THE USE OF SIMLOCK BY TELECOM OPERATORS AND THE CONSEQUENCES TO CONSUMERS

Transcription

1 THE USE OF SIMLOCK BY TELECOM OPERATORS AND THE CONSEQUENCES TO CONSUMERS DECEMBER 2014

2 With the support of Consumers International 2

3 ÍNDICE pág. 1. INTRODUCTION. LOCKING MOBILE PHONES RESEARCH AND FINDINGS... 5 EUROPEAN UNION... 5 OPINION POLL (SPAIN)... 9 SIMLOCK AROUND THE WORLD FINAL CONSIDERATIONS

4 1. INTRODUCTION. LOCKING MOBILE PHONES With the unstoppable spread of mobile telecommunications services throughout the world, commercial relations between telecommunications providers and the users of mobile services have taken on major importance. The practices of these companies differ substantially from one country to another depending on different aspects, such as the level of liberalization of communications in each country, the existence or non-existence of competition between companies and the greater or lesser level of state regulation of these companies. Among the varied complaints and claims which users have against telecommunications companies, there is one which has not been so relevant but which nevertheless remains important: the barriers which providers impose on users to prevent them from migrating to another company. These barriers establish a period of time known as "minimum contract term" which prevents customers leaving the company before that established time limit. Failure to comply with this clause often leads to disproportionate cancellation charges, as they do not take into account the reciprocity enforceable between the service provided and the benefits enjoyed. Another practice linked to the above is that of the minimum contract term, which establishes a commitment by the consumer/user to remain a customer of the carrier over a certain number of months so that if they want to cancel the service early, this clause acts as type of "penalty clause" or cancellation of the subsidy and the "special" or subsidized price of the handset provided on accepting the minimum contract term as this is no longer applicable. And what is the consequence? It is the request to pay this subsidized extra fee (which is sometimes disproportionate or abusive). These cancellation charges imposed by the providers are often accompanied by locking of the handset, also known as "SIM lock", which prevents the handsets operating with the SIM card of other providers. In many countries, removing this lock by means of a code requires the user to pay an extra fee to the provider. This is also not a right offered by providers at the end of the minimum contract term, but rather in most cases users have to request the unlocking themselves. This code or SIMLock is a technical restriction that impedes the use of the telephone with other operators. Many consumers are unaware of the handset locking practice (which is often absent or hidden in the contract), and therefore when they change carrier they discover that the handset is of no use to them with the new company. This usually leads to situations of neglect and infringement of rights as consumers are either unaware that the company which sold the terminal is the one which can "unlock it", or they do know and they approach the company which sold the handset, and this company, which has already covered the handset's total cost, also charges for unlocking (often abusive amounts). Finally, in most cases, consumers choose to approach "third parties" who will unlock the handset for a cost. In many countries this has generated a market niche in which many small companies operate. 4

5 Since once the permanency established in the contract has elapsed, the mobile phone purchased is the sole property of the consumer, changing provider should not make any difference for the normal use of the phone, therefore, this practice is also a barrier to free commerce. Upon a light review of the issue, it was found that the problem was widespread, with differences between countries depending on wither these have enacted regulation to prevent this practice or not, a project based on further investigation of the issue was seem like a way to expose it and to promote change. The main objective of this project was to make the issue public and relevant to consumers and regulators, promoting changes that impede the use of this technical restriction by telecom operators. Also, it was necessary to find out if consumers had enough information on the subject to inform them consequently. 2. RESEARCH AND FINDINGS The investigation started by collecting data in reference to the use of the SIMLock in different countries, especially in Europe and Latin America. For this purpose, Internet was used to visit numerous websites to see references to the practices of the telecom operators as well as consumer forums and other sites that covered normative issues. After the analysis of practices and regulations in different countries, it was concluded that there are many differences in place depending on the greater or lesser rights which consumers have with regard to providers of mobile telecommunications services. EUROPEAN UNION The Directive 2002/22/EC of the European Parliament and of the Council of March, 7th 2002, on the authorization of electronic communications networks and services establishes - among other issues - that subscribers shall have a right to withdraw from their contracts without penalty upon notice of proposed modifications in the contractual conditions. Although each country within the European Union (EU) has its own legislation with regard to SIMlocking, they must comply with the EU's Unfair Commercial Practices Directive (Directive 2005/29/EC of 2005). This Directive, for example, was successfully applied in Belgium to revoke the laws prohibiting bundling phones with contracts. However, carriers in many EU countries do not necessarily associate a phone's SIMLock status to the customer's tie-in contract status. Therefore, the European Union leaves this aspect in the hands of the market although with the possibility of regulating some aspects. Austria 5

