FCC Brokers Industry Agreement on Fighting Smartphone Theft

Police officials appeared on the same dais as FCC Chairman Julius Genachowski, Sen. Charles Schumer, D-N.Y. and CTIA Vice President Chris Guttman-McCabe at the D.C. government’s John A. Wilson Building to unveil the agreement.

Smartphones today are “like catnip” for criminals, Schumer said, “They're valuable. … They're exposed. They're easy to steal. They are ripe for the picking.” At $600 apiece, some smartphones “cost about as much as a flat-screen TV,” he noted. Deactivating cellphones “can put a really serious dent in this growing crime trend,” Schumer said.

The message he received from major city police chiefs was clear: “This is a real problem; we need a solution,” Genachowski said. “I agreed, and we rolled up our sleeves looking for practical solutions. We formed a task force with some of our agency’s most talented people. We spoke with carriers, manufacturers and operating system and software companies.” In February, Genachowski said he raised the issue at GSMA World Congress in Barcelona. “I met while I was there with the GSMA executive responsible for the GSMA database operating in a number of countries,” he said. “I learned that a database system was both working in countries like the U.K. and doable here in the United States.”

D.C. Mayor Vincent Gray said he had called on police in the District to work with the cellphone industry on stolen phones during this year’s state of the city address. “This will … remove the incentive for stealing and selling smartphones,” Gray said. “It’s no secret that this growing problem that we faced in Washington, D.C., with the cellphone robberies and the thefts, was going on all over the country,” said D.C. Police Chief Cathy Lanier.

More than 40 percent of robberies in New York City involve smartphones and other cellphones, up from 8 percent 10 years ago, said Ray Kelly, commissioner of the New York Police Department. “Carriers with the push of a button will be able to take highly prized stolen instruments and turn them into worthless pieces of plastic,” Kelly said. “It’s like draining the swamp to fight malaria. What we're doing is draining up the market for stolen cellphones."

"We take the smartphone theft issue very seriously and recognize the need to help law enforcement with its uptick in criminal activity,” Guttman-McCabe said. Initially, each carrier will have its own database, but “the idea ultimately will be to link those databases and then ultimately to link those databases internationally,” he said. Verizon Wireless, AT&T, Sprint Nextel and T-Mobile have all agreed to participate in the program, he said. Verizon and Sprint already have in place internal databases for identifying stolen phones. The carriers each issued statements supporting the agreement. Last month, top Democrats on the House Commerce Committee sent letters to wireless carriers and device and operating system makers, asking how they protect consumers if their phones are stolen (CD March 26 p2).

The agreement is similar to one announced in October, in which the FCC, CTIA and Consumers Union unveiled “Wireless Consumer Usage Notification Guidelines” as an alternative to bill shock rules (CD Oct 18 p1). In this case, unlike bill shock, the FCC is not threatening to impose regulations if voluntary efforts don’t work. Both agreements are in keeping with the Obama administration’s broader move away from regulation where possible. “Industry would rather have a voluntary program that they run than a regulatory mandate,” said John Nakahata of Wiltshire Grannis. “It’s more flexible … and oftentimes it can be put in place faster too."

"I don’t see the public-private effort to deter mobile-phone theft representing any fundamental shift in the FCC’s traditional regulatory role,” said Jeff Silva, analyst at Medley Global Advisors. “Some issues lend themselves better than others to consensus- or coalition-building. The development of a stolen-cellphone database is one of those. Achieving a meeting of the minds among key stakeholders on important public matters is no easy thing, so it tends to be beneficial if government, the private sector or a non-governmental organization can act as a facilitator in bringing about a positive outcome. Consensus on anything is a rare commodity these days."

"I would be troubled if what occurred was the government called together the wireless operators and said, ‘These are the four things you must do -- or else,'” said Free State Foundation President Randolph May. “I don’t think that is what occurred here. Also, keep in mind in this instance industry and government are cooperating to take steps to combat criminal activity.” Still, May said, “We need to remain alert that the FCC doesn’t resort to a modus operandi of ‘or else’ regulation under the guise of ‘voluntary’ agreements.”

Voluntary agreements have been “a favorite tool of regulators … for 25 years,” said Public Knowledge Legal Director Harold Feld. “It is all a part of the general psychology that regulation is intrinsically bad and the reality that regulation invariably generates more political push back than voluntary public/private agreements. … Genachowski has certainly emphasized these partnerships as a big part of his approach.” Sometimes voluntary agreements have real benefits for consumers, Feld said. Both cellphone theft and cybersecurity are areas where the approach makes sense, he said. “These are cases where the companies themselves have a strong interest in taking measures that are pro-consumer and stopping bad behavior. The role of the FCC in these cases is to overcome obstacles for companies developing common solutions, and ensuring that the solutions don’t create barriers to entry or infringe consumer rights.” But there are also dangers for consumers, he said. “I believe consumers are ultimately better protected by narrower rules, such as the anti-cramming rules under consideration, than a broader agreement which sounds good but is ultimately unenforceable,” he said. “It is not at all clear that voluntary commitments last after the chairman that brokered them leaves.”