Prepaid Registration: Will U.S. Consumers Be Required to Show Photo ID When Buying a Cell Phone?

By Bob Stankey, Danielle Frappier, and Bradley W. Guyton

The use of a prepaid mobile telephone by the Times Square bomber has again raised the question of whether the identity of prepaid phone buyers should be verified and kept on file. Currently, there is no requirement in the United States, either at the federal or state level, to register end users of prepaid mobile wireless devices or subscriber identification module (SIM) cards.

Recently, however, Senators Charles Schumer and John Cornyn introduced a bill that would require retailers of prepaid mobile wireless communications devices or SIM cards to verify consumers’ identities and forward certain identification information to the underlying wireless carrier. The bill comes as foreign governments are considering the introduction of similar requirements.

Senate bill 3427 requirements

Senate bill 3427 proposes to require sellers of prepaid wireless mobile devices and SIM cards to verify a purchaser’s full name, home address, and date of birth. Acceptable identification documents for in-person sales would include a government-issued photo ID or two forms of alternate identification, such as recent W-2 forms or Social Security statements (Form 1099). For online or phone purchases, sellers could verify a customer’s identification information via credit/debit card numbers, Social Security number, or driver’s license number.

The seller would then be required to create a record of the sale and forward it to the wireless carrier, which would retain the information for 18 months. The information to be retained includes the identification information, date of the sale, manufacturer name, wireless carrier, telephone/account number, and other technical information to identify the mobile device or SIM card, such as the international mobile subscriber identifier (IMSI).

Anyone selling mobile devices or SIM cards who is not an “authorized reseller” for a wireless carrier would face a fine and up to a year in jail.

In prior years, bills have been introduced in several U.S. states but none have been passed into law. In fact, as of today, only a South Carolina bill covering devices used to originate voice calls appears to remain pending.

Practical problems

The registration system envisioned by the Schumer-Cornyn bill raises four practical problems:

  1. Registration requirements would result in increased costs to retailers and providers, which would ultimately be borne by consumers. This is troubling when one considers the fact that prepaid wireless telephone services provide crucial communications ability to the poor and the homeless. Low-income consumers are particularly vulnerable to these potential cost increases, given that this segment of the population is much more dependent on prepaid wireless services. According to a recent study by the Centers for Disease Control and Prevention, adults living in poverty are nearly twice as likely to live in households with only wireless telephones. Moreover, they more often choose prepaid arrangements, thus avoiding credit-check requirements and establishing a simple means of cost control.
  2. A requirement to register technical information on each mobile device or SIM card could prove disruptive if it results in the turning off (intentionally or otherwise) of previously sold, unregistered devices and SIM cards already in use.
  3. Minority populations adopt prepaid wireless services in higher numbers than other segments of the population, thus the increased costs and any service disruptions could potentially widen the digital divide.
  4. How would registration stop the use of anonymous prepaid SIM cards purchased outside the U.S. or the use of old prepaid phones by someone other than the original buyer? The registration system depends on record-keeping by U.S. resellers at the point of sale.

Identification requirements overseas

Beyond the United States, several countries have implemented identification requirements of some sort. For example, registration requirements of varying complexity have been mandated in China, Japan, France, Germany, and Spain.

  • In China, consumers must show their national identity cards or passports in order to purchase prepaid SIM cards.
  • In Japan, user registration requirements do not apply to data-only services.
  • Under French law, carriers must collect identifying information of users and subscribers of prepaid communications services.
  • In Germany, retailers must collect the name, address, date of birth, and other information from purchasers and forward it to the carrier.
  • Spanish law requires carriers to collect the name and nationality of prepaid SIM card purchases, and to verify a customer’s information by reviewing documentation such as a passport or voter registration card.

As part of its review of the EU Data Retention Directive, the European Commission is considering requiring all European Union countries to implement prepaid phone registration requirements. Key EU countries such as the UK have declined to put such measures in place due to the large number of pay-as-you-go SIM cards already in use.

For the moment, it is unclear whether the United States will follow suit. Senate bill 3427 has been referred to the Senate Committee on Commerce, Science, and Transportation but has yet to be reported out of committee. Click here to view a copy of the bill.

About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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