Up Is Down, Day Is Night, And Keeping Mobile Phones Locked Increases Consumer Choice?

from the let's-try-this-again dept

Mon, Jun 24th 2013 2:53pm — Mike Masnick

A guy named Michael Moroney has taken to Roll Call, a popular publication for politicians, to argue that we don't need to allow mobile phone unlocking, as is currently being debated in Congress, after over 100,000 people signed a petition in favor of it and the White House came out supporting such unlocking rights as well. I'm not sure where Moroney got his information, but it's almost entirely factually incorrect, which is quite incredible. Derek Khanna has a very thorough point-by-point debunking, but here's a shorter look at some of Moroney's statements that really don't make any sense. After reviewing that background, along with one of the bills that has been introduced, Moroney jumps into the meat of his argument:

Despite the best of intentions, the very innovation that some members of Congress, the White House and presumably consumers who signed the petition claim they want to protect would actually be hampered by allowing consumers and third parties to unlock their cellphones. The DMCA is supposed to prevent digital piracy by making it illegal to disable digital rights management software, and it applies to the device locks that carriers put on cellphones — primarily to prevent phones they sell from being used on other carrier networks.

First off, it's not intentional that the DMCA applies to the locks on mobile phones. Basically, the phone providers recognized the law provided them with a backdoor way of locking in customers, and used it. The intention of the DMCA was to stop copyright infringement, not phone locking. That it was eventually used that way is because the authors of section 1201, the anti-circumvention provision of the DMCA, drafted it terribly, opening up lots of opportunities for tech companies -- including ink cartridge makers, garage door openers, and mobile phone makers -- to abuse the law not to stop copyright infringement, but to be anti-competitive.

When tech companies spend billions of dollars on research and development, they have to recoup those costs and make a profit to stay on the cutting edge of innovation.

One of these things has nothing to do with the other. Just because a phone maker needs to recoup its money on R&D has nothing to do with whether or not it should have the right to forbid unlocking by using a twisted interpretation of copyright law. There are lots of ways to recoup your investment, such as by selling a product at a reasonable price above what you made it for.

One of the ways they do this is by entering exclusive agreements with certain wireless carriers. AT&T, for example, dominated the smartphone market for years because of its exclusive contract to distribute Apple’s iPhone in the United States. AT&T paid Apple an exceptionally high subsidy on top of the consumer purchase prices, but the company made quite a return on its investment. In subsidizing more expensive phones, AT&T could sell more expensive data plans to its customers.

Phone subsidies are really a red herring here. Even with phone unlocking, mobile carriers can (and do!) offer phone subsidies. In the meantime, carriers like T-Mobile have already realized phone subsidies are bad, and actually mean consumers pay more in the long run. But, again, this has nothing to do with unlocking. Most subsidies are held in place via contractual agreements and early termination fees that have nothing to do with phone unlocking.

Now that cellphone manufactures and cellphone carriers have more protection for their intellectual property, they can recoup their research-and-development investment more quickly and, hence, spend more on developing new technologies in the future. It also ensures that most major carriers will continue to offer subsidized phones to their customers — increasing consumer choice.

Except, this isn't true. None of this is about "protecting intellectual property." It's about trying to keep people from switching carriers when their contracts are up. And for all his talk about "increasing consumer choice," that's simply incorrect. Being able to unlock your phone, and go to a different provider once there's no contract, clearly increases consumer choice. If someone doesn't want to buy a new phone, but wants to switch carriers, unlocking means they don't have to spend on a costly new phone, but can continue to use their existing phone.

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Filed Under: 1201, anti-circumvention, contracts, copyright, dmca, early termination fees, locking, michael moroney, mobile phones

30 Comments

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Richard (profile), 24 Jun 2013 @ 2:59pm

Nominative determinism
Nominative determinism Michael Moroney
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crade (profile), 24 Jun 2013 @ 3:11pm

"First off, it's not intentional that the DMCA applies to the locks on mobile phones."

They want people to think it's unintentional at least. The anti-circumvention clause was intentionally extended to cover activity unrelated to copyright infringment for this exact purpose. If they really didn't want the DMCA to apply to these sort of situations, it wouldn't.
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Jamie Anderson, 24 Jun 2013 @ 3:12pm

Recouping R&D investment
Moroney somehow seems to think that unlocking a phone and taking it between carriers will somehow cause phone manufacturers to sell fewer phones. I completely fail to see how he comes up with this.

If someone buys a phone on network A, then unlocks it and moves to network B, then the maker of that phone has still made a sale. Sure, you can argue that the consumer then doesn't have to buy a phone for network B, but chances are that they wouldn't have moved if they couldn't take their existing phone with them.

