Your local mobile phone repair shop might not look like a criminal enterprise, but if the U.S. wireless industry and its allies in the U.S. House have their way, it soon will be.
The issue is whether consumers should have the right to “unlock” phones from a specific wireless carrier’s network. So, for example, if at the end of a two-year service contract with AT&T, you want to move your phone to Sprint, you’ll need to unlock it to do so. Likewise, if you travel internationally with a tethered phone, you’ll pay expensive roaming charges to your “locked” carrier unless you unlock the phone so that it can be used with a local carrier’s SIM.
Phone carriers, for obvious reasons, aren’t fond of unlocking. Manufacturers, meanwhile, view locked phones as limited use products likely to be replaced as soon as consumers switch plans. Thus, as early as 2006, some phone companies began to claim that unlocking phones violated provisions in U.S. copyright law that forbid users from evading technological measures (such as digital rights management for music and video files) that protect copyrighted works.
That argument didn’t get far until October 2012, when the Librarian of Congress, acting under statutory authority, ruled that unlocking was not exempt under the Digital Millennium Copyright Act. In other words, mobile unlocking could be a copyright violation, and what was once a common if legally gray practice was seen as a crime punishable by up to five years in prison and a $500,000 fine.
For individual users, the ruling is more affront than it is threat. Cell phone carriers, after all, have nothing to gain from tossing their customers into jail. But the threat to America’s growing mobile-phone repair and refurbishment industry is much greater. IbisWorld, a market research firm, reported that in 2012 there were 2,455 cellphone repair shops in the U.S. generating $1.1 billion in revenue, with industry revenue forecast to grow 4.9 percent per year to 2017. It’s a green industry, driven by price-conscious and environmentally conscious consumers. Yet without the ability to unlock phones (most American phones are purchased, and retired, locked), millions of phones with usable life would be recycled before their time, or exported for repair, unlocking and sale overseas.
Needless to say, that’s precisely how the wireless carriers and manufacturers would like it. Used phones, unlocked from their networks, are potentially potent competition to revenue models based on two-year contracts and upgrades. Still, as recently as a few days ago, there was hope that a bipartisan bill -- the “Unlocking Consumer Choice and Wireless Competition Act” -- would pass Congress without industry-favored provisions that would restrict the “bulk unlocking” that is essential for the survival of the phone repair industry.
Unfortunately, in advance of a Tuesday vote on the bill, House Judiciary Committee Chairman Bob Goodlatte unilaterally added an industry-supported provision that expressly prohibits “the unlocking of wireless handsets or other wireless devices, for the purpose of bulk re-sale.” Despite a last-minute effort by Silicon Valley Democrats to block the bill, it passed 295-114. Afterwards, Jot Carpenter, the vice president of government affairs for the wireless industry trade group CTIA, released a statement in which he equated the cell phone repair industry with thieves and scam artists who buy subsidized U.S. cell phones to sell overseas. “Except for those engaged in large-scale subsidy arbitrage or fencing stolen devices, this should not be controversial,” it read.
Carpenter’s misleading statement is illuminating in part for indicating just how frightened America’s wireless industry is by the possibility of a vibrant market for used phones, none of which are locked. Whether they succeed in killing that industry is open to question -- the Senate hasn’t scheduled action on the House bill -- but the message that the House has sent to the repair and re-use industry certainly won’t encourage its growth. “We are preaching reduce, reuse and recycle all the way down to kindergarten at this point,” wrote Jim Levine, president of Regency Technologies, a major U.S. electronics repair and recycling company, in a Wednesday e-mail to me. “This bill puts a major dent in the reuse part of the mantra with no good reason whatsoever.”
(Adam Minter is a regular contributor to Bloomberg View based in Shanghai and the author of "Junkyard Planet," a book on the global recycling industry. Follow him on Twitter at @AdamMinter.)
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