Why Are People Being Sent To Jail For Unlocking A Mobile Phone?

from the bad-news-all-around dept

For a few years, we've been covering the various lawsuits over mobile phone unlocking, mostly involving the company TracFone. TracFone focuses on the "prepaid" mobile phone market. That is, rather than selling long term contracts to people with various total minutes, it just sells phones with a certain number of minutes already on them that can then be re-upped at the buyer's discretion. However, like typical mobile phone service providers, TracFone subsidizes the price of the phone in order to make it seem quite cheap (sometimes as low as $10 or $15). The idea is to hook people and make money on selling the minutes. However, there's no requirement that people buy more minutes.

What's happened, of course, is that people figured out a huge arbitrage opportunity. They buy TracFone phones on the cheap, unlock them, and then resell them for a higher price (often outside the country). The problem here is TracFone's choice of a business model. It decided to subsidize the phones and it set up a business model that doesn't require people to sign a long term contract or ever agree to buy more minutes. However, if you listen to TracFone tell the story, this is a case of felony interference of a business model, and anyone unlocking those phones must be stopped.

For a while it was abusing the DMCA for this purpose -- using it to claim that the unlocking was circumvention of copy protection. Of course, that's exactly how the DMCA is not supposed to be used -- and that was made even more clear when the Library of Congress explicitly carved out an exemption for mobile phone unlocking, making it quite clear that this is perfectly legal. TracFone has whined about this, but it still doesn't amount to much more than that the company just picked a bad business model.

However, the situation keeps getting more bizarre. Some folks involved in one of these arbitrage opportunities were eventually arrested for terrorism, after US officials assumed that anyone buying so many prepaid phones must be planning some sort of attack (don't ask). This had companies in the space suddenly claiming that this action of unlocking prepaid phones was a national security threat (seriously). What's scary is that some officials seem to believe it.

It turns out that TracFone actually is winning a bunch of the lawsuits it's filing, using both questionable copyright and trademark claims. However, the real kicker is that one man is actually facing jailtime for this. It's a little unclear from the wording in the article, as the jailtime may actually be as a result of him ignoring a judge's order to stop the practice of reselling unlocked TracFones -- but it's still not clear why it's illegal to unlock these phones that were legally purchased. The DMCA exemptions say that unlocking a phone is perfectly legal, and as long as the phone was legally purchased, it's now the possession of the buyer, who should be allowed to tinker with the software and resell it without having to worry about lawsuits or (worse) jailtime. Yes, TracFone is upset that it wipes out their business model, but the law isn't designed to protect their own poor choice of business models.
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Filed Under: jailtime, legality, mobile phones, prepaid wireless, unlocking
Companies: tracfone


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  1. identicon
    dorpus, 14 Jul 2008 @ 12:13pm

    Re: Re: Re: Re: Re: Re: Re: Re: Not arrested for terrorism

    Techdirt linked to one of it's own articles from August 2006, which in turn has a now non-working link to the Baltimore Sun. So, yes, the linked article from 2006 had a dead link in it. However, you only raised that point when you were proven to be completely wrong on the reasons the men were arrested.

    My original post questioned the authenticity of Techdirt's claim, to which other bloggers (but not Techdirt itself) responded. Was it completely wrong for police to arrest cell phone traffickers on suspicions of terrorism, when other men in the area had been arrested for doing so along with the passenger lists and airport security information?

    Lying about what, exactly?

    Failing to mention the context of the suspicion.

    About the conspiracy that the FBI couldn't provide any evidence to support? Or are you relying on the ultra-secret non-disclosed evidence that nobody knows about? It should be noted that even the men with the passenger lists were not charged with any terrorism related charges either. I'm not saying that those incidents should not have been investigated, but if there's no evidence to support the charge they were arrested for, then they probably shouldn't have been arrested in the first place.

    It is up to the FBI's discretion to disclose what they know or don't know. Investigating organized crime is a complex art.

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