6 In Austria, the owner of the handset is allowed to unlock it at any time. A lawsuit was decided in favor of a mobile operator which encouraged the unlocking of phones by providing links to free/cheap unlocking services. T-Mobile Austria charges 150 to unlock the iphone for prepaid and contract subscribers. For subscribers which have finished their 2-year iphone contract, T-Mobile Austria charges 50 to unlock it. Belgium Until 2007, Belgium had laws prohibiting bundling but these were challenged as they breached European Directive 2005/29/EC (Unfair Commercial Practices Directive). On 23 April 2009, the European Court of Justice ruled against Belgium and cancelled the anti-bundling law. The Belgian government was given until May 2009 to change the law. T-MOBILE sells phones with SIMLock that may be unlocked after 40 days if the handset is paid in full among other stiff conditions, the prepaid phones are sold with SIMLock but the iphone is sold unlocked. Denmark The telecom operator may choose to SIMLock handsets for up to 6 months following the start of the contract. Many companies choose to lock the telephones but may only do so for six months. A charge of 67 may be applied for unlocking the phone within the first months. Following the first six months, the company is required by law to unlock the telephone free of charge. However, the customer needs to contact the original company and provide the IMEI and the telephone number of the handset. Finland In Finland, telecom operators are not authorized to sell SIMLocked GSM telephones or to offer tie-in sales on GSM devices. Pursuant to the terms of a provisional exception, valid from 2006 toil 2009, tie-in sales were permitted with 3G handsets and equipment, therefore, the equipment purchased under such tie-in sales could be SIM-locked. The SIMLock must be removed at no charge at the end of the tie-in contract, with a maximum period of 2 years. In September 2008, the Finnish government extended this exception and, at the same time, reduced the duration of tie-in contracts to one year. France SIM-locking is not banned in France, however, the operator must inform the consumer of the existence of a SIM lock and the subscriber has the right to request that it be removed at any time. In a maximum period of six months following signing of the contract, the mobile operator must "systematically and free of charge" provide the subscriber with a procedure for deactivating the SIMlock. There is a proposal to shorten the time during which providers may charge a fee for removing the SIMlock from six months to three months. 6

7 Germany It does not seem to be any law in force in Germany which regulates SIM locking. For example, the iphone was initially offered for sale in Germany exclusively through T-Mobile, and only for the T-Mobile network; after legal action was taken by Vodafone, they started to provide unlocking codes for that telephone and a temporary injunction was issued which required T- Mobile to do so. Vodafone's injunction was subsequently overturned, and the iphone is once again available locked exclusively for T-Mobile. T-Mobile Germany explained that they were going to unlock the iphone upon expiry of the contract and that they were doing so voluntarily. In general, as from 2012l only prepaid handsets are sold with a SIM lock. Usually, telephones sold with a contract which stipulates monthly payments are not locked (as the monthly payments are due no matter what network the phone is used on). In addition, most providers unlock the phone on demand. Usually a fee is charged during the first two years following purchase and afterwards unlocking is free. Greece Telecom providers do not SIMlock phones in Greece. Upon changing telecommunications operator, since the previous does not lock the telephone, the consumer may automatically use the new services without any obstacle. Consumers may break their contract at any time and the only consequence is the penalty set forth in it. In addition, the Greek legal system has no regulation in this regard; the only similar practice detected is the so-called "regional SIMlocking" of Samsung Galaxy phones, which allows the carrier to lock the mobile phone when a consumer tries to use a SIM card from another region. Holland There are no SIMlocking laws in the Netherlands. Dutch mobile telephone companies have an agreement with the telecommunications regulator in the Netherlands (OPTA) to establish a code of conduct about SIMlocking. Unlocking fees may be charged during the first 12 months and SIMlocking may not last longer than 12 months. Ireland The customer may demand unlocking of the handset at any time. Italy Italy has SIM-locking laws which require companies to specify the amount of the subsidy on the sale of the handset, which allows subscribers to obtain unlocking codes after nine months by paying half of the subsidized amount. After 18 months the SIM lock must be removed. Norway In Norway handsets may not be SIMLocked past one year. 7

