Apple Beware: CA Supreme Court Gives Go Ahead For T-Mobile Phone Unlocking Lawsuit

from the folks-in-cupertino-may-be-interested dept

Thu, Oct 11th 2007 3:06pm — Mike Masnick

Just a few days after a class action lawsuit was filed in California against Apple for locking down the iPhone, the California Supreme Court ruled on a different case that may have an impact on the Apple case. It's given the go ahead on a separate lawsuit against T-Mobile for locking its phones and requiring an early termination fee. T-Mobile had argued that the terms of service required that any dispute go to binding arbitration, so that it didn't make sense to take it to the courts. Of course they want binding arbitration because companies almost always win in binding arbitration. The court found that it's perfectly reasonable to take this issue to court. How the courts will actually rule on the issue could make a big difference in the Apple/iPhone case -- as there is the possibility that the courts may find that (in California at least) locking a phone to a single network is not allowed. It may depend on the specific wording of state laws, as the specifics of such a case can get rather technical. To be honest, if a mobile phone operator wants to lock a phone to only their network, and people agree to it in the contract (or agree to an ETF), then that should be a contractual issue. It's a dumb business practice -- as many operators are starting to realize. However, that doesn't necessarily mean it should be illegal.

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Filed Under: california, early termination fees, mobile phones, unlocking
Companies: apple, at&t, t-mobile

12 Comments

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Anonymous Coward, 11 Oct 2007 @ 4:22pm

To be honest, if a mobile phone operator wants to lock a phone to only their network, and people agree to it in the contract (or agree to an ETF), then that should be a contractual issue.

Not all contractual terms should be legal, especially in view of the wildly disproportionate bargaining power between big companies and individual consumers, as well as the pervasive ignorance and general absence of organization which disables them from acting in their own interest.
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Anonymous Coward, 11 Oct 2007 @ 4:45pm

Is it really Apple beware...or AT&T beware?
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glitch, 11 Oct 2007 @ 4:59pm

how about if
the only way to get an iphone is thru AT&T ?

what could the courts do then ?
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who me?, 11 Oct 2007 @ 5:18pm

An out for Apple?
If it's ruled a phone can't legally be locked to a carrier/network, would that mean the phone could be legally used on any compatible carrier's network? Seems Apple, and perhaps the consumer, would benefit more than AT&T.
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Smart Thinking, 11 Oct 2007 @ 5:52pm

Re: An out for Apple?
Actually companies like Apple would benefit from this because then the iPhone is opened up to a larger customer base and the customers benefit because then we have our choice of carriers to buy something like the iPhone on. Remember, Apple makes money off hardware sales and not the operating system itself.

While ATT makes money off the subscribers. But if the subscribers have a choice of where to get the iPhone from, thenit is Apple who in the end comes out on top and the consumer wins because the carriers will have to come with some sort of deal package to win iPhone lovers to their service. Cheaper iPhones sold + more iPhones sold = Apple, and not the individual carriers make $
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Dr.A, 11 Oct 2007 @ 6:29pm

30%
Apple is cashing (from AT&T) on the comunications too ... and maybe just as much as on the hardware...
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Fresh, 11 Oct 2007 @ 7:27pm

Really if the that case wins wouldnt that be bad news for california. AT&T would probably stop selling the iphone there or something ... I dont know its a guess. Plus Apple doesnt do thing to benefit. If they signed a contract to AT&T they must adhere to what their contract says with them or face getting sued by AT&T. so in a way Apple has to kind of help AT&T.
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Pete, 12 Oct 2007 @ 1:33am

I hope the case does win. AT&T will lose out in cali. Now, not knowing the terms of Their Apple's contract with AT&T seems to me like Apple could then sell the phones unlocked in Cali and AT&T would not be able to do anything about it. That portion of the terms may then be invalid in the state. Great for apple and the consumer.
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Shawn Nunley, CISSP, 12 Oct 2007 @ 8:44am

Revenue sharing is the issue
AT&T agreed to partner with Apple, but I believe they had to agree to fork over x% of subscription revenue to Apple. Apple stands to make billions over the course of the contract, but if the phone are unlocked and on a non-AT&T network, Apple loses their share unless they have agreements with the other networks. And, if the phones can roam networks, there's no incentive for the networks to share revenue.

This kind of revenue sharing agreement only makes sense if you can lock the phone to the network.

If the courts unlock the iphones, something else is going to break as well. I hope a ruling 'in the interest of consumers' doesn't actually screw the consumers.
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SteveF, 12 Oct 2007 @ 12:56pm

Two Separate Issues
Maybe I'm missing something, but I see 2 separate issues here. AT&T discounts the price of phones in return for a service contract of 1-2 years. It is like financing part of the price of the new phone. The ETF should pay off the loan, compensate them for the lost revenue that would have paid for the H/W discount. ETFs are often lump sums that feel proportionately larger and more unfair as the contract nears its end, but that is a topic for another discussion. There is nothing basically wrong with the concept of ETF (in spite of some greedy examples).

The second issue is the way Apple wants to lock iPhone users to AT&T, probably due to the service usage kick-back mentioned in other posts. They want their revenue stream, too. In the same way, AT&T and other wireless providers want to lock the hardware they sell to using their service. This is one of the real problems I see with wireless phone service. Wireless providers want to rake in money without having to compete for it so they create hidden debt to lock-in customers.

In some ways this is like the mail-in rebates we have become used to seeing in many retail situations. I would rather see a fair price for the phone which I am then free to connect to any compatible service. Don't try to trick me with an artificially low price. The service provider should also offer better rates for people who are not expecting them to finance part of the cost of the phone.

I should be able to do anything I want with hardware I purchase, but it's not mine until it is paid off (at the end of the service contract that financed it). Why won't Apple unbundle iPhones from specific service providers? Many people would be willing to pay for an open iPhone just because it's an Apple.
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Shawn Nunley, CISSP, 12 Oct 2007 @ 4:06pm

Apple makes money on AT&T service, not just the iP
Apple isn't interested in selling phones as much as they are interested in getting a slice of the multi-billion dollar telecoms revenue the phone generate.

People seem to be missing that point. Apple is selling a revenue generator, not a phone. It's Apple's way of entering the telecoms market. They are getting thousands (not hundreds) of dollars per phone sold. Get it?

That model breaks if the phones are free (unlocked) to use any carrier.
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sammy colbert, 17 Oct 2007 @ 8:51pm

Why don't people just buy another phone? I mean if you don't like Apple's deal with the iPhone get another phone and pick another carrier. While I don't agree with Apple's policies as of late (and we though Microsoft was bad), I don't understand why consumers thing Apple owes them something. You don't have to buy an iPhone and you don't need to do business with Apple.
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