January 18, 2006  ·  Lessig

From Jennifer Granick, director of the Stanford Center for Internet and Society:

The Stanford Law School Center for Internet and Society is collecting stories about problems with locked cell phones to support our request to the Copyright Office for an exemption to the DMCA anti-circumvention provisions for cell phone unlocking. The original comments filed are here. These will be for the reply comments.

If you have a good story, know someone who does, or are aware of a community of people who might be interested, please send the link to them.

  • billb

    I don’t know if this helps, but the guy at the AT&T Wireless store I bought my phone from wouldn’t unlock my phone for me. He did however give me the address of the guy down the street that would do it for a small fee.

  • http://hasan.wits2020.net/~hdiwan/blog Hasan

    billb, the reason that AT&T Wireless, etc. won’t unlock GSM phones is because they sell them subsidized, and use the monthly service fees to recuperate their cost.

  • three blind mice

    billb, the reason that AT&T Wireless, etc. won’t unlock GSM phones is because they sell them subsidized, and use the monthly service fees to recuperate their cost.

    exactly right Hasan. moreover, consumers have the well-advertised option of purchasing, at a significantly higher price, an unlocked phone from the beginning.

    furthermore, at the end of a contract period, nearly all operators offer the customer the – again well advertised – opportunity to purchase for the unlock code for a nominal price.

    because of the lock, operators can – and do – heavily subsidize the purchase price of a mobile phone. you pay a little down and then pay it off over time. it’s a simple form of consumer financing. nothing more, but certainly nothing less.

    but because the loan is tied to service/use the operator’s risk is much less than that of a credit card company, or a bank. thus the loan can be made on advantageous terms that benefit the consumer. it should be noted that lowering the barrier of entry particularly benefits poor and low-income people who stand to benefit the most from access to mobile communications. (according to a study done by the Economist last year.)

    the lock makes this contract possible and the DMCA makes the lock possible. there are lots of problems with the DMCA, but this friends ain’t one of them. the exemption should – and will – be rejected out of hand.

  • John S.

    Mice,

    Why can’t you have the same contract without the lock? Eg, why can’t Verizon lock me in with the contract for 2 years in order to let me buy the cheap phone instead of locking me in both with the contract and the technological lock? I thought that’s why these companies all had exorbitant contract cancellation charges.

  • Montana

    Not only that, but why not make the financing more obvious? Instead of charging $50/month for the service, charge $40/month for the service and $10/month for paying off the phone. That way you don’t get screwed if you already have a phone, you want to buy one the service you use doesn’t sell, you already have the money up front and don’t want to pay the built in interest or you keep your phone well past the period it would take to pay off the cost.

    On top of that, it means you don’t need a two year contract just to get a cell phone: If you want to switch providers after a year, you just pay off the remaining $75 on your phone (instead of the $150 termination fee they need for people who switch after ten days) or keep paying the $10/month to your old provider until you have. It would certainly increase competition, which is always a good thing — and unfortunately quite likely the reason why it isn’t done that way.

  • three blind mice

    Eg, why can’t Verizon lock me in with the contract for 2 years in order to let me buy the cheap phone instead of locking me in both with the contract and the technological lock?

    it’s called risk, John S.

    the technological lock lowers the risk for the operator which allows them to offer advantageous credit terms. and again, it is the consumer’s choice.

    there is nothing stopping you from buying an unlocked phone using your credit card – nothing but the 19% annual pc rate.

    the fact that the lock exists makes this financing model work and we think this provides an immense benefit to the public – partcularily to low income people who are otherwise denied credit or forced to pay very high interest rates.

    providing an exemption to the DMCA to allow high street villans to circumvent the lock with impunity will raise the barrier of entry for poor and low-income people and raise the costs for everyone.

    that’s our good story. someone please tell the Stanford Law School Center for Internet and Society before it’s too late.

  • John S.

    Mice – I get that managing risk is important. I just don’t see how the tech. lock lowers the risk below the threshold of certainty the contract provides.

    It seems like you’re saying that people will have less of an incentive to break their legal contract if they also have a locked phone, is that correct or am I misunderstanding you? Is this solely because if you have a locked phone then the cost of buying another locked phone from another provider is a cost to take into account (in addition with the large cancellation fees, etc) when doing a cost/benefit analysis of switching providers? Is there another factor I’m missing?

  • three blind mice

    It seems like you’re saying that people will have less of an incentive to break their legal contract if they also have a locked phone, is that correct or am I misunderstanding you?

    that is precisely it John S. the technological lock means that the operator does not have to rely on the contract alone to recover the loan. a consumer cannot buy a subsidized phone and then use it with another operator. without the lock, the contract is all there is.

    the lock is what allows operators to loan money at more attractive rates than the credit card company. or even at the same rates. no one if forcing this model on the consumer.

    it is the consumer’s choice. if you want to buy an unlocked phone that allows you to switch with to any operator, the option exists and is freely (free as in speech, not as in free beer) is available.

    what the Stanford Law School wants to do is make it freely available like free beer and this is fundamentally in error.

