NCTA Warns 60-Day Phone Unlocking Rule Could Fuel Billions in Fraud

WASHINGTON, Oct. 22, 2024 – A major cable industry group is warning that a proposed 60-day mobile phone unlocking standard could open the door to billions of dollars in fraud.

In a filing submitted Friday, NCTA – The Internet & Television Association urged the Federal Communications Commission to extend its proposed phone unlocking period to 180 days, arguing the proposed 60-day timeframe would not give mobile carriers enough time to detect and prevent fraudulent activity.

While NCTA supports unlocking to increase consumer choice and competition, the group cautioned that, without modifications, the FCC’s current proposal could fuel widespread handset trafficking, leading to financial losses for mobile providers.

“Handset fraud has blossomed into a billion-dollar industry: criminals obtain handsets under a subsidized/financed arrangement in the U.S., unlock them or wait for them to be unlocked, then repackage and sell them overseas as new,” NCTA’s Deputy Chief Legal Officer, Russ Hanser, stated in the filing.

NCTA cited a study by the Communications Fraud Control Association, which found that global telecom companies lost $3.25 billion to handset fraud in 2019, with losses rising by 28% in 2021.

A white paper appended to the filing, authored by Stacey Sutton and Amanda Jesteadt, found that extending the unlocking period to 180 days could reduce fraud-related losses by more than two-thirds, from a rate of 3.5% to 7% at 60 days to just 1% to 2% at 180 days.

In addition to extending the unlocking period, NCTA proposed a fraud exception allowing carriers to deny unlocking requests when they suspect fraudulent activity, such as non-usage, missed payments, or the use of stolen payment methods.

The group also requested a six-month transition period to give carriers time to update their internal systems and implement enhanced fraud prevention strategies.