Imagine you had to buy all new phones when you switched your landline telephone service provider. Or suppose you took your laptop overseas but could go online only by connecting with your home broadband service company – at exorbitant international rates.
Cellphone owners today face a similar situation, thanks to a new and misguided federal policy that effectively makes all cellphones second-class devices. The new rule risks further reducing competition in cellphone industry, which is already basically a duopoly. And it puts consumers who want to “unlock” their cellphones from a particular service provider at risk of outrageous civil and criminal penalties.
The change, put in place by the U.S. Copyright Office in the Library of Congress, went into effect Jan. 26 and is drawing fire from high places – and rightly so. The Obama administration this week said consumers ought to be able to legally unlock their phones, at least when they have completed their wireless contracts. And Julius Genachowski, chairman of the Federal Communications Commission, which regulates the wireless industry, said the new rule “doesn’t pass the common sense test.”
Genachowski and the White House were responding to a petition seeking to overturn the new rule that drew more than 114,000 signatures. Most cellphones sold today are “locked” to a particular wireless carrier through software inside the phones that prevents them from being used on another carrier’s network.
The locks are unfair and anticompetitive, but until recently consumers didn’t have to put up with them. Federal rules allowed consumers to break the software locks using a variety of legally available software.
Once phones were unlocked, consumers could use them with any carrier whose technology was compatible. And they could take their phones overseas and connect them with carriers based in the countries they were visiting, rather than pay often huge roaming charges on their home network.
But under the new federal policy, consumers can no longer “unlock” their cell phones without risking civil and criminal penalties, including a prison term of up to five years and a fine of up to $500,000.
The new policy stems from the Digital Millennium Copyright Act, a law passed in 1998 to update copyright law to protect intellectual property in the digital age.
With a computer, users for the first time can create a limitless numbers of perfect digital copies of songs, books or films at almost no cost to them but at a huge cost to those industries.
The law sought to protect copyright owners who use technology to prevent the copying of their works. If a movie studio uses encryption to prevent a DVD from being duplicated, or if a software company uses digital rights management software to prevent a program being copied, the law makes it illegal to break those “locks.”
The law was never meant to bar consumers from switching their carriers. Unlocking cellphones has nothing to do with illicit copying, a fact the Copyright Office recognized back in 2006 when it granted an exception to the law for that purpose.
But the Copyright Office has rescinded that exception in the new rule, arguing consumers can now find numerous brand-new unlocked phones for sale, and that carriers such as AT&T have policies in place under which they promise to unlock consumers’ phones once they have completed their contracts. The office has bought the wireless industry’s line that cellphone locks are necessary to ensure that consumers stick with the carriers long enough for them to recoup their losses when they offer phones below cost.
That argument is seriously flawed. Carriers will unlock phones only if consumers meet certain requirements, such as showing their original proof of purchase. And consumers are still legally required to keep paying monthly subscription fees on existing contracts – or pay a pricey termination fee instead.
So there’s no good reason to bar consumers from unlocking their phones and to threaten them with jail time if they do. The Obama administration acknowledges that, and has proposed that Congress eliminate the civil and criminal penalties for those who unlock phones. And the FCC is considering taking action to preserve consumers rights to unlock phones.
Let’s hope that one of these steps is taken quickly. Because the new policy is not only unfair – it’s just plain unnecessary.