Reality Check: Locked cellphones may have more in common with old rotary phones than you think


Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.

For those of us old enough to remember, there was a time when you couldn’t buy a corded, rotary phone. Instead, you had to lease your phone from Ma Bell. After divestiture, customers were given the options of buying their phones, continuing to lease them, or canceling their agreements. I remember reading a few years ago about an elderly couple who never canceled their lease with AT&T and ended up paying several thousands of dollars over the years to lease what was an outdated piece of equipment.

I thought about the story of that elderly couple last October, when the U.S. Copyright Office failed to renew an exemption that previously allowed mobile device owners to unlock their handsets and take them to the carrier of their choice without violating copyright law. The decision took effect on January 26, 2013, and means any handset purchased after that date cannot be freely unlocked. In other words, if a consumer wishes to change carriers, she/he cannot take their newly purchased device to the desired carrier of choice. The U.S. Copyright Office failed the American consumer.

Representing more than 100 wireless providers who service approximately 80 million subscribers across the United States, Competitive Carriers Association (CCA) has worked hard to ensure that all consumers can take advantage of cutting-edge devices available today. The existence of exclusive device arrangements between the largest wireless carriers and device manufacturers and the lack of interoperability in the lower 700 MHz band both make it difficult for many CCA members to get access to the newest devices their customers want. Now, the Copyright Office’s decision to discontinue the practice of device unlocking has put an even larger burden on consumers.

Having the ability to unlock a device is particularly important for rural, regional and smaller carriers that lack the scope and scale to gain access to the latest, most iconic devices directly from the equipment manufacturers. As a result, millions of consumers who may have bought the latest devices are prohibited from using that device on another carrier’s network. With their enormous purchasing power, AT&T and Verizon Wireless (the largest wireless carriers) have dominated the attention of the device manufacturers and have essentially shut out other players in the industry from obtaining the latest devices. Consumers deserve access to the device of their choosing with the carrier that provides the best service to meet their needs, and there is no reason why a customer in a rural or hard-to-reach area should be denied this access.

The Copyright Office’s failure to renew the unlocking provision not only affects consumers’ access to devices but also acts as a “penalty” on consumers exercising their free market choice. Consider the following three scenarios for when a consumer would want to move to another service provider: (1) a subscriber has been receiving service under a prepaid plan, and the consumer paid for the phone outright from the beginning; (2) the consumer is a post-paid subscriber who is out of contract, in which case the phone has been paid for over the course of the contract term; or (3) the consumer is a postpaid subscriber who wants out of her contract early, and is willing to pay an early termination fee to do so. Under any of these scenarios, the consumer ends up compensating the carrier for the handset, in full and legally owns the handset. Forcing the consumer to then turn around and purchase a new handset from their new provider is unjustifiable, and only acts as a penalty on the consumer for switching carriers. Besides, it simply is not right to take a consumer’s private property and a perfectly good device and relegate it to the proverbial “trash heap.”

In addition to the price of the handset, a loss on any apps, contacts and personal information the subscriber might face also must be considered. In 2011, the Federal Communications Commission found that consumers are significantly discouraged from purchasing a new device based on cost alone. Competitive choices for consumers should not be cost prohibitive nor act as a penalty, and policymakers should do everything in their power to ensure consumers are not faced with undue financial burdens when trying to change service providers.

The Copyright Office unfortunately got it wrong by allowing the unlocking exemption to expire. With new devices coming on the market, consumers will find it much more difficult to take their devices to the carrier of their choice. CCA strongly believes consumers should have a competitive choice and is working with stakeholders and Congress toward possible legislation to allow devices to be legally unlocked. CCA will continue its work to restore competition among wireless service providers and handsets. Cellphones should not go the way of the “old rotary phone,” – we should have learned better!

About Author

Martha DeGrasse

Wireless Martha DeGrasse has been creating content for RCR Wireless News since 2011. Recent feature reports include Building Tomorrow's Neworks, Outdoor DAS and Small Cell Case Studies, Wireless Infrastructure Service Company Review, and Investing in HetNets. (All of these can be found by clicking on Reports at the top of this page.) At RCR, Martha also developed the 5 Things to Know Today series and the Mobile Minute. Prior to joining RCR Wireless News, Martha produced business and technology news for CNN and Dow Jones in New York. Martha left Dow Jones to move to Austin, Texas, where she managed the online editorial group at Hoover’s Online before taking a number of years off to be at home when her children were young. Follow her on Twitter @mdegrasseRCR