What is the controversy over unlocked phones? Why it should be consumer choice and not mandated through government policy.

There has been some controversy over the issue of ‘locked’ versus ‘unlocked’ phones. A recent revision by the Librarian of Congress to the Digital Millennium Copyright Act (DMCA) which criminalizes sharing of copyrighted materials has made it illegal to unlock phones (in most circumstances) from service providers. This resulted in a petition to the White House to review and coerce the Librarian of Congress to rescind the ruling and make the act of ‘unlocking phones’ legal.  The White House and the FCC have separately commissioned statements to the Librarian of Congress in agreement with petitioner’s that unlocking phones should be consumer choice and made legal.

The Digital Millennium Copyright Act was established in 1998 and made it illegal to use or develop software that shared copyrighted material for free. Among others, Napster spawned the development of this act.  Decreased profits and computer piracy created the need to address rules and regulations regarding copyright infringement. In October of 2012 the Librarian of Congress decided the ‘unlocking of phones’ would be removed from the exceptions to the DMCA and now consumers are required to gain carrier permission to unlock their phones or face large penalties and cancellation fees.

This deters customer choice and lowers resale value for devices that consumers paid for. Besides affecting the consumer ability to switch plans during a contract, it also impedes international travelers who would be able to switch services for lower rates when traveling. A petition regarding the changes to the DMCA were submitted to WhiteHouse.org.  The White House is in favor of the petition and extended the requirements to all mobile devices including Tablets. The FCC backed up this statement by saying they should look into this matter personally and that it, “raises serious competition and innovation concerns, and for wireless consumers, it doesn’t pass the common sense test.” (Julius Genachowski, FCC Chairman).

These statements spurred a defensive memo by the Library of Congress stating its process of determining the exception and that it would stick to its ruling. This is due to the fact that service providers offer options for unlocked(ing) phones like when buying direct from the manufacturer or when your contract has expired. Service providers offer unlocking policies but do not grant consumers full control over their phone options.

What does this mean for the Telecommunications industry? It means that resale of used or refurbished mobile devices will have a greatly reduced market.  Consumers will only be able to buy phones that work with their service providers’ network. Someone  trying to resell iPhones from a company that bought them directly through Sprint, will not be able to resell them to another company that uses Verizon. A consumer that bought an iPhone through AT&T but found a better plan through Sprint, will not be able to switch without paying exorbitant fees and penalties.

The positive responses from the White House and FCC may potentially lead to legislative fixes and possibly persuade the Library of Congress to rescind their decision. Addressing the issue may take more time in reviewing the DMCA policy. Nothing should prevent the choice to switch carriers and even though service providers give consumers options, the impediments of the DMCA ruling are intrusive on our rights. The petition and statements from government agencies are the beginning steps towards reforming the Library of Congress decision and hopefully we will see a position change in the near future.