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The days of carriers locking down phones to keep customers are over

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February 12, 2015

Well American consumers have been waiting for this for a long time, and now it looks like the days of wireless carriers locking down smartphones to keep their customers on board might be a thing of the past.

Starting today, all U.S. wireless carriers must comply with requests from postpaid and prepaid mobile customers to unlock their devices, as long as certain parameters are met.

To be clear, the rules officially came down as early as 2013 and the industry group CTIA committed in 2014 to have all wireless carriers adhering to the new regulations by February 11 of this year.

The debate over device unlocking has come a long way in just a few short years. Unlocking a smartphone allows its owners to put the device on whatever mobile carrier network they choose.

For several years, wireless carriers have locked down their devices, allowing them only to connect to their own networks.

The move was designed to keep mobile customers close by, and not see them transfer over to other carriers. Of course it made sense for the carriers but not the consumers.

"We are pleased that the FCC acknowledged the participating wireless carriers met the deadlines to unlock their customers' devices per the Consumer Code for Wireless Service," said Scott Bergmann, the CTIA's vice president for regulatory affairs.

"We also remind consumers than an unlocked device does not necessarily mean an interoperable one since different wireless carriers use different technologies and spectrum frequency bands."

Still, the inability to unlock handsets had been a nuisance for customers. Many subscribers have desired taking a smartphone from one carrier's network and running it on a compatible alternative without needing to buy a new device.

An unlocked mobile handset would allow that interchange between, say, AT&T and T-Mobile networks. Locked devices force customers to stick with their carrier networks and if they decide to switch, buy a new device on the other carrier's network. Up until today, it was a real pain for customers.

In 2013, the issue of unlocking phones hit a tipping point when the U.S. Digital Millennium Copyright Act (DMCA) banned American consumers from unlocking their devices without the consent of their carriers.

Consumer protection groups quickly took issue with the ruling, which actually came down in 2012, but only went into effect in 2013.

After several months of criticism, President Obama in 2013 signed into law the "Unlocking Consumer Choice and Wireless Competition Act," which effectively made unlocking legal again for carriers.

However, under the new regulations that went into effect yesterday, wireless carriers will have no other choice but to remove locks on devices owned by both postpaid and prepaid wireless users.

On the postpaid side, carriers must unlock devices after a customer in good standing has fulfilled "postpaid service contract, device financing plan, or payment of applicable early termination fee."

In other words, postpaid subscribers who get smartphones for less by paying a subsidy at the beginning and paying in full over the life of a contract, must have satisfied that payment covenant before they can be allowed to unlock their device.

On the prepaid side, things are bit simpler in fact-- wireless carriers must, upon request, unlock a handset "no later than one year after initial activation."

All unlocking, regardless of the type of subscriber, must be completed within two days of a request, and wireless carriers are now required to inform consumers of their policies.

"Mobile carriers that lock devices will clearly notify customers that their devices are eligible for unlocking at the time when their devices are eligible for unlocking or automatically unlock devices remotely when devices are eligible for unlocking, without additional fees," the regulation reads.

"Carriers reserve the right to charge non-customers/non-former-customers with a reasonable fee for unlocking requests. Notice to prepaid customers may occur at point of sale, at the time of eligibility, or through a clear and concise statement of policy on the carrier's website," the new regulation states.

Earlier today, Corning has unveiled its Project Phire, a new Gorilla Glass-like material that's both extremely tough and scratch-resistant to boot, making it a good product for smartphone screens.

The developmental product was announced today at a New York investor meeting by Corning executive James Clappin.

He said the company plans to start selling the material later this year. "We have developed a new product that will provide sapphire-like scratch resistance while maintaining the legendary toughness and break resistance of Gorilla Glass," said Clappin, president of Corning Glass Technologies.

Corning's Gorilla Glass division was under pressure for much of last year amid concerns that Apple would flip from using Gorilla to synthetic sapphire, an extremely hard material that is incredibly difficult to scratch.

While Corning repeatedly said sapphire is a poor alternative to its glass in mobile devices because it shatters easily when dropped, the situation highlighted a weakness of Gorilla-- while it may not break, it scratches much more easily.

Bringing together a display cover that's both highly damage-resistant and scratch-resistant could help Corning avoid a future competitor from taking its place as the leading display-cover maker for smartphones and tablets.

Corning makes most of its money from TV display glass and fiber-optics glass, but Gorilla has been a major growth area for the company in the last few years.

It's now dominant in the hardened glass market, outpacing a handful of competitors such as Asahi Glass' Dragontrail.

Corning's Gorilla Glass business has come a long way since Steve Jobs visited the company several years ago and asked Corning to develop a screen that would be highly resistant for Apple's upcoming iPhone in April 2007.

In other mobile news

A recent decision by the CRTC (Canadian Radio-Television and Telecommunications Commission) could have some significant implications after it applied net neutrality rules to some wireless connections.

The decision wasn't expected by most observers, although some in the industry saw it coming.

In its ruling, BCE, Canada's largest telephone company was ordered to stop offering a mobile app that for $5 per month allowed users to watch up to ten hours of video from television channels owned or licensed by the company on their cell phones without it counting against a data cap.