It just goes to show that no matter how much common sense you can see on a debate, there's always someone who will try and spin the truth into something completely nonsensical because of profits.
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crade (profile), 24 Jun 2013 @ 3:19pm

Re: Recouping R&D investment
He's saying having your phone locked to particular carriers helps subsidize the phone cost.

Expect I'm sure he's aware they already have contracts to lock people to carriers. The only time blocking people from unlocking phones is an advantage for them is if you want to travel to asia or something they can keep you from using a cheap local carrier while you are there, and when your contract is finally up, they can make it harder for you to choose a new carrier without buying a new phone.
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That Anonymous Coward (profile), 24 Jun 2013 @ 3:26pm

"primarily to prevent phones they sell from being used on other carrier networks."

Because competition is bad.
Because allowing consumers to own what they purchase is wrong.

The carriers have contracts that make sure if you get a phone on 1 carrier and move to another they get back their cash if you break the contract.

So this is just extra punishment?
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Chris Brand, 24 Jun 2013 @ 3:31pm

Counterpoint
You bought it and own it outright, so you should obviously be able to legally remove any locks that somebody else put on it.

It really doesn't need a whole lot of justification, because it's blindingly obvious.
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Anonymous Coward, 24 Jun 2013 @ 3:40pm

Roll Call
Of coarse he had to write this in Roll Call, because lying to congress is a crime.
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Anonymous Coward, 24 Jun 2013 @ 3:43pm

I think the telcos and cable companies are feeling the pressure because the Verizon guy just came out saying how wonderful broadband is in the US LoL

http://www.nytimes.com/2013/06/21/opinion/how-the-us-got-broadband-right.html?_r=0
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Anonymous Coward, 24 Jun 2013 @ 3:46pm

Re: Recouping R&D investment
Well, if you want to see how full of it he really is just look at Europe that disallows blocking or even Brazil.

Don't see companies complaining that they are selling less in those places.
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Big Al, 24 Jun 2013 @ 4:12pm

No problem in Australia
Interestingly, the last three phones I've had on a contract (in Australia) have been unlocked.
This has been very useful as a couple of times I've gone overseas and picked up a local SIM card for use while I was away, avoiding the horrendous roaming charges ($2.00/Mb, $5.00 per minute).
I presume that the carriers know that if I'm still paying the monthly fee then I'm paying off the phone. If I'm not using their service then they are making even more money off me because they're not supplying a connection.
(Disclaimer - contracts here usually include the phone, the connection and a certain value of calls and texts for a fixed monthly payment over a one or two year contract. Early termination costs apply).
The only locked phones I've seen here are the cheap pre-paid phones.
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Anonymous Coward, 24 Jun 2013 @ 4:25pm

https://en.wikipedia.org/wiki/Open_Source_Ecology

US companies are really testing peoples patience, maybe what is needed is an Open Source Ecology for telecommunications, then when thousands of little guys start producing their own solutions those big boys understand what trying to abuse granted monopolies leads to.

Also people you got more power than you was lead to believe, did you know that you can produce biopolymers in your kitchen?

Youtube: How to Turn Milk into Stone! (AJ this one if for ya)

Milk is great, you can make also make glue (Youtube: Make Your Own Glue From Skim Milk - Mr. Wizard's Supermarket Science) and paint (Youtube: Homemade Milk Paint) with it.

Those things were used to make buttons, jewelry and even pool balls.

Why that is important or relevant?

Simple, you have an frigging universe of knowledge out there, thousands of years worth of know how to make stuff, you can find just about how to produce anything including how to produce your own telecomunications network and hardware, doubt?

engineeringforchange: Open-source cell phone network could cut costs to $2 per month

OpenBTS

Just got laid down from your job and you are an engineer and need to find some income source?
Go open source, help design and produce new networks and protocols with a global R&D team that you can join today and rip the benefits for yourself, offering services from, installation of open source cellphone towers equipment and maintenance, help build the future.

Frak me I am sounding like a salesperson already.

Companies will not hire you, help others build their own networks where they will need your services and in the process stick it to the man.

Need the phone hardware?

http://faircompanies.com/blogs/view/making-your-own-open-source-android-smartphone/
ht tps://en.wikipedia.org/wiki/TuxPhone

Build a local factory to churn out smartphones for everyone in your area.

Don't want to produce the phones, want to get some of the sleek ones out there but can't afford it?
Use micro financing to emulate a subsided phone plan that will be cheaper or create a micro financing scheme for the locals in your area.

