Up Is Down, Day Is Night, And Keeping Mobile Phones Locked Increases Consumer Choice?

Wireless

from the let's-try-this-again dept

A guy named Michael Moroney has taken to Roll Call, a popular publication for politicians, to argue that we don’t need to allow mobile phone unlocking, as is currently being debated in Congress, after over 100,000 people signed a petition in favor of it and the White House came out supporting such unlocking rights as well. I’m not sure where Moroney got his information, but it’s almost entirely factually incorrect, which is quite incredible. Derek Khanna has a very thorough point-by-point debunking, but here’s a shorter look at some of Moroney’s statements that really don’t make any sense. After reviewing that background, along with one of the bills that has been introduced, Moroney jumps into the meat of his argument:

Despite the best of intentions, the very innovation that some members of Congress, the White House and presumably consumers who signed the petition claim they want to protect would actually be hampered by allowing consumers and third parties to unlock their cellphones. The DMCA is supposed to prevent digital piracy by making it illegal to disable digital rights management software, and it applies to the device locks that carriers put on cellphones — primarily to prevent phones they sell from being used on other carrier networks.

First off, it’s not intentional that the DMCA applies to the locks on mobile phones. Basically, the phone providers recognized the law provided them with a backdoor way of locking in customers, and used it. The intention of the DMCA was to stop copyright infringement, not phone locking. That it was eventually used that way is because the authors of section 1201, the anti-circumvention provision of the DMCA, drafted it terribly, opening up lots of opportunities for tech companies — including ink cartridge makers, garage door openers, and mobile phone makers — to abuse the law not to stop copyright infringement, but to be anti-competitive.

When tech companies spend billions of dollars on research and development, they have to recoup those costs and make a profit to stay on the cutting edge of innovation.

One of these things has nothing to do with the other. Just because a phone maker needs to recoup its money on R&D has nothing to do with whether or not it should have the right to forbid unlocking by using a twisted interpretation of copyright law. There are lots of ways to recoup your investment, such as by selling a product at a reasonable price above what you made it for.

One of the ways they do this is by entering exclusive agreements with certain wireless carriers. AT&T, for example, dominated the smartphone market for years because of its exclusive contract to distribute Apple’s iPhone in the United States. AT&T paid Apple an exceptionally high subsidy on top of the consumer purchase prices, but the company made quite a return on its investment. In subsidizing more expensive phones, AT&T could sell more expensive data plans to its customers.

Phone subsidies are really a red herring here. Even with phone unlocking, mobile carriers can (and do!) offer phone subsidies. In the meantime, carriers like T-Mobile have already realized phone subsidies are bad, and actually mean consumers pay more in the long run. But, again, this has nothing to do with unlocking. Most subsidies are held in place via contractual agreements and early termination fees that have nothing to do with phone unlocking.

Now that cellphone manufactures and cellphone carriers have more protection for their intellectual property, they can recoup their research-and-development investment more quickly and, hence, spend more on developing new technologies in the future. It also ensures that most major carriers will continue to offer subsidized phones to their customers — increasing consumer choice.

Except, this isn’t true. None of this is about “protecting intellectual property.” It’s about trying to keep people from switching carriers when their contracts are up. And for all his talk about “increasing consumer choice,” that’s simply incorrect. Being able to unlock your phone, and go to a different provider once there’s no contract, clearly increases consumer choice. If someone doesn’t want to buy a new phone, but wants to switch carriers, unlocking means they don’t have to spend on a costly new phone, but can continue to use their existing phone.

Filed Under: 1201, anti-circumvention, contracts, copyright, dmca, early termination fees, locking, michael moroney, mobile phones