FCC pushes TracFone to start unlocking handsets as part of settlement

The FCC reached a settlement with América Móvil's U.S. MVNO, TracFone Wireless, which will force TracFone to unlock its customers' handsets.

An FCC investigation found that TracFone violated agency rules by improperly and repeatedly certifying that it would unlock phones for its customers enrolled in the FCC's Lifeline program when it fact it was not doing so.

To settle this violation, the company has agreed to transition all its phones to be unlockable, and will let both Lifeline and non-Lifeline programs have phones that they can move to another carrier. Unlocking a phone lets it work on any compatible network, regardless of carrier.

In the meantime, while TracFone is transitioning to unlockable phones, eligible TracFone customers will be entitled to other benefits under the settlement. The FCC said eligible customers can contact the company to receive a new unlocked handset, credit for a handset upgrade or a partial cash refund in exchange for their locked handset.

The FCC estimates that at least 8 million TracFone customers could benefit from the settlement. With an average benefit of $10 per handset, the value of this settlement to consumers is expected to be in the range of $80 million, the FCC said. In addition, the company will provide a projected offset of $3.2 million to the Lifeline program tied to how quickly its unlocking program becomes active.

"Unlocking of cell phones has been widely embraced by the wireless industry and by consumers across the country," said Travis LeBlanc, chief of the FCC's Enforcement Bureau, in a statement. "Today's agreement ensures that millions of eligible TracFone customers will be able to use their phones on any compatible network they choose."

Wireless carriers started abiding fully by a code of conduct in February on unlocking phones. Carriers must clearly explain their policies on unlocking. Once postpaid customers finish their service contracts on postpaid plans, carriers must, upon request, unlock customers' phones within two business days. In terms of prepaid phones, carriers, upon request, must unlock prepaid phones no later than one year after activation. Carriers can also charge non-customers a "reasonable" fee to unlock phones. The FCC has also said that carriers must notify postpaid customers when their devices are eligible for unlocking, but prepaid customers must only be told at the time they purchase their phone. Carriers must also unlock the phones of military personnel who are deployed.

By Sept. 1, TracFone has committed to providing clear notifications to its customers about its handset unlocking policy. All eligible consumers will get at least one text message telling them that they are eligible, and consumers can go to the TracFone website to determine eligibility, request pre-paid mailers for trade-in of locked phones, and obtain other relevant information. Also by September 1, eligible non-Lifeline TracFone customers can trade in their old device for a cash refund of the trade-in-value of the handset.

Beginning in October, TracFone will provide a $400,000 per month offset to the Universal Service Fund until it provides unlockable handsets to new Lifeline customers. This is expected to total $3.2 million. By May 1, 2016, as TracFone begins to launch handsets capable of being unlocked, eligible non-Lifeline TracFone customers can trade in their old device for an upgrade credit toward a new, unlockable handset. Customers can trade in their locked handset for either a cash refund or an upgrade credit, but not both. Also by May 1, 2016, TracFone must provide new Lifeline customers with phones capable of being unlocked. Existing, eligible Lifeline customers may request a replacement unlocked handset. By Dec.31, 2016, all phones launched by TracFone must be capable of being unlocked.

For more:
- see this FCC release (PDF)
- see this FCC order (PDF)
- see this IDG News Service article
- see this PhoneScoop article

Related articles:
TracFone leans on FCC to make changes to Lifeline program
Survey paid for by TracFone-funded group finds support among older Americans for maintaining Lifeline program
América Móvil's TracFone loses 318K subs in Q1, partially due to Lifeline changes
Sprint, T-Mobile not meeting all cell phone unlocking policy commitments, advocate says
Verizon, AT&T, Sprint, T-Mobile and others now fully embrace cell phone unlocking rules
Cell phone unlocking bill appears set to become law

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