• "Customers need to be aware at the time of purchase whether the handset is locked, and the procedures for unlocking on request;"
• "The existence/amount of any subsidy and conditions for its repayment must be stated at the time of purchase;"
• "An unlocking procedure must be convenient to the customer (e.g. not involving return of handset to a manufacturer)."

1. The TA does not restrict operators and dealers to use "SIM Lock" for protection of subsidy of equipment provided that the customers are well informed of the amount of any subsidy, the "SIM Lock" arrangement and the conditions for repayment of the subsidy to unlock the "SIM Lock" at the time of purchase of the equipment;

2. The TA would allow operators and dealers to deploy SIM locked equipment to customers for the purpose of deterring theft and fraud or for the enforcement of the rental or installment contracts with the customers concerned. However, the following conditions governing such deployment of "SIM Lock" will apply -

   • For anti-theft and anti-fraud applications, operators and dealers should inform the customers clearly about such "SIM Lock" arrangement and also provide them with the necessary procedures and methods of unlocking the equipment by the customers themselves or by the operators and dealers free of charge to the customers;

   • Where the equipment is rented or paid by installments by the customers, operators and dealers will have to advise the customers concerned about the SIM locking arrangement and provide them with the detailed unlocking procedures if they have already paid up the total equipment cost.

3. If "SIM Lock" is solely used for the purpose of tying customers to networks other than for the purposes stated in (a) and (b), it may adversely affect competition in the mobile industry. Therefore, this practice is forbidden.

4. The European Telecommunications Standards Institute (ETSI) is now developing the specification for the "SIM Lock" feature as part of the GSM/DCS standard. The TA requires that the "SIM Lock" feature to be implemented in Hong Kong must be in conformity with the ETSI specification and standard.

Senior Telecommunications Engineer
Technical Support Section 2
Technical Regulation Division
Office of the Telecommunications Authority
29/F Wu Chung House
213 Queen's Road East
Wanchai
Hong Kong
Telephone No. 2961 6611
Fax No. 2803 5112

The company recognises the fact that the SIM Lock feature may restrict competition between operators but strongly supports the introduction of the "SIM Lock" feature as HTCL is much concerned at the potential problem of theft and the export of the subsidised "unlocked" handsets to neighbouring countries by unscrupulous users and traders. The lack of safeguards against abuse would mean that the network operators would not be able to pass on the benefit of low prices to consumers in Hong Kong.

The company considers to offer customers the option of having their "SIM locked" handsets unlocked by HTCL either at time of purchase or at a later date through appropriate commercial arrangement.

In principle, TCSL supports TA's initial considerations. However, it considers that the inclusion of the "SIM Lock" feature on handsets should not be restricted so that the bona fide owner of the handset can use such feature to protect his property. In order to prevent operators to use "SIM Lock" feature as a tool to adversely affect competition, the feature should be in conformity with GSM standard and in cases as the bona fide owner requires, he should be able to deactivate the feature easily.

As it is most probably all GSM/DCS1800 handsets available on the market will be so equipped the "SIM Lock" feature in the future, it will not be practical for OFTA to restrict the inclusion of this feature within the handsets unless the Hong Kong operators can secure at higher cost specially modified versions which do not have the feature.

The effectiveness of "SIM Lock" in tying customers to a particular network is questionable. As a matter of fact, different network technology used in Hong Kong has provided an implied "SIM Lock" function to prevent the customers in taking their handsets to other more common networks.

The "SIM Lock" feature is currently the most effective mechanism to prevent some dealers to buy a large number of subsidised handsets from an operator and then export them to other countries in addition to that already provided by the civil law.

The "SIM Lock" feature simply provides an additional means in protecting the private properties of the operators in the rental agreements with customers.

Peoples Telephone supports OFTA's considerations in para. 4 of Consultative Paper on "SIM Lock" and recommends that SIM locked handsets are to be acceptable purely for the purpose of anti-theft.

"SIM Lock" function should be adopted as a device to deter theft of handsets rather than tying the handsets into a particular network as this may affect free competition in the cellular market.

Subscribers who own the handset should have the right to access the "SIM Lock" function at his/her own discretion.

In cases when "Handset Rental Package" or "Payment By Instalments" is offered by resellers/dealers, the "SIM Lock" function should then be controlled by the resellers/dealers to protect their interests; and in the later case, the unlocking procedure be released to the end-user upon completion of payment.

New World takes the view that the "SIM Lock" function incorporated in GSM/DCS handsets could be allowed for use in Hong Kong as to provide the anti-theft security to the subscriber. If the subscribers would like to unlock the "SIM Lock", they could go to the Service Provider to unlock the "SIM Lock". Hence, the subscribers can use their handsets with any SIM and there will not be any effect on open competition.

Mandarin agrees that SIM lock should be restricted for anti-theft and fraud management purposes only. However, it hopes that OFTA would keep high flexibility in reacting to unpredictable market changes and may want to lift this restriction if it brings more benefits to the consumers in future.

TA's initial consideration as outlined in para. 4 of Consultative Paper on "SIM Lock" is fully supported.

Shun Hing considers that network operators should have the right to consider whether the "SIM Lock" function can be included in their service packages and the end-user should be informed properly before the purchase of the handset.

First Submission on 31 October 1996

Dr Lam supports OFTA's view that "SIM Lock" can be anti-competitive and OFTA should tackle this problem. All kinds of locks should be designed in such a way that end users can unlock them by themselves. All network operators concerned have to inform their customers of such function and user rights.

Second Submission on 30 December 1996

Dr Lam is concerned about the legal right of using the SIM lock. If legally the terminal owner is the purchaser/end user, then he/she should have the sole control over the unlocking of the SIM lock. If ownership still legally belongs to the operator/supplier, it can have control over the unlocking; however, in such case, the end user should be informed about how he/she would be controlled by the SIM lock and how such control might be transferred to him/her later.

Regarding some operators' fear that terminals are physically stolen (and brought to other countries), some hard data on theft unveiled will make such argument more convincing. Moreover, if the legal terminal owner is already the end user/purchaser, he/she would bear the risk, not the operator/supplier.

The EC's ruling should be seriously considered by OFTA. However, before implementing its suggestion, the following need to be clarified to the customer/and user -

• the definition of owner and customer, customer under a rental agreement, lessee etc.;

• under what situations can customers make a request to unlock;

• whether customers can unlock by themselves without the help of the staff of the supplier/retailer/network operator; and

• the ethics of the cross-subsidisation

The CC recognises two advantages of the "SIM Locks". The first is that they can deter theft and the second is that they enable suppliers to offer the consumer the choice of a package consisting of a subsidised handset and higher call charges. The CC recommends OFTA to impose the same three conditions as given by the European Commission. Looking at the specifics of the Hong Kong situation, the CC considers that providers should only be allowed to sim-lock when they have demonstrated to OFTA that they will have several locations where a 'while you wait' unlocking service can be provided and that information to be given to the customer will be clear and prominent.

HKTUG supports the use of SIM Lock as a means for fraud management for both the end-users and the service providers. As such the end-user should be informed of existence and condition of offer of the SIM Lock at time of purchase and access to the SIM lock in a convenience manner. Furthermore, the end-user should be able to unlock the SIM Lock if it is wholly owned.