Verizon says phone sales fraud is on the rise, wants to lock new phones to fight

Verizon, the only major US mobile operator to regularly sell consumers to unlocked 4G LTE phones, asked last week for the government's authorization to lock its phones for 60 days after it was purchased.

An unlocked phone can be used by a consumer on the network of any operator (as long as the phone and network are compatible), while a locked phone can only be used with the phone. Operator who locked the terminal. Verizon phones are unlocked due to open access rules that the Federal Communications Commission applied to the 700 MHz spectrum purchased by Verizon at auction in 2008.

This could change if the FCC granted Verizon's request to let the carrier lock its phone for 60 days to deter fraud when people buy phones with payment plans that require little or no down payment.

Verizon: fraud on the rise

Verizon says that fraud is on the rise and that it is affecting Verizon and its customers more than other carriers. Indeed, the company claims that Verizon phones are unlocked at the time of purchase. Fraudsters "often use a stolen identity or other fraudulent means to obtain a new handset on the account of an existing customer or to open a new mobile service account, then immediately return and sell the handset on the black market without ever paying the device or service, "Verizon told the FCC in his filing Friday. About 7,000 Verizon customers are affected by such fraud each month, Verizon said in a blog post.

The 60-day waiting period would counter fraud by allowing Verizon to collect and verify payment for the first device. Verizon is committed to automatically unlocking phones once the 60 days have passed, barring evidence of fraud.

Verizon told the FCC:

Verizon wants to adopt a temporary 60-day lock on the proposed 4G LTE handsets to ensure their purchase by a serious customer. This targeted 60-day timeframe will allow Verizon to determine if a new device has been purchased by a legitimate customer who makes the first payment on that device and the payment is being processed. Temporarily locking devices while Verizon determines if the device is associated with a real customer will help Verizon reduce the theft of these devices by making them less attractive for resale on the black market. Unlike other major wireless carriers in the United States, Verizon will automatically unlock the device at the end of the 60-day period, regardless of whether the device has been fully refunded. So even after implementing this targeted approach, Verizon will continue to lead the wireless technology industry in opening platforms and devices.

In contrast, the Verizon filing stated: "AT & T will unlock a device 14 days after a request if the payment is fully paid and it has been in active service for at least 60 days.T-Mobile and Sprint unlock the automatically when both companies require a mandatory waiting period after activation to unlock a phone: 50 days in the case T-Mobile. "

Verizon: No negative impact

Verizon argued that the change would have a "minimal or no" effect on legitimate customers, as few of them have ever changed providers within 60 days.

Verizon told the FCC:

Virtually all people who get new 4G LTE handsets from Verizon are doing so in accordance with a two-year device payment plan and are staying with Verizon for a full two years to pay for their wireless device … Only one tiny fraction of legitimate users Customers are looking to end their new relationship with Verizon within 60 days of joining the service. Those who do so usually do so within 14 days of the return date and return their phone to Verizon. Thus, all legitimate customers who wish to leave Verizon shortly after their registration will be able to do so, as they can today.

Overseas travelers could be affected

Some customers may still have legitimate reasons to want to unlock a phone less than 60 days after purchase. International travelers may wish to use other carriers overseas even if they continue to pay for Verizon service each month, for example.

The FCC file filed by Verizon did not indicate whether it intended to provide any method to unlock its phones before the end of the proposed 60-day waiting period. We contacted Verizon about this today and we will update this story if we get an answer.

Verizon's Unlock Policy does not apply to international travel. Verizon sells direct international access, but the phone lock would prevent customers from choosing another carrier when they move.

Verizon's application to the FCC only related to 4G LTE phones. But Verizon should also follow the open access rules of future 5G phones if they are able to connect to the same 700 MHz spectrum. We asked Verizon what its locking policy would be for 5G phones, and the company told us: "All phones currently in our pipeline will be able to connect to block C [700MHz] spectrum and comply with our lockdown policy. "

Verizon's existing anti-fraud effort

The phone fraud described by Verizon "was minimal in 2015", but it has increased every year since, because of the rise in retail phone prices and the fact that 4G LTE devices are compatible with foreign networks, said Verizon .

Verizon is already taking some steps to fight fraud, the company said:

When a new subscriber or existing subscriber is looking for a new handset, Verizon authenticates the buyer by searching for credentials and credit information. With the assistance of external vendors, Verizon performs a credit check and a red flag test to ensure that subscribers are the ones they claim to be and are likely to pay for the devices they are charging. have ordered. In addition, Verizon uses an exclusive anti-fraud decision engine that evaluates more than 140 different attributes associated with digital, telesales and face-to-face transactions. For each transaction, the engine calculates and assigns a fraud risk score by examining various attributes such as the IP address, the matches between the delivery address and the credit card history.

Verizon said it "was participating in the GSMA IMEI database (International Mobile Equipment Identity), a centralized global database through which Verizon reports IMEI stolen phones, so that other operators not consulting the database would activate it, thus helping to prevent theft. "

But "relatively few foreign carriers" are using the database and "criminals are constantly developing new strategies and techniques to thwart fraud detection mechanisms," Verizon said. Verizon says that a 60-day waiting period will be more effective.

A year ago, Verizon began locking phones before the sale to prevent armed robberies in stores. But Verizon continued to unlock phones for customers at the time of the sale.

Observers give a boost

Consumer advocates could oppose Verizon's request. But lawyers who spoke to Ars tentatively said the proposal seemed benign.

"We are still reviewing Verizon's application, so we can not commit to opposing it or not, but at first glance it seems like a reasonable security measure without too many practical inconveniences," Matt Wood, vice -President of Free Press, said: says Ars.

The Verizon explanation seems plausible, although there is not enough information to make a definitive statement one way or another about the Verizon program, "said Public Knowledge Vice President Harold Feld.

"In general, I can say that, if [was] a host of data indicating that customers were most likely to change stores within the first 60 days could cause some concern, "said Feld. In the absence of such data, it seems that the explanation is plausible and that setting a 60-day delay significantly reduces the risk of abuse. "

"At first glance, and unless otherwise noted, what Verizon has described here appears to be a reasonable measure to address the very real problem of theft in order to limit the risk of abuse for anti-competitive or anti-competitive purposes. -consumption, "Feld also said.