8 Portugal In Portugal telecom providers may apply SIMLocking. A law approved in 2010 requires network providers to unlock the devices at no extra charge if the respective contract has expired (although they refuse to do so without charging at least 10). It also establishes limits to the fees which providers may charge for unlocking a device while the contract with the customer remains in force. Romania From September 1 st, 2009, the Romanian telecom regulator (ANCOM) signed a code of conduct with several Romanian companies establishing that providers selling SIMlocked mobile telephones within their own network had to inform consumers of this fact and provide them with the unlocking code upon request. This self-regulation aimed to prevent the regulator imposing rules on them. If the telephone is not purchased together with other electronic communication services, the operator selling the handset will pay the unlocking costs and will not link unlocking of the handset with the purchase of other services or the payment of other fees. If the telephone is purchased as part of a promotional package or at a preferential price and the consumer requires unlocking prior to the end of the minimum period provided in the communication services contract entered into with the operator, the consumer will have to pay both an unlocking fee and the penalty for early unlocking of the handset. The price charged for unlocking telephones shall not exceed the costs of the operation and providers are required to comply with unlocking requests within 15 days. Spain In 1998, the Spanish telecommunications regulator, the Telecommunications Market Commission (CMT), was aware that Spanish mobile telephone operators had already started to voluntarily provide unlocking codes for a fee within the first 12 months and at no extra charge after 12 months of the signature of the contract, but there has been no revision of the issue and therefore there is no regulation of SIMlocking in Spain. In the last years apart from the four companies with the biggest market share (Movistar, Vodafone, Orange y Yoigo), there have been a large offer of new providers such as: Euskaltel, Lebara Mobile, Ono, MÁSmovil, Digi Mobil, BT, Jazztel, FonYou, TeleCable, E-Plus, Lycamobile, R, Carrefouronline, Pepephone, Díamóvil, Hits Mobile, Happy móvil, RACC Móvil, Moreminutes, Eroski Móvil, You Mobile, Orbitel, which has given more options to consumers and some of them sell SIMLock free phones. Some recent changes within the marketing policies of the large companies have been introduced, advertizing the sale of phones free of SIMlock. In October of 2013, MOVISTAR, the largest company, announce that they would provide unlocked phones responding to their new strategy. ORANGE did the same in April 2014, VODAFONE in July 2014 and YOIGO in August Unfortunately, most of them still apply SIMlocking to subsidized phones. Some 8

9 companies unlocked the phones free of charge upon request after the contract has expired (up to 24 months) and others charge an extra fee but neither of them to inform consumers about the SIMlock policy. Sweden There is no regulation in place and each carrier establishes its contractual conditions. SIMLocks end when the tie-in contract ends. Unlocking of the handset prior to the end of the contract is simple but expensive. United Kingdom In the United Kingdom, mobile telephone network providers are not required to provide the unlocking of the handset even after expiry of the contract, although, most operators offer some type of unlocking service depending on the status of the contract and the telephone model but generally at a cost. The main networks often agree to unlock contract and prepaid telephones at an extra cost whether at the end of a contract or after a few months. As of April 2011, the operator O2 unlocks its monthly payment phones at no charge, even if they have a contract in force, with the exception of telephones produced exclusively for them, as well as the Palm devices. CARPHONE WAREHOUSE, one of the largest telephone retailers in the United Kingdom, offers some unlocked telephones. OPINION POLL (SPAIN) When consulting Internet by introducing in the search engine the words unlock phone (English) there were 73,000,000 entries in Google. When the same words were introduced in Spanish, there were 868,000 entries. This simple exercise gives an example of the extension of the problem through the world since there are entries in every continent. The survey used asked for basic information in order to know if consumers knew enough about SIMLocks. There were a total of 236 answers. 1. Have you ever liberated your mobile phone? Yes No (go to question 6) 2. How did you liberate your mobile phone? The telecom company gave me the code By myself or through a specialized store that liberates mobile phones, because the telecom operator didn t want to give me the code 9

10 By myself or through a specialized store that liberates mobile phones, because the telecom operator wanted to charge me for giving me the code By myself or through a specialized store that liberates mobile phones, because the telecom operator didn't want to give me the code By myself or through a specialized store that liberates mobile phones, because the telecom operator put so many obstacles that it was easier and faster to do it the other way. 3. If you have a term contract with the telecom operator and you have asked for the code to liberate your mobile phone, has the company given you the code? Yes No Which telecom company gave o didn t give that code to you? 4. If you don t have a term contract with the telecom operator and you have asked for the code to liberate your mobile phone, has the company given you the code? Yes No Which telecom company gave o didn t give that code to you? 5. If the telecom company gave you the code Without any problem The company charged me an amount of money It was very complicated to get the code The company said to me that they couldn t give me the code the term contract ended. Other (open question) 6. Why didn t you liberate your mobile phone? I didn't know I could I asked for the code but the telecom operator didn t want to give it to me The company wanted to charge me for the code Other (open question) 7. Gender 8. Age 9. Country The participation in the survey was very low but it gathered enough information to evidence the lack of consumer s knowledge in regards to the introduction of the SIMLock by the mobile phone companies in their handsets. On the first question about having unlocked handsets, a 43.22% (102) of the total answers had done so while 56.78% (134) had not. 10

