Sprint Nextel Corporation (S), AT&T Inc. (T), Verizon Communications Inc. (VZ): Will You Be Trapped by Your Wireless Provider?

The country’s wireless providers may have Groundhog’s Day circled on their calendars. Already seeing a boost in price during the week from economic data, AT&T Inc. (NYSE:T), Sprint Nextel Corporation (NYSE:S), and Verizon Communications Inc. (NYSE:VZ) may have a reason to celebrate once a new rule guarding phone usage goes into effect.

The term “jailbreak” just got a little more appropriate
Jailbreaking a phone refers to a person unlocking his or her smartphone, which allows the person to use any cellular network with the same device. This was often the thorn in a wireless provider’s side, because customers were able to switch carriers if they no longer liked their current network. But all of that changes on Feb. 2, when a new exemption under the Digital Millennium Copyright Act will make jailbreaking a smartphone a crime that serves out fines or jail time.

The phone carriers will be able to file suit against customers for damages caused by the unlocked phones, such as contract loss, etc. — though the maximum fine levied would be $2,500. In the case of people looking to profit from jailbreak phones, the maximum damages could reach as high as $500,000.

Investors in the telecom businesses should consider this ruling, though questionable, a win for their stocks. There has always been a lot of competition in the space, with customers taking advantage of subsidized phone deals (think $600+ iPhone 5s for $199 and a two-year contract), and then moving to a new network, or selling the phone. And some of that competition was prevalent in the days leading up to the new rule’s start date.