Unlocking a Balance in U.S. Mobile Phone Locking Policies

Abstract

On June 29, 2007, Apple finally released its long-awaited iPhone. However, consumers soon discovered that not only was the iPhone incompatible with the Verizon and Sprint networks, the device could only be accessed through the AT&T mobile network for five years. Even after other carriers negotiated their own exclusive agreements with Apple in subsequent years, their devices were still locked to their own mobile network and could not be used on any other mobile network. Today, although some mobile phones are available from the carrier unlocked, most mobile devices in the U.S. are still locked. Of course, there are ways to unlock a mobile device, both through the mobile carrier or alternative unlocking services. In fact, mobile phone unlocking enjoyed a statutory exemption from the anti-circumvention provisions of the Digital Millennium Copyright Act (“DMCA”) for six years, from 2006 to 2012. However, the statutory exemption was not renewed, and as of January 26, 2013, it is illegal to unlock mobile phones without the carrier’s authorization. Mobile customers were understandably outraged at this policy change, and reports of increased illegitimate mobile phone unlocking spread. At the same time, phone carriers continued to authorize mobile phone unlocking for its customers, but began advertising more stringent policies and requirements for it. Meanwhile, various bills, such as the Unlocking Technology Act of 2013, have been proposed to Congress in an attempt to somehow undo the unlocking policy changes of the DMCA. Indeed, opponents of the Librarian of Congress’s decision to deny the renewal of the mobile unlocking exemption touted, inter alia, consumer choice and copyright arguments. However, a default rule that allows mobile carriers to control access to the devices they sell may affect other issues that are not readily evident to customers. In fact, customers generally take for granted subsidized mobile device prices, and other bundling or service-related benefits that carriers can provide because of the assurance of customer commitment to their network by means of mobile phone locking. In addition, customers may overlook the innate technological incompatibilities of mobile devices that prevent them from working on other carrier networks, which the ability to unlock a mobile device would not overcome. In this article, I argue that although the DMCA anti-circumvention provision creates a default rule that places initial control of access in mobile devices into the hands of the carriers, it does not categorically ban mobile phone unlocking. Rather, it preserves the freedom of parties to contract by reserving the ability of mobile carriers and mobile customers to bargain for mutually beneficial terms. Arguably, this balance can be met with a default rule that legalizes mobile phone unlocking, as the Unlocking Technology Act of 2013 proposes. Nevertheless, I argue that proposed legislation such as the Unlocking Technology Act of 2013 will inevitably prove ineffective. Not only does the bill’s intent-to-infringe requirement make the enforceability of its terms difficult, it ironically quells the incentive of carriers to provide its customers with flexibility and additional benefits in an attempt to bolster consumer choice. If mobile carriers were to lose the assurance of customer commitment to their network, customers would likely lose certain benefits that they had previously received, such as flexible payment plans, prepaid network services, and mobile device subsidies. Part I of this article provides a general background of mobile phone locking and the laws regulating it. In Part II, I discuss the effect of recent and proposed changes in mobile phone locking policies on interactions between mobile phone carriers and their customers, focusing on the role of subsidies and device-service bundling in the customer-carrier relationship. Furthermore, as a means of comparison, I examine the consequences of foreign policies on mobile phone locking on those mobile phone markets. Finally, I argue that, if enacted, proposed legislation may eliminate the incentive for mobile carriers to provide mobile customers certain benefits, which mobile customers often take for granted.