11 Of those unlocking the phone, 41.58% (42) had asked the company for the code, 9.90& (10) had done it on their own with the code provided by the company, 10.89% (11) had also done it on their own but this time because the company had not helped them, another 18.81% (19) had unlocked their handset on their own because they did not know that the operator had to provide them with the code and the same amount of consumers 18.81% (19) had unlocked the phone on their own because it was too complicated and slow to do it through the company. Therefore, 58.42% (59) were not able or did not even try to contact the company to get the code to unlock the phone and it is relevant to see the percentage of consumers that did not even know that the company had to provide them the code. Of those having the handset subsidized or tied-in to the contract 14.28% (7) had no problem unlocking but 85.71% (42) could not do it. The companies mentioned were MOVISTAR (10), VODAFONE (15), ORANGE (8), YOIGO (2), ONO (1) and FRANCE TELECOM (1). Of those not having the hone subsidized 61.22% (30) asked the company for the code and received it - an ORANGE customer mentioned that with great difficulty and having to pay a fee and 38.78% (19) did not get it. Of those getting the code only 18.60% (16) received without much trouble, while 20.93% (18) had to pay an extra fee, 13.95% (12) had a lot of problems getting it and 20.93% (18) were told that they could not have it until they had ended the contract tie-in period. An extra 25.58% (22) had entered comments about the problems they encountered, such as: having called and not getting an answer or being told that it was not company policy, some just mentioned that they were asked a large amount of money to unlocked it, other that they ended up doing it through a third party page in the Internet or with the help of a family member, others mentioned that they were promised to get and never received it. A total of 141 consumers had not unlocked the handset and they had different reasons not to do it: 31.91% (45) they did not know, 4.96% (7) did not get the code to unlock, 8.51% (12) did not want to pay an extra fee to unlock and 54.71% (77). Of the total of 77, 12 consumers had bought phones that were unsubsidized and free of locks from operators before changing to a different company and therefore did not have a problem. Another 30 consumers had no need to unlock because they wish to remain in the company or because when they did change they were given a new phone by the new operator. There were 3 people that did not know about unlocking phones. Another 5 consumers said that they could not unlock because they had to wait for their contract to end. There were 3 consumers that do not wish to pay extra fees. Some consumers said that they did not care enough about the issue and other had prepaid type phones. One person answered that the resolution of a legal claim on this issue was pending to be solved. Of the 236 respondents, 116 were males and 120 females. The distribution by age was: 21to (5.51%) 31 to (24.58%) 41 to (31.78%) 11

12 51 to (25.85%) 61 to (11.44%) 71 or more 2 (0.85%) SIMLOCK AROUND THE WORLD In countries like Andorra, small and without true competition, the phones are sold unlocked, which is understandable from the point of view of the provider no loss no gain, but that is not the case in many countries, unless the public administrations decide to regulate the issue, such as Colombia, Ecuador, Chile, Singapore, Thailand or Israel, where a regulation dictates that all handsets must be sold unlocked and providers had to unlock all previously sold. On the other hand, we find a country where unblocking a phone is not permitted: Puerto Rico. Unfortunately, in one of the largest economies of the world, the USA, the blocking of phones is a normal practice, making difficult the transition to a different operator and the same could be said of Canada. In India, the situation is different since the phones and SIM cards are sold separately since roaming between different parts of the country and different operators is costly, therefore the consumer is able to change SIM cards when travelling. This would be one of the advantages of not having phones blocked, being able to change providers to choose better billing plans when travelling. 3. FINAL CONSIDERATIONS From the study of the situation of the SIMLock, we concluded that some countries have introduced specific regulations to solve the problem but there are many others that rely on the good behavior, code of ethics or good practices of the operators. As a result of the opinion poll, it was obvious that many consumers faced problems when they wish to unlock their phones, other had to pay extra to do it and some could not do it and ended up buying a new phone and changing provider. Therefore, as Consumers International made public during the Consumer Day Campaign of the year 2014, we must insist in the need for public administrations to clarify the issue, that so much trouble is causing to consumers, by regulating it accordingly to avoid the application of this technical barrier imposed by telecom providers. At the same time, more pressure must be exerted towards companies that still use this technical barrier to competition that is not allowing the normal use of the handset when the consumers try to change providers or to use a different telecom operator while travelling abroad. Addressing other issues of concern to consumers within the telecom area, we must remind companies to provide: 12

13 Affordable and reliable access to communications Fair contracts, written in clear, complete and accessible language Transparent and fair bills Safety for consumer data as well as consumer power over it Timely, fair and adequate response to all complaints from consumers Madrid, november