My weekly technology law column (Toronto Star version, Ottawa Citizen version, Ynet Hebrew version, BBC version, homepage version) discusses the legal issues surrounding locked cellphones in light of the recent attention focused on the Apple iPhone. The iPhone, like many cellphones in North America, is "locked" to a single carrier. Consumers who want the iPhone must use AT&T since the device contains technical limitations that render it difficult to use on other networks. These limitations are artificial in the sense that there are otherwise no impediments for an iPhone to run on a competing U.S. network such as T-Mobile, a compatible European or Asian network, or on the Rogers network in Canada.
Locked cellphones have become common in North America as carriers claim that they sell "subsidized" phones in return for an exclusive commitment and long-term contract from consumers. While many consumers may like the opportunity to purchase a phone for a fraction of the full retail price, others would presumably prefer the freedom of an "unlocked" cellphone that would allow them to easily switch between carriers. The freedom provided by unlocked cellphones is particularly useful for people who travel, since they can avoid roaming fees by converting their phone into a local phone in most countries by simply inserting a local SIM card. This approach is standard in Europe and Asia, where consumers would not tolerate a market comprised solely of locked cellphones.
While the iPhone may be locked to AT&T, several consumers, including a New Jersey teenager, have uncovered how to unlock their phones. This has unleashed a legal battle pitting companies anxious to offer unlocked versions of the iPhone against AT&T, which has threatened to sue anyone offering unlocking services.
From a policy perspective, it is readily apparent that locked cellphones undermine efforts to encourage greater competition in the marketplace.