If the subscriber were to watch videos from a rival app, the deal did not apply and the data would count against their plan's download limit.

That situation prompted Canadian student Ben Klass to complain to the CRTC, and it upheld his complaint. Crucially, however, the federal watchdog dismissed gripes put forward by Bell Canada that the video watched was a broadcast service and so telecom regulation was not applicable.

Bell also argued that the service was a good thing for Canadians and should not be prevented.

The CRTC disagreed on both counts, and it used 'net neutrality speak' to argue that such a service wouldn't be in the best interest of most Canadians.

The CRTC's decision could end up inhibiting the introduction and growth of other mobile TV services accessed over the Internet, which reduces innovation and consumer choice.

More importantly, it could also tore down a somewhat arbitrary barrier between different types of data and the rules that apply to each.

In doing so, the CRTC recognized the modern reality that people access the same content from the same providers over different channels without differentiating between them.

"From a subscriber’s perspective, the mobile TV services are accessed and delivered under conditions that are substantially similar to those of other Internet-originated telecommunications services," the decision noted, effectively extending net neutrality principles.

CRTC chairman Jean-Pierre Blais was well aware of the importance of the decision, telling reporters-- "At its core, this decision isn’t so much about Bell or Videotron. It's about all of us and our ability to access content equally and fairly, in an open market that favors innovation and choice. The CRTC always wants to ensure - and this decision supports this goal – that Canadians have fair and reasonable access to content."

Bell Canada told CBC news that it was "shocked" by the ruling. The decision will have no impact on the showdown expected at the end of the month in Washington DC when the FCC decides whether to introduce new net neutrality rules.

That decision could also still impact Canadians despite the ruling today since many internet service providers are still based in the United States and so would be subject to U.S. laws.

In other mobile news

According to the most recent numbers from market research firm Strategy Analytics, the battle appears to be levelling off for the number one spot in the fourth quarter of 2014, with Apple's fortunes on the rise, while Samsung is heading in the opposite direction.

To be sure, Apple's larger-screen iPhones seem to have gotten the company back in the game in a big way, and the trend appears to be strenghtening. So it's like 'neck and neck' between Apple and Samsung in the race for smartphone supremacy. And to be sure, Apple has all the momentum on its side of the ledger.

The iPhone maker saw its share of the global smartphone market grow to 20 percent in the fourth quarter of 2014, up from 18 percent in 2013.

At the same time, its South Korean rival's fortunes went the other way, dropping the company to that same 20 percent number from 30 percent for the same period a year ago.

Both companies saw fourth-quarter shipments of 74.5 million smartphones, Strategy Analytics said, and Samsung remained No. 1 in sales worldwide when considering all of 2014. But now it all appears to be shifting in a big way.

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Samsung has been struggling a lot recently to compete against Apple in the high-end smartphone market and also against newcomers such as Xiaomi at the low end.

In particular, Apple has become a larger threat with its bigger screen devices, the 4.7-inch iPhone 6 and the 5.5-inch iPhone 6 Plus.

Simply wanting a larger display is no longer a reason to buy Samsung's devices, and its smartphones can't reach the low prices of those from Chinese and Indian vendors either.

That very last point is important because markets like China are increasingly where the action is these days. Strategy Analytics said global smartphone shipments grew by about 31.2 percent, to a record of 380.6 million units, in the fourth quarter of 2014 from the year-ago period, with 1.3 billion smartphones shipping globally in 2014 and "very strong growth in emerging markets such as China, India and even Africa."

And Apple doesn't seem to be having trouble in those areas either. During the company's earnings call Tuesday, CEO Tim Cook said that iPhone sales in emerging markets such as Brazil and Mainland China were "absolutely stunning," more than doubling year-over-year, which is three times to four times what those markets had been doing, according to market research firm IDC.

It looks like very soon, Apple's top iPhone market may no longer be the United States by rather China instead.

Set to announce its earnings for the 4th quarter this week tomorrow, Apple could reveal that it sold more iPhones in China than in the United States for the first time ever.

Analysts at UBS Securities predict that China captured about 36.2 percent of all iPhone shipments last quarter, compared with 24 percent in the U.S.

Understandably, that's a very big change from the same period last year, when the U.S. held about 29 percent of iPhone shipments, and China close to 22.1 percent.

To be sure, Creative Strategies analyst Ben Bajarin forecasts that Apple sold 2 million more iPhones in China than it did in North America.

Analysts believe the changeover was initially triggered by Apple's deal with China Mobile in December 2013 and then boosted by the release of the iPhone 6 across all three of China's major wireless carriers in October 2014.

In 2011, China became the world's largest smartphone market and now is home to an incredible 519 million+ smartphone users.

Apple has been striving the past few years to gain more market share in the China by securing deals with its major carriers.

An agreement with the nation's largest wireless carrier, China Mobile, proved challenging but was key as it provides access to more than 800 million subscribers.

But while all of this is happening, Apple faces challenges in China getting regulatory approval for its latest iPhones.

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Source: The CTIA Group.

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