When the Library of Congress and the Copyright office released their latest list of exemptions from the DMCA anti-circumvention rule, the ability to unlock mobile phones was included. This means consumers can remove the software locks on their devices that prevent ones sold by one carrier from working on another's network. Operators use the locks in order to try and protect the subsidies they spend on devices, which lower their cost to consumers. For quite some time, operators have been saying they want to end these subsidies, but they've really done little to actually do so -- since they allow for the use of locked handsets and contracts with high early-termination fees that serve as significant obstacles to customers who want to change providers. Adding handset locks to the DMCA exemptions probably won't have a huge impact, but it could allow some users to change operators at a lower cost (contract fees and ETFs notwithstanding). However, prepaid provider Tracfone says that the ruling will undermine its business because people will simply buy its cheap, no-frills handsets, unlock them, and take them to another provider. Their devices are prepaid, so there's no contract and no ETF, and hence no way for them to guarantee their subsidy. Unsurprisingly, the company is considering suing to get the exemption overturned, nicely following its history of using the DMCA and copyright lawsuits to protect its business model. Once again, this is exactly how the DMCA is not supposed to be used. It sounds more like Tracfone's got a flimsy business model that can't work without special legal protection: after all, most prepaid operators minimize or eliminate their device subsidies because they have no way to guarantee that users will spend enough to recoup the expense. In the end, though, Tracfone and other operators should still be able to try to prevent users from unlocking their phones contractually -- there's no need to rely on the DMCA, so in actuality, this ruling may not carry a lot of meaning.
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