&T, both TSTT and Digicel operate GSM networks and both sell their customers GSM-compatible mobile phones. A GSM-compatible cellphone is designed to run on any GSM network. When a carrier locks a handset, their customer cannot use the handset on another competing carrier network without first unlocking the handset. The handset locking limitation is artificial in the sense that there are otherwise no impediments for any phone running on a compatible competing national or even North American, European or Asian mobile network. Of course, savvy users can unlock their phone through several methods, such as independent phone dealers and online Web sites. Such services, however, often incur costs and can sometimes even void the warranty on the device. Also, most users will be ignorant of the fact that such facilities exist or of the procedure to access them.
Disincentive to switch
The practice of locking cellphones is not uncommon. Carriers often claim that they lock handsets because they sell subsidised phones in return for a contractual commitment of one, two or three years from consumers. The logic goes something like this: the hefty handset discounts need the insurance of customer retention. For many mobile phones sold by carriers in the English-speaking Caribbean, however, the subsidised handset argument does not quite hold true. What it all comes down to is that carriers lock handsets as a disincentive for consumers switching to another network. Whether the switch is temporary (like overseas travel) or permanent (like bailing to a competing provider) carriers will attempt to extract maximum revenue from customers on their network. For example, locked handsets can force consumers to pay their carrier’s hefty roaming fees when travelling internationally. Unlocked phones allow consumers to easily use a subscriber identity module card, commonly known as a SIM card, from a local carrier and make local calls without incurring roaming charges.
From a regulatory perspective, it should be readily apparent that locked mobile handsets undermine efforts to encourage greater competition in the region’s telecommunications sector. There needs to be a positive obligation on carriers to unlock mobile handsets.
This needs to be complimented by mobile number portability policies that allow consumers to switch carriers without being forced to change their phone number. This approach is already standard in Europe and Asia and parts of Latin America. Several countries in those regions have long instituted legal obligations, ranging from requiring the carrier to unlock phones immediately when asked by a customer to doing so at the conclusion of term contracts. Examples can be found in Chile, Columbia, France, Israel, Singapore and South Africa.
Canada also presents a useful model. In 2010 that country passed the Cell Phone Freedom Act mandating:
• consumers buying new cellphones in Canada must be informed of the existence of any network lock on their phone before sale;
• wireless phone companies must unlock handsets upon request, without fee, when a consumer purchases an unsubsidised phone without a contract;
• wireless phone companies must unlock handsets upon request, without fee, when a consumer comes to the end of their contract, or at any time thereafter.
Here in the Caribbean, carriers should be legally obligated to unlock handsets, not just on consumer request, but on sale of the device.
Safeguarding consumers, promoting competition. We cannot wait for this to happen at the carrier’s leisure. It is in the economic interest of carriers to extract as much money with as little effort from consumers. Given the virtual duopoly existing in many Caribbean markets, this is precisely what is happening now.
The majority of phone users may not even know they’re using SIM cards, let alone understand the full implications network locked handsets. This is why telecom regulators must move to protect consumer interests and ensure the overall competitiveness of the mobile market. Regulators must act decisively to remove all barriers to consumer choice. Healthy competition in the mobile marketplace is critical to a healthy, service-innovation driven telecommunications sector. This, in turn, is a catalyst for competitiveness in the local economy and competitive advantages in the global market. If mobile subscribers are to enjoy the full benefit of competition and the products they purchase, regulators across the region must press carriers to provide truly open and interoperable devices. For this to happen at the required pace, carriers and policymakers must themselves be unlocked from the mentalities that have constrained regional development for too long.
Bevil Wooding is an Internet strategist with the US-based research firm, Packet Clearing House and the chief knowledge officer at Congress WBN, an international non-profit organisation. Follow on Twitter: @bevilwooding, and Facebook: facebook.com/bevilwooding