FCC backs consumers in unlocking cellphones

by Edward Wyatt, New York Times

For a decade consumers have been able to keep their cellphone numbers even if they switched their wireless carriers. On Monday, the Obama administration and the Federal Communications Commission said consumers should also be able to switch carriers and keep their actual phones.

 For consumers, being able to take their iPhone or any other type of handset with them when they switch carriers could make it easier to take advantage of lower rates once an initial contract is fulfilled. That might mean more price competition and more choices for cellphone customers.

The administration and the F.C.C., under Julius Genachowski, announced that they will urge Congress to overturn a ruling last year by the Copyright Office of the Library of Congress that made it illegal for consumers to unlock their cellphones, opening the software that restricts most phones from working on another carrier’s network.

Most consumers probably are not even aware that there is a process that would allow them to keep their current phone when they switch from one national carrier to another ‘ but only after they have satisfied their initial service contract. The freedom to keep a phone regardless of the carrier has become a popular cause in technology circles, and an online petition to the White House gained more than 100,000 signatures in a month, prompting a response.

‘If you have paid for a mobile device, and aren’t bound by a service agreement or other obligation, you should be able to use it on another network,’ R. David Edelman, a senior White House adviser for Internet, innovation and policy, wrote in a blog post on the White House Web site.

‘It’s common sense,’ he said, and it raises concerns about consumer choice, competition and innovation.

Without a change, the potential consequences for unauthorized unlocking, under the Digital Millennium Copyright Act, are stiff: a $500,000 fine and five years in prison.

Wireless phone companies say they do not understand what the fuss is about. The big carriers each have policies that allow for phone unlocking on request once a user has fulfilled the initial contract terms. And, the carriers say, there are plenty of places to buy an unlocked phone to be used on a pay-as-you-go basis.

‘We’ll unlock your device if you’ve fulfilled the terms of your service agreement,’ AT&T, one of the largest wireless carriers, said in a statement Monday. ‘And, if you bring an unlocked device that will work on our network, we’ll sell you a SIM card and service.’

The key, therefore, is whether a cellphone designed to operate on one company’s network will operate on another company’s system. Unlike in Europe, cellphone systems in the United States do not all operate using the same technology, meaning a phone from one carrier might not easily transfer to another.

Michael Altschul, a senior vice president of CTIA ‘ The Wireless Association, a trade group representing cellphone companies, said the national wireless carriers only insist on a phone remaining locked for the duration of the service contract so they can recover some of the cost of their subsidy that reduces the purchase price of the phone. Consumers have long been able to buy phones that already are unlocked, but that usually requires paying full price, which is often several times the subsidized price at which carriers offer phones along with a two-year contract.

For example, an unlocked iPhone 5 can be bought from the Apple store for $649; the same phone bought from AT&T costs $199 if the buyer accepts a two-year contract for wireless service.

The ban on unlocking a cellphone became an issue with the passage in 1998 of the copyright act, which among other provisions makes it illegal to circumvent digital protection technology. Unlocking a phone requires altering the software that restricts use of the phone to a certain carrier’s network, and runs afoul of the act.

But until recently, the copyright office had granted an exemption for mobile phones, subject to review every few years. Last year, however, the copyright office did not renew the exemption, prompting protests from the tech community.

The Library of Congress issued a statement Monday saying it agreed with the Obama administration that the issue of whether consumers should be able to unlock their phones ‘has implications for telecommunications policy’ and that it should be reviewed by Congress and the administration.

Because the Library of Congress, and therefore the copyright office, are part of the legislative branch, the White House cannot simply overturn the current ruling. But both the White House and the F.C.C. urged Congress to take up the issue.