  • John S.

    I understand that given the technological opportunity for additional security on their “loans” – the phone companies would want to take advantage of it.

    And given the legal backing that the DMCA gives to their technological locks, they’d obviously want to take advantage of that.

    I think the objection is the availability in the first place of the legal protections. Why does this have to be a copyright issue at all instead of a pure contract issue? It just seems unnecessary to involve copyright in things like this.

    Let them cover their own risks in their own ways. If the phone companies don’t think they are covering their risk enough, they can raise prices. This has the negative consequence of removing lower income people from buying, but there are ways around it still – for instance, they could accomplish the same thing if they required those who buy “subsidized” phones to return the phones if they break the contract. Or, they could merely loan out phones while you have a contract, with an option to buy it after the term ends.

    What are the benefits of solving the problem with copyright as opposed to leaving it to ordinary agreements between private parties?

  • poptones

    “We” agree nearly completely with the TBM on this one. The DMCA, at least in this case, has verifiable merit. By making the act of hacking a cellphone illegal the DMCA removes the commercial viability of mass infringement of the one “lock” they have on their contract. If you remove that lock the local Walgreens can now reassign identity to cellphones. That means the cellphone company now has to prosecute violations of the contract on a case by case basis – more legal fees, or at the very least more customers lost as soon as they obtain their “free phone,” more customers in default on their contracts, more contracts sold for pennies on the dollar to collection agencies.

    You might argue “so what, they can afford it” but we both know in this political climate it isn’t the cellphone company or its shareholders who will eat that tab – it will be the cellphone customers. They will “eat it” at least until it is economically advantageous for them to go to another company – and with no restrictions on the equipment they bought, it will be even easier for them to leave.

    No one is forced to buy a $300 cellphone. You can buy a prepaid phone at walmart for about forty bucks and you can restock it with very expensive minutes at your leisure. Cellphone companies can offer an improved “appliance” over the forty dollar walmart cheapo and a better value in billable minutes in exchange for a commitment. Having the cellphones locked into that agreement offers the cellphone companies a relatively robust and – this is the important part – economical means of enforcing that contract.

    It seems to this very geeky old school liberal this may be one of the best cases for the DMCA rather than an argument against it. I would much rather see some pressures upon the many ways speech is restricted in this context than put upon such a narrowly defined and easily refuted “loophole.” Discussing in public and on websites about the ease with which most phones can be “hacked,” for example, serves both the interest of the public and of the phone companies that rely upon this restriction as a means of enforcing their contracts; if the phones that are easily “hacked” are well known, the companies providing cellular service will have econmic incentive to offer customers a different model, for example, or to pressure the cellphone manufacturers into providing a more secure product.

    Defend our liberty to speak and to share knowledge upon the terms which we each deem in our own best interest and the rest of it will work itself out. DRM (and this is a form of DRM, after all) needs to evolve in a manner that benefits us all. And it willl, but only if we participate in that evolution.

  • Montana

    I still fail to see how applying the DMCA in such a way can possibly be a benefit to anyone but the phone company. It’s illegal to violate a contract; making it illegal to circumvent a copy protection device that under certain circumstances allows you to violate a contract doesn’t make any sense. If somebody is already willing to break the law then making the penalty more severe by adding an additional charge rather than by just increasing the penalty for the actual infraction (if so desired) makes little sense and serves to outlaw something that may be done legitimately by people who aren’t breaking any contracts or other laws.

    You may make the argument that it will be more difficult to bypass the lock if it’s illegal and you can’t just have it done at the corner store or by walking into a competitor’s shop, but there are better ways to achieve the same results. For example, make it illegal for a cell phone company to offer you service if you have an outstanding contract with a competitor. This way you can’t use your phone with a different provider until you’ve settled the account and paid the termination fee that covers its cost. No DMCA, no technical measures to circumvent, no prohibition of legitimate acts and no unhappy customers or providers.

    If the law is lacking and using copyright as a sword to advance your interests in a non-IP market seems viable, find another way or fix the law. Any other course is a kludge that devalues both copyright and the law.

  • poptones

    One method (I sell you an encrypted phone at cut rate under the promise you will stay with me long enough that I might pay it off) allows the contractual parties to economically “police” these issues amongst themselves. The other way involves more industry regulation, bookeeping, and “corporate policing.” Who keeps the records? How do you even make it illegal to do business with someone? Banks don’t even have such regulations – they may choose to share information but no bank is obligated to deny a savings account to someone just because that person owes some other bank a bad check debt. How do you constitutionally deny my right to transact business with another individual?

