The White House has submitted a formal proposal with the Federal Communications Commission (FCC) asking them to require wireless carriers to unlock customers’ phones on request, reports Steven Musil for CNET. This is consistent with the Obama administration’s previous statements in favor of legalizing phone unlocking.
Digital Millennium Copyright Act
Unlocking smartphones is illegal under the Digital Millennium Copyright Act, which criminalizes any attempt to circumvent technology meant to protect intellectual property. This provision, which is mostly meant to cover Digital Right Management technology, had been used by carriers to make it harder for customers to switch to a different provider by maintaining control of the phone itself, even though the customer owns it. The Library of Congress granted DMCA exemptions to service that unlock smartphones in 2006 and 2010, but chose not to renew that exemption this year.
FCC Chairperson on unlocking phones
Former FCC Chairperson Julius Genachowski worried that a ban on unlocking phones would be bad for customers and could stifle competition. FCC chair nominee Tom Wheeler has come out in favor of legalizing unlocking smartphones. Carriers argue that subsidized phones should not be allowed to switch networks (an argument that has little to do with copyright law), even though the initial loss is generally recouped through fees and higher pay rates.
With the former and likely next FCC chairs in favor of lifting the ban, not to mention the president, it’s probably just a matter of time before unlocking phones is legal again. When that happens, carriers may need to review their subsidy policies and decide if the model still makes sense. Plenty of providers are already moving away from subsidies and replacing them with full price phones and cheaper plans.
AT&T allowing customers to finance phones
AT&T Inc. (NYSE:T) announced a plan over the summer to let customers finance their phones with a non-binding contract. The customer can either pay off the phone over twenty monthly payments, or they can pay off the remaining balance and leave at any time. T-Mobile USA, Inc. (TMUS) has a similar plan that doesn’t include a long-term contract, and both carriers are clearly passing the blame for high prices onto mobile manufacturers. In the long run, permanently lifting the ban on unlocking phones may simply push carriers in a direction they were already headed.