Editor's Note: This note draws on “Telecommunications Regulation Handbook, Module 5: Competition Policy,” Washington, DC: The World Bank, November 2000
On May 30, 1996, the EC’s Director-General for Competition informed handset manufacturers and network operators that the EC considered the “subscriber identification module” (SIM) card lock to have anti-competitive effects. The SIM Lock feature was then common on most European mobile phones.The SIM Lock was designed as both a theft deterrent and a user identity tool. However, locking the SIM card in the handset and preventing its replacement restricted customers from changing service providers. Even though the SIM card could technically be “unlocked,” service providers generally imposed significant charges for the SIM override service, effectively deterring customer mobility.
After further correspondence and consultation, the manufacturers agreed to modify the SIM Lock feature in their mobile phones to enable “unlocking.” Service providers were obliged to make full disclosure to customers regarding the SIM Lock feature. In addition, they were required to disclose (1) the amount of the subsidy, (2) the time and the commercial terms it would take to recover the cost of subsidized phones, and (3) how the subsidy could restrict the customer’s ability to unlock the SIM Lock feature. Service providers were allowed to keep the SIM cards locked in the handsets they sold until the subsidies they had provided were recovered.