    In a world where we are constantly screaming about a lack of privacy, how is it the better option to create even MORE beauracracy and excuses for untrustworthy companies to share and sell personal information?

    Encryption and meaningful, robust and well applied laws will enable all of us – little guys and megacorps alike – to interact with one another on our own terms. Continuing as we are means fostering an increasingly dysfunctional and litigious culture. Encryption and well applied data protection laws can displace the drive to the courts every time someone breaks a nail simply because fewer nails are going to get broken.

    We cannot create a new “digital culture” and have any degree of privacy if we are going to say no one can own data or share data unless they are prepared to pay lawyers and courts to defend them over every last infraction of trust. I can understand a Stanford law professor drooling over such a notion, but I see a lot more merit in a DRM-ed and encrypted culture where “little guys” as well as corporations share tools of individual empowerment. If the “price” of that culture is slightly less less “free and public” access to hype laden, soundbite driven, corporate infotainment, so much better the bargain.

  • three blind mice

    You may make the argument that it will be more difficult to bypass the lock if it’s illegal and you can’t just have it done at the corner store or by walking into a competitor’s shop, but there are better ways to achieve the same results. For example, make it illegal for a cell phone company to offer you service if you have an outstanding contract with a competitor.

    point well taken Montana. there are other ways to enforce the contract and to preserve the business model.

    but we don’t really see the phone-lock as a misuse or inappropriate application of the DMCA.

    if you remember lexmark tried to protect their ink-jet cartridges from competition using the DMCA, but the courts ruled that it was not an appropriate application of the DMCA to protect an article of manufacture.

    we think this was a correct decision, incorrectly decided. what lexmark was (IOHO) doing was clearly within the literal language of the poorly written DMCA, but obviously outside the intent of the law. whist we believe in the necessity of a DMCA-like law, the DCMA itself is a sloppy bit of legislation.

    one might ask why this case is different.. indeed there are many similarities.

    the difference is that the mobile phone lock is bbeing used to enforce a contract/license. it only affects the article of manufacture purchased by the consumer. it does not prevent others from offering competiting products as was the intent with lexmark.

    at the same time, it is clear to us that protecting a mobile phone lock was not the intended application of the DMCA..

    but if lexmark was a negative unintended result of a well-intentioned law, the mobile phone lock is a positive unintended result.

    it seems absurd on its face that the Stanford LC believe this is anti-competitive. the consumer is free to buy a locked phone, or an unlocked phone, among hundreds of models made by more than a dozen manufacturers, from a number of different operators – and in some regions there is even competition among different mobile standards. by any measure, the mobile market is a massive success of competition and deregulation. over 1/6th of the world’s population owns a mobile phone.

    the DMCA has positively contributed to this and that should be taken into consideration by the Copyright office when granting exemptions.

  • Chicago

    Interesting.

    My experiences with Verizon are:

    1. they won’t activate a phone unless it’s one they’ve hacked – no buying any new phone of eBay. You have to buy a used one that Verizon already hacked (i.e. crippled) or buy a new one from them.
    2. for years they wouldn’t sell any bluetooth enabled phones, and when they finally sold the Motorola 700 (something like that) model they crippled the bluetooth so it couldn’t be used with a computer’s bluetooth modem to connect to the internet.
    3. they refused to re-activate my old cell phone they sold me and I had used up till 7 months prior to my request claiming the FCC won’t let them.

    Also, I’ve been told if you try to use your phone plugged into the computer with a cord with your modem that they’ll try to charge you “data rate” for the minutes.

    Phone service bites in this country.

    three blind mice, what phone company do you work for?

  • poptones

    Phone service bites in this country? I called a friend in germany – had no idea it was his cellular number. They charged me 80 bucks for little more than a half hour call because it was a “mobile phone” on his end.

    I can call a friend in England for about the same rate I pay to call a friend in Cali. Not quite that cheap, but damn close.

    If Verizon won’t sell you a phone they haven’t “hacked” then it sounds like a good reason to choose another provider. it also doesn’t sound like a good case against this application of the dmca, since there’s no logic in concluding from those stories they wouldn’t still require you to use one of THEIR phones if this law were not in place.

    I’ve heard an account of one AT&T customer whose phone was “locked” via digital data sent by AT&T – they locked his phone to their service without his knowledge or consent and refused to unlock it. Of course it was a phone he had unlocked from ANOTHER provider’s service thus giving AT&T reason to believe he might violate his contract with them as well. And, of course, this was only one side of the story – it’s entirely possible his contract with AT&T granted them the right to lock his phone and he simply didn’t read it before ageeing to it.