How long will people take the abuse before they do something about it?

I tell ya, I am long done complaining about those things, now I am a maker, screw those closet companies, I am going open source baby.
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skinny poppy, 24 Jun 2013 @ 5:19pm

The phones - for the most part in the US - are locked based on the chipsets/frequencies/technologies the carrier uses, IIRC. So, you're pretty much stuck with Sprint, Verizon, or whatever if you're not using GSM or a "world phone".

This business model is as stupid as it gets. Like the folks on Capitol Hill.
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Anonymous Coward, 24 Jun 2013 @ 5:45pm

Re:
Good thing that some very insteresting things are coming up in the WiFi world.

http://techcrunch.com/2012/05/21/open-garden-lets-you-crowdsource-your-mobile-connectivity /
https://en.wikipedia.org/wiki/Open_Garden
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Anonymous Coward, 24 Jun 2013 @ 5:46pm

Let's get the obvious joke out of the way - this guy is a moron(ey).
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Shmerl, 24 Jun 2013 @ 6:03pm

The intention of the DMCA was to stop copyright infringement

No, it was always to protect DRM, not to prevent infringement, since as known infringement isn't stopped neither by DRM, nor by DMCA fences around it. However they have interest in DRM precisely for such cases - i.e. control over the usage of technologies.
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Jamie Anderson, 24 Jun 2013 @ 7:11pm

Re: Re: Recouping R&D investment
I'm from New Zealand, and the situation here is not very different from Europe. We don't have any regulations around the locking of phones to carriers, but it's so rare that it's not worth talking about.

We do have carrier subsidies if you take out a long-term contract, but these are completely optional and the majority of phones are bought outright. The only technical barrier to moving any phone to any network is that one of our networks is 3G-only and uses different frequencies to the other two 2G/3G networks. But if the phones support the right frequencies, there's no trouble switching providers if you want.
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Anonymous Coward, 24 Jun 2013 @ 8:36pm

two things to do here.
a) stop letting idiots get hold of and then put out ridiculous bits of information
b) even more important stop letting idiots (in Congress) write laws that are not fit for purpose, half-arsed wastes of paper!
i appreciate that it may mean they have to stay an extra half hour or put in an extra day occasionally, but that's what they are paid for. if you cant do it right, dont do it!!
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techflaws (profile), 24 Jun 2013 @ 10:30pm

Re: Nominative determinism
Who is Michael Moron ey?
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PaulT (profile), 24 Jun 2013 @ 10:41pm

Re: Re: Recouping R&D investment
Actually, locking is very much allowed in Europe (for example, my current iPhone is locked to Vodafone). However, there's no legal reason that I can't get the phones unlocked and most carriers will unlock the phone for you as long as you've satisfied the contract (my last phone was unlocked by Vodafone for me when I wanted to sell it following my previous contract).

The issue in the US isn't so much that locking occurs, it's that the DMCA blocks people from utilising the property they've bought after they've completed their contract terms. If Vodafone had refused to unlock my last phone for me, they couldn't have stopped me from taking it to a 3rd party and doing it perfectly legally - a right removed from Americans. As long as I satisfied my contract, Vodafone had no say, and if I had violated the contract then it would have been contract law I was breaking, not some dumbass law controlling what I can do with my own property.
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Anonymous Coward, 25 Jun 2013 @ 4:21am

If software is copyrighted protected - As Masnick claims
Masnick is always claiming when arguing against Software patents that software has sufficient protections under copyright law.

Now he does not like the fact that copyright law is being applied to software ??? So does that mean you Mr Masnick does not like protections on software that are patent based, but you also don't like protections based on copyright.

I guess you would be happy with no protections at all !!!

But if you continuously argue that software is protected by copyright law, therefore should not have patent protections. Then you have to accept that the laws relating to copyright should therefore apply to software.

Reading 17 USC 1201 it does not appear 'badly written', I guess you mean by that is you don't agree with it, but it appear quite well written and thought out, these are not "Loopholes" they are using, they are using the law as defined and it's intent.
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Anonymous Coward, 25 Jun 2013 @ 4:25am

Up Is Down, Day Is Night
Well if you live on the second floor of a building, and I live on the 15th floor, the 10th floor is down for me, but up for you.

If you live on the other side of the earth, your up is my down, plus your night is my day, it's all relative..

So yes, up is down and day is night.. live with it.
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Niall (profile), 25 Jun 2013 @ 5:32am

Re: Roll Call
Everyone else seems to be getting away with it.

