Here's How to Legalize Phone Unlocking

In the wake of a public petition to allow people to unlock their cellphones for use on the wireless network of their choice, both the White House and the Federal Communications Commission came out in favor of a change in the law. Now, Congress has floated several proposals that would do just that.  Unfortunately, the current bills do not take into account what we've learned from seven years of unlocking battles and none of them provide a comprehensive fix for consumers.  This isn't a case of the perfect being the enemy of the good.  These bills aren't really all that good.  Even assuming Congress wants to leave the broader problems of the DMCA alone for now, we can do much better.  In this blog post, I give a brief background on the DMCA and its relation to phone unlocking, take a close look at each of the congressional proposals and suggest what an effective unlocking fix would look like.  

Congress' Proposals
Here's How to Legalize Phone Unlocking

Background on Phone Unlocking and the DMCA

In 1998, Congress passed the Digital Millennium Copyright Act (DMCA), which is essentially two provisions, the safe harbor and the anti-circumvention rules, also known as Section 1201.  Section 1201 is at issue here.  That provision was intended to encourage copyright owners to release their works in digital format, having some assurance that by using access and copy protection schemes, backed with the force of law, infringement would not run rampant.  

To that end, section 1201 prohibits circumventing a technological measure that effectively controls access to a copyrighted work (ACT of circumventing an ACCESS control) as well as trafficking in TOOLS or services that circumvent ACCESS or COPY controls.  

At the time of passage, people identified important, valuable activities, including encryption and security research and reverse engineering that would be adversely affected by the prohibition.  In response, Congress identified narrow statutory exemptions and gave the Librarian of Congress, upon recommendation of the Copyright Office, authority to issue new exemptions every three years to allow individuals to circumvent access controls if the proponant can prove that the statute burdens a non-infringing use and that an exemption won't overly harm copyright interests.

The exemption safeguard is hobbled in serious, even fatal, ways.   Very importantly, the exemption process applies only to ACTS, and cannot exculpate providers of the very TOOLS or services that most individuals need to exercise their freedoms under the exemption.  The proponents' burden of proof in the Rulemaking is heavy and byzantine, and the details change every three years.  

In 2006, it came to my attention that phone companies like Motorola and TracFone were claiming that the DMCA prohibited people from unlocking their phones for use on other carriers.  My Stanford Law School Cyberlaw Clinic students and I applied for an exemption allowing people to unlock their cell phones.  The Librarian granted the exemption on behalf of a man who needed to unlock his phone so he could use it during international travel, and a phone recycling company.  The Librarian renewed the exemption in 2010.  

Despite these two victories, lawsuits against phone unlocking continued nearly unabated.  In particular, TracFone, the nation's largest seller of prepaid handsets continues to successfully use section 1201 to shut down phone unlockers.  The company's business model is premised on selling subsidized handsets and making up the difference in service fees.  There are organized arbitragers that encourage people to drive around the country from Wal-Mart to Wal-Mart purchasing the handsets and shipping them to the middlemen, who eventually unlock them and sell the devices overseas. Virgin Mobile has a similar business model, and has faced the same problem, but has not used the DMCA to go after arbitragers. 

Still, as recently as 2012, TracFone was successfully arguing that phone unlockers were not covered by the Librarian's exemption because the were motivated by their interest in reselling the altered devices for profit, and not, as the exemption required, "for sole purpose of lawfully connecting to a wireless telephone communication network". See e.g. TracFone Wireless, Inc. v. Technopark Co., Ltd., S.D.Fla.2012, 2012 WL 1229454. TracFone's success means that a cloud continues to hang over my phone recycling clients' lawful activities.  They, too, turn a profit from unlocking and reselling handsets.  Meanwhile, law abiding individuals who lack the technological expertise to modify their own phones (anyone?) have to rely on necessarily grey (or black?) market unlocking tools and services. If unlocking is legitimate, the law shouldn't criminalize those who help us get the job done. 

The Librarian of Congress decided last October to let the unlocking exemption lapse, despite petitions from MetroPCS, RCA-The Competitive Carriers Association, Youghiogheny Communications and Consumers Union to renew it.  As of a few weeks ago, individuals who unlock their phones may be in violation of the anti-circumvention provisions of the Digital Millennium Copyright Act of 1998 (DMCA), 17 USC 1201. Ironically, this lapse may be the best thing that ever happened for phone unlocking.  The decision led to a public uproar and to the petition, which led to White House and FCC support, which prompted Senators to act.

Congress' Proposals

There are currently three distinct proposals on the table, from Sen. Leahy, Sen. Wyden, and Sen. Klobuchar.  Reportedly, Rep. Chaffetz is considering introducing a bill as well.  If so, the Senator's office can learn from the currently available proposals, none of which actually address the problem of locked phones for consumer choice, economic prosperity and the environment.

