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Unlocking the Mysteries of Locked Cellphones

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.   Both the U.S. and Canada have mandated wireless number portability, which is designed to allow consumers to switch carriers without being forced to change their phone number.  However, locked cellphones run counter to that policy by requiring consumers to fork out hundreds of dollars on a new phone to make the change.

Unlocking cellphones also raises some interesting legal issues as consumers ask whether the practice of unlocking cellphones is legal.  In certain respects, this is an odd question to even have to ask – no one would ever question whether consumers have the right to tinker with their car or to use the same television if they switch providers from cable to satellite, yet the telecom industry has somehow convinced the public that unlocking their phones – consumers' own property – is wrong.

Indeed, earlier this year a Telus executive boldly claimed that "unlocking a cellphone is copyright infringement. When you buy a handset from a carrier, it has programming on the phone. It's a copyright of the manufacturer."  The Telus position is almost certainly incorrect under current Canadian law, though that could change if the government goes ahead with planned reforms that mirror the law in the United States.

The U.S. situation is far more complicated since they have laws that prohibit picking a digital lock such as a cellphone lock.  Last year, the U.S. created an exemption to allow consumers to legally unlock their cellphones, yet the provision seemingly does not allow a company to offer the service of unlocking cellphones.  In other words, consumers can do it, but they're on their own.  

While the U.S. may face renewed pressure to remove this impediment, new Industry Minister Jim Prentice will confront the issue as he addresses telecom policy reform.  If Canadians are to enjoy the full benefit of competition and the products they purchase, Prentice should use the upcoming spectrum auction to reserve some space that welcomes only "open and interoperable" devices that are not locked to any single carrier and ensure that the law clearly reflect Canadians' right to unlock phones without legal risk.

9 Comments

  1. A couple things
    It is possible to buy cellphones (at full-cost) without a plan; however, I’ve never looked into actually buying a plan without a cellphone. [ link ] is one example, although its not really ‘ready for the public’ yet.

    As to the legality of unlocking cellphones, this in many ways is related to actions such as copy protection circumvention, XBox modding or p2p file-sharing. In general, I think these sorts of actions are eventually going to come down to “Are there any legal ways to use the modified product?”

    1) With a car, its clear that if you alter the transmission, you could still legally drive the car. Hence, modding cars is ok.
    2) With copy protection circumvention, in most cases fair-use would say there are still a number of legal uses for the product (such as DRM’ed music) after circumventing the copy protection. I believe this is ok too.
    3) With XBox mod chips, there may be some fair-use issues, such as backing up games, but really that’s the only legal reason I can think of. Hence, selling mod chips is probably illegal.
    4) p2p file-sharing theoretically has lots of legal uses. YouTube for example, could be distributing its user generated content via a p2p model. In fact, p2p file-sharing is simply a generic transfer protocol, no different from http or ftp. The problem is, of course, that as far as the courts can tell, the only reason anyone downloads a p2p program these days is to share copyrighted music and movies. So in the States the courts are basically out-lawing p2p programs that can’t dispute the above.
    5) Which leaves cellphones, which when unlocked have plenty of legal uses. To go back tot he car analogy, a locked cellphone is like a car you are physically only able to drive on streets x, y and z, but not any others.

  2. Re: A couple things
    @Chris:

    Regarding your Xbox modchip comment, I can’t see your logic there. You can only think of one legal use, so it’s probably illegal? How many legal uses do you have to come up with for the argument to be sufficient? Why isn’t one enough?

    I feel if there is even one legal use, then no blanket law or system should be written that inhibits those as a side-effect. For argument’s sake though, here’s a second legal use: To allow you to play games that you legally purchased in a country other than the one where you legally purchased your game console. DRM always bad, m’kay? DMCA-like laws are also bad, because they artificially support DRM.

  3. Well in the US there is the DMCA which normally protects again this. One of the exemptions to the DMCA is cell phone unlocking. It was determined that locked phones do nothing more than protect a business model. I don’t know if there any laws in Canada which make it legal or illegal to unlock phones.

  4. Unlocked IPhones
    My brother purchased a locked iPhone in the states and had it unlocked. He’s now using it on the Rogers network and he tells me that it works just fine.

  5. Brandon Ma says:

    DVD Players and Continent Coding
    The same argument(s) can be applied to DVD & Blu-Ray players. Legally purchasing a Blu-Ray DVD in a country that has released and being play on another continent should not be deemed as illegal. Only the greedy corporations who own the distribution channels will disagree.

  6. ronny batia says:

    Unlock cellphone
    I bought my phone from fido and Unlocked it with http://www.Freeyourcellphone.com and now I’m using it on Rogers with no problems what so ever.

  7. Nick Guenther says:

    Unlocking illegal?
    I just called rogers (this is two years after this post) and asked for my unlock code. The tech was sympathetic but clueless; he claimed that he thought that unlocking was now actually illegal. My paranoid side wonders if Rogers is training its techs to say that now to stop people from unlocking their phones.

  8. Unlocking is legal 100%
    Hi Nick,

    Unlocking is 100% legal in North America I can say for sure.

    I work at an import cellphone store/ AT&T dealer in Santa Monica, California

    We unlock phones all the time(at least 20 a week)

    Don’t listen to anybody that says it’s illegal,
    it is 100% legal to unlock your phone, and it has been for the past few years. a lot of service reps for networks say no, because they don’t want to lose a customer in case you unlock your phone and move to a different network.

    Bottom line, you can unlock your phone, it’s your right in USA and Canada.

    If your in LA and want to unlock your phone, email me at andybeesla @ gmail.com and come down to our shop, we can do it for you

    or if you want to do it from home.

    I can recommend http://www.FreeYourCellphone.com.

    we have used them many times and there service/price is excellent

    Thought I would share.

    Cheers, mates.

  9. chococream52@gmail.com
    Unlocking is legal now