Seems the real 'crime' in American political circles is telling the truth, especially to the public!
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Niall (profile), 25 Jun 2013 @ 5:41am

Re: If software is copyrighted protected - As Masnick claims
"Copyright over-maximalists are always arguing for Software patents when the whole idea is a load of tosh.

Now they do not like the fact that people are pusing back against their blatant attempt to force copyright law to affect non-copyright issues. So does that mean you copyright over-maximaliss do not like Constitutional protections on physical products that people own, but you also hate freedom and Mom's Apple Pie?

I guess you would be happy with no-one able to own anything, physical or digital, at all !!!

But if you continuously argue that property whargarble patents derp copyright...

Reading 17 USC 1201 (as copywrong maximalists cannot do) it does appear not only badly written and thought out by vicious copyright baboons, these are definitelyusing pre-planned "Loopholes" the maximalists are using, they are using the law as they bought it and as they are twisting it, even when they aren't pretending it's even more limiting than it is."

There, fixed it for you. It still scores a D- for coherency though.
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Niall (profile), 25 Jun 2013 @ 5:42am

Re: Up Is Down, Day Is Night
Well, I guess then we can all agree that what seems stupid to us with decent IQs seems intelligent to a Moron...
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Anonymous Coward, 25 Jun 2013 @ 7:28am

Go to your local ATT store. Say, "I want to buy a Samsung Galaxy S4 32GB (because they're currently the only US carrier that has it) at full price and use it on your GoPhone network." They won't sell you the phone without a standard, postpaid plan--which is marked up to recover their 2-yr plan discount. Their unlocking rules say you must keep service (postpaid) for at least two months before they'll unlock your phone. Even then, they may say, "We don't unlock new models for at least six months after release." Irony is, you can buy the phone on a 2-yr contract, convince them to unlock it ("I'm going to Cambodia next month"), pay the $325 ETF and come out no worse off than if they would let you do what you asked in the first place.

How is that not obviously a game to hassle customers?

Personally, I think Moroney has his head acrobatically positioned at the outbound end of his digestive system.
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Anonymous Coward, 25 Jun 2013 @ 7:50am

Please feel free to weigh in, but is it not now the case that all (or virtually all) of the "majors" unlock phones upon request when conditions specified in their service contracts have been met? Likewise, is it not now the case that all (or virtually all) of the "majors" are now either creating "no-contract" plans or teaming with third parties doing so?

Since market forces seem to be driving in the "unlock" direction, do we need to embrace in law that which is already becoming the norm?

BTW, I have no stake in any cellular service company or any hardware provider, so no "shilling" here is intended. Mine is just an observation that the DMCA may not regarding this circumstance be as bad as many seem inclined to believe.
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John Fenderson (profile), 25 Jun 2013 @ 9:37am

Re: If software is copyrighted protected - As Masnick claims
Reading 17 USC 1201 it does not appear 'badly written'

If it's not badly written, then why are there so many instances where it's being used to prevent legal activities that don't have any connection to copyright issues at all?
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Anonymous Coward, 25 Jun 2013 @ 10:13am

Re: Up Is Down, Day Is Night
Wow, darryl. You failing English is one thing; now you want to fail logic, too?

How about you get your ass kicked, because we find it acceptable and you don't?
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Loki, 25 Jun 2013 @ 10:51am

When tech companies spend billions of dollars on research and development, they have to recoup those costs and make a profit to stay on the cutting edge of innovation.

First off, you aren't, and never have been, guaranteed the right to recoup cost and make a profit. You are only guaranteed the opportunity. If you fail to provide an effective business model you go out of business. That's the way it is suppose to work, not to have the government artificially prop up or protect you business.

Secondly, and perhaps more importantly, where in the hell does this "make profits to stay on the cutting edge of innovation" idea come from??? The vast majority of companies, once attaining market dominance, only innovate as necessary, or purchase innovative technologies from companies/individuals who continue to do so.

Perhaps he could read Bill Gates' book The Road Less Traveled, and see how IBM stagnation at innovation (as just one of numerous examples) allowed Gates and company a foothold in the door (giving their software to IBM for free, then licensing it to everyone who wanted to be "IBM compatible" (since IBM was the 800 pound Gorilla).

Or how about Microsoft itself, and how it stopped innovating IE when it had like 95% of the market share, and only started "innovating" again (mostly copying/modifying Firefox's improvements) once Firefox came along and started kicking their ass.

If I had unlimited time, I could list out hundreds of examples of how excessive profits actually tend to hinder cutting edge innovation.
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julian, 26 Jun 2013 @ 8:16am

sim card
with CDMA phones true, but now with global sim cards coming out more and more those people would be fine if they did that right?
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