The Klobuchar bill would require the FCC to direct wireless providers to unlock their customers' mobile devices on behalf of the wireless subscriber or her agent.  The law specifies that consumer contracts with their providers are not affected. This part is confusing. If contracts are unaffected, and the contract says that the consumer may not unlock, then the bill does nothing.  Alternatively, the contemplated FCC mandate must limit consumer contracts at least to allow the customer to force the provider to unlock upon request. In any case, any FCC rule issued under this bill would suffer from at least two limitations.  First, only subscribers or their agents would be entitled to unlocking from their provider.  That leaves phone recyclers, second hand sellers, bona fide purchasers for value and other legitimate unlockers in the lurch. Second, unlockers other than the provider would have no safe harbor.  The consumer herself is not able to unlock because her exemption for the act of unlocking has expired.  Nor would anyone be authorized to go to any unlocking service other than the provider.  This means that just one of my clients in the 2009 rulemaking, ReCellular, would be taking up to 4 million phones a year to its local mall for unlocking.  That's almost 10,000 a day.  This will not work.

Wyden's bill would amend section 1201 to instantiate forever the 2009 exemption for unlocking.  Of course, that exemption is severely limited.  It  does not allow sale of unlocking tools or services.  It involves only used handsets. It may only be done by the owner of the phone, and then "solely in order to access such a wireless telecommunications network and access to the network is authorized by the operator of the network." These limitations leave your average Joe who wants to unlock his phone but doesn't know how without legal recourse.  It puts recyclers in a grey area.  As in the TracFone cases, are they unlocking "solely" to access a network, or is it also for resale and profit? If the latter, then the Wyden bill wouldn't protect them. Moreover, its unclear how the Wyden bill, if passed, would effect requests for future broader exemptions based on new facts and evolving market practices.  

The Leahy approach would amend the Federal Register to continue to 2009 unlocking exemption until 2015, and direct the Librarian of Congress to reconsider unlocking handsets and other devices, presumably tablets, a year from now.  I'm not sure how this proposal gives any meaningful support to phone unlocking, unless the idea is that the recent unlocking hoopla is a shot across the bow that would somehow make the Librarian change his mind three years from now. So much for promulgating regulations based on a legal standard, and burden of proof and all that annoying process. In any case, this fix has the same limitations as the Wyden bill while ensuring consumers one more year of unlocking privileges.

Here's How to Legalize Phone Unlocking

We have an opportunity here to do something great for consumers and for the planet. Let's assume a modest goal: Congress wants only to address the unlocking problem, and leave broader concerns about section 1201 aside for now.  Any unlocking bill must:

  • Legalize distribution of the TOOLS and services that the vast majority of consumers need to unlock their handsets;
  • Allow any lawful handset owner -- not only wireless customers but also second hand purchasers and recyclers -- to unlock lawfully owned phones, or to pay someone else to do it on their behalf;
  • Encourage or require wireless providers to unlock, but not force handset owners to rely solely on providers for the service;
  • Regulate excessive penalties in service contracts that improperly interfere with customer choice in network providers;
  • Consider barring network providers from forcing handset manufacturers to lock phones; and
  • Ensure that bulk unlockers like recyclers and exporters aren't thrown in the same bucket as handset arbitragers.  

I look forward to seeing what Rep. Chaffetz's office proposes.  With full understanding of section 1201 and the limits of the current exemption process, we have a great opportunity ahead of us.

Comments

The Australian System works well.

Handsets sold on contract are rarely locked, as the provider will recieve thier fees back. If they are locked they are then freely unlocked at the end of the contract, by the provider.

In the instance of pre-paid they are locked and can be unlocked after as 6/12 Months or you recharge $XX, whichever is earlier.

This provides unlocking to be legal and the tools do not even need to be distributed.

You did not explain why unlocking is an issue. Carriers unlock phones after 18 months in the contract or after the customer paid the ETF. So you can unlock your phone once you don't owe subsidy.
(Two spelling errors: proponant/proponent, effect/affect, You can delete this comment.)

You['ve given a great overview of the legal mechanisms around licking and unlocking - but without looking at why phone are unlocked and what would happen with different ways of unlocking them, you can't really understand the consequences of what might be enacted.

The lock is part of an economic model under which a phone is subsidised in exchange for a service contract and the phone's use with that contract. That model has been very successful at driving high ownership rates of mobile phones in general and smartphones in particular.

Outside the USA, unlocking phones after the end of the associated contract is absolutely standard practice. However, if you mandate unlocking the phone INSIDE the contract, you risk breaking the economic premise behind the subsidy. That, in turn, would mean fewer people getting subsidies, smaller subsidies and lower smartphone adoption, amongst other things.

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