The Library of Congress Ruling
Under the Digital Millennium Copyright Act (DMCA), Congress set up a mechanism to allow copyright holders to enforce penalties against individuals who bypass “copyright protection systems” (i.e. the digital locks that copyright holders use to restrict access or manipulation to copyrighted content). DMCA § 1201 grants the Library of Congress the ability to grant exemptions for certain actions bypassing copyright protection systems if the Librarian of Congress believed that the system adversely affected the ability of users of the copyrighted work to make “non-infringing uses” of the work, for example, creating digital copies of computer games on obsolete hardware. Last October, the Library of Congress issued a final ruling that would decline to extend the exemption for unlocked smartphones after a 90-day transitional period. While there is some doubt as to whether unlocking smartphones is covered under the DMCA, under the current ruling, smartphones can now only be unlocked by the owner of the phone, who, in most cases, is the carrier, not the consumer. Consumers, the White House, and the Federal Communications Commission all came out against the ruling with worries about competition and consumer flexibility.
Why do carriers love it and consumers hate it?
Carriers see the exclusive power to unlock smartphones as a way to protect their initial investment of selling consumers smartphones at a deep discount. Prior to the final ruling, if a consumer was dissatisfied with her service, she could pay her early termination fee, unlock her phone and move to another carrier. Now, if the same consumer wants to walk she is welcome to, but she’ll have to leave her phone behind. For manufacturers, the strategy of partnering with a single carrier for high profile smartphone release is more feasible under the new ruling. While the legality of such practices has been challenged on antitrust grounds, a ban on unauthorized unlocking would make exclusive releases even more profitable for carriers, meaning more profit for manufacturers as well.
On the other hand, consumers fear that a ban on unlocking cellphones will reduce consumer choice, hurt international travelers and lower the resale value of devices paid for in full. For international travelers, the option to unlock the smartphone and purchase a short-term contract with a local carrier is no longer readily available. Now travelers must choose to either pay the high roaming charges levied by their current carrier or purchase an unlocked phone from the manufacturer at a much higher price than what is offered by carriers. The resale and gift markets would be negatively affected as well, since consumers in those markets will not have to choose between getting a locked smartphone with a potentially unsatisfactory carrier, or paying significantly more to get an unlocked smartphone.
What should you do?
For the majority of us, the answer is nothing. If you’re satisfied with your service and you’re still on contract, unlocking your smartphone won’t yield any benefits but it could yield complications. If you’re done with your contract but want to keep your device, many carriers will unlock your phone for free and let you decide whether you want to move to another carrier. If you’re looking to jump ship early, or unlock your phone for another reason, you may be in for a stern warning from your service provider with the force of law behind it (a fine up to $500,000 and up to 5 years in prison), but none of the major carriers have announced what their actual enforcement policy will be. James Baldinger, a lawyer for some of the wireless carriers, has said that “[t]he carriers’ position has always been, it’s never been about individual consumers. Individual consumers have never been the target of any of the lawsuits or enforcement proceedings or investigations.” So while it might be harder to find someone to unlock your device, its unlikely that Verizon will come knocking at your door if you do.