Owners of $600 smartphones can rejoice in last week's ruling by the Library of Congress exempting cell phone unlocking from the anti-circumvention provisions of the Digital Millennium Copyright Act. So can environmentalists and business travelers.
I had asked for this rule on behalf of Robert Pinkerton, an individual who traveled frequently for business, and The Wireless Alliance, an organization that refurbishes, resells and recycles handsets. Pinkerton found that phone locking prevented him from using his handset when traveling. The Wireless Alliance found that the restrictions interfered in its efforts to keep phones in circulation and out of landfills.
But prepaid wireless purveyor TracFone called me this week to explain how the ruling I fought for will hurt poor people's ability to afford cell phone service. Which one of us is right?
TracFone's subsidy of these phones is so large that everyone in this gray-market resale chain can make a couple of dollars a handset, and the end customer still gets a discount. As a result, TracFone is losing millions of dollars, as it fails to reap the intended economic benefit of its subsidy. The company actually tries to reduce the number of handsets on the shelf at major retailers to prevent mass purchases for arbitrage.
The company's lawyers say the new DMCA exemption will rob them of a tool to crack down on the resellers, who they call criminals.
But my view is that TracFone was an unintended beneficiary of the DMCA and is now an unintended victim of the exemption. While prepaid is an interesting and perhaps socially beneficial business model, there are other values at stake, too. Customers should have the right to alter or modify devices that they own. Consumers and the environment generally benefit from competition and innovation enabled by phone unlocking.