    In other words I’m not saying either party here is an obvious good guy or bad guy. Laws need to be changed to better protect consumers, but that doesn’t mean shooting holes in a very efficient means of contract enforcement is the only or even best solution.

  • Sapper

    “billb, the reason that AT&T Wireless, etc. won’t unlock GSM phones is because they sell them subsidized, and use the monthly service fees to recuperate their cost.”

    Oooh, actually not true. While it is true that the carriers “subsidize” the cost of cell phones, they do that by locking you into a 1 or 2 year contract. If you terminate early, even if it is in the 23d month of a 24 month contract, they charge the full “contract termination fee” which more than covers the subsidy. In fact, some argue that this early termination fee is illegal in california because it isn’t related to any actual damages to the carrier.

    ***I*** own the phone outright. The cell phone company has no lean or legal interest in my phone. They have no legal right to disable the phone or engage in anti completive practices to lock the phone–that is what their tenuously legal 2 year contract is for.

  • Montana

    [i]the difference is that the mobile phone lock is bbeing used to enforce a contract/license. it only affects the article of manufacture purchased by the consumer. it does not prevent others from offering competiting products as was the intent with lexmark.[/i]

    And that isn’t the case that concerns me. If a provider locks your phone while you have a contract with them, that’s fine. In fact, I wouldn’t be against a law that allowed them to lock the phone and disallowed anyone else from unlocking it until either the contract term expires or you settle the issue by paying the termination fee. But the DMCA is not that law, because it does more than that: If the provider refuses to unlock the phone after your contract term is up or after you have paid your termination fee, it is still a violation of the DMCA to unlock it yourself. After you’ve paid the cost and settled the contract, the phone is yours. The phone company should have no rights to it but that’s just what the DMCA gives them, and that is how it becomes anticompetitive: If my phone company doesn’t want me to switch to a competitor, they can force me to buy a new phone using the DMCA. Artificially tying customers to a particular company should be neither the intent nor the result of any legislation.

  • John S

    But doesn’t the “economic” type argument that the mice were making earlier apply just as well beyond the contract term? That is, one could argue that Cingular producing a phone that can only ever be used with Cingular service provides Cingular with the ability to offer lower cost phones to the consumers since the tied-down phones make it more likely that customers will sign new contracts to avoid having to buy new phones. And supposing that customers still can buy unlocked phones for more money, you can still argue they have a choice if they do not like it.

    I think this sort of activity is narrowing the gap between owning something and renting something. Maybe narrowing the gap isn’t the best way to put it… It’s maybe like eliminating the relevant differences between owning and renting. Eg, you can rent a DVR from many cable companies now, and it would have to be returned if you end the contract. Or, you can buy Tivo for more, and the service for more, and take it with you no matter who provides your cable (supposing there were competition in the cable market, for the sake of argument). This seems to me pretty similar to the phone situation, but the locks on the phones are essentially taking something the customer owns and applying to it properties that ordinarily apply to things you rent.

  • poptones

    If the provider refuses to unlock the phone after your contract term is up or after you have paid your termination fee, it is still a violation of the DMCA to unlock it yourself….If my phone company doesn’t want me to switch to a competitor, they can force me to buy a new phone using the DMCA.

    If your phone company is in violation of your contract you have grounds for a lawsuit. In today’s world there’s a good chance of someone making that into a class action suit to represent others the company may have trated like you.

    If someone steals from you it is still against the law for you to break into their house to steal your stuff back. This is no different.

    I think this sort of activity is narrowing the gap between owning something and renting something.

    It’s really more like redefining. What do you think they were talking about all these years when the talking heads spoke of leading us into a “service based economy?” Things are not owned by us, they are owned through contracts and promises to tithe a portion of our income to corporations and banks. It’s socialism without the government.

    Of course, if I really want a tivo and I don’t want to tithe I can always buy a computer and build my own “personal media server.” And yeah, this new world we are heading into means my “home made and tithe free” tivo probably won’t have access to all the same content as the version blessed by the corporate big brother… so what? A hundred million blogs proves there people want to be heard and will produce “free content” if given the opportunity. Even if 99.999% of those blogs suck that’s still more “channels” of worthwhile content than all the satellite channels offer.

    So you can tithe and be a serf in the corporate kingdom or “own” and live without that particular corporate “culture.” So long as the freedom to choose exists without regulatory coercion or outright legislation against free voices, it’s a completely fair trade. Want free cellphone service? Start a public drive to populate the world with open access wifi hubs and let those wanting to use it buy wireless network handsets.

  • TC

    Very simple: locked phones should be illegal. Think about it for just an instant, and you realize that the locked-in service gambit is not all that different in principle from selling cars that would run only on a specific brand of gasoline — i.e. absurd. Service providers can do so without gimmicks and tricks and ripoffs, just offer good service at a good price.

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