Cellphone Unlocking Ban Overturned, Now Legal

John Lister's picture

President Obama is expected to sign a bill in the coming weeks to make it legal to unlock cellphones. That may give users more choice about the cellphone network they use to get service, though there will still be technical restrictions.

Most new cellphones are sold in a 'locked' state, meaning that they can only run on a particular cellphone network carrier. Usually that's because the network sells the handset at a reduced cost, hoping to make money back from associated monthly service fees and call charges. Unlocking a cellphone effectively modifies the phone's software, and thus allows cellphone users to choose different service providers.

Unlocking Cellphone Ban a Quirk of Copyright Law

The practice of unlocking without carrier consent has technically been illegal for the past 18 months. That's because a technicality means it comes under the Digital Millennium Copyright Act (DMCA), a law more commonly associated with actions such as removing copy protection measures on commercial DVDs.

The Librarian of Congress, a government appointee, has the right to make exemptions to the DMCA. Until the start of last year, phone unlocking was among the exemptions. That changed in a ruling many observers have blamed on lobbying from the cellphone industry.

Now, in a rare intervention, Congress has agreed to pass a law that specifically brings back the exemption and makes unlocking a cellphone legal. The law will remain in place until the next review by the Librarian of Congress, expected late next year. Political insiders believe that even if the Librarian of Congress does remove the exemption, politicians will simply vote to restore it again.

The new law also makes clear that operating as a "bulk unlocker" is entirely legal. A bulk unlocker is any business that charges nominal fees to unlock the phones of cellphone customers. Previously, bulk unlocking was a gray area of the law.

Cellphone Unlocking Still Has Restrictions

In principle, then, users can now unlock a phone and use it on whichever network offers the best deal. In practice, users still face some restrictions.

Firstly, any minimum contract terms still apply. While users can unlock their phone at any time, they must still pay their monthly service charge for the duration of the contract, even if they switch service and use a different carrier.

Secondly, technical restrictions will limit choice. For example, many phones sold on AT&T or T-Mobile won't work on the Verizon and Sprint networks because of different technology used to connect the phones to the networks. Meanwhile, phones that support high-speed 4G services may not get the full benefit of increased speeds on all networks. That's because 4G services may not be available in varying parts of the country, depending on which provider is used.

What's Your Opinion?

Have you unlocked your phone in order to use another cellphone provider? Do you believe you have the right to use a phone on any compatible network or do you believe that carriers should be allowed to impose restrictions? Would the ability to buy a phone on one network but use it on another affect your choice of handset?

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PayPaul's picture

I can't imagine that actual cost of manufacture and shipping of smartphones comes anywhere near the stated full prices of these devices. $750 is way out of line given the prices of far more sophisticated devices with greater functionality. It would be very helpful to know the true cost of smartphones. The so called discount offered by the cellular carriers is still not good enough. Even if one can unlock a new smartphone the prices of them far outweigh the reputed benefits of unlocking. To truly achieve a financial gain from this, a much older smartphone would be a better choice. However, who really wants to walk around with a smartphone that's "ancient" in today's tech arena.

al's picture

Cost isn't just manufacture and shipping. A lot goes into design. So the full cost is unknown until the design cost has been accounted for. We will almost always be talking about a new product here, which has just been released. It's a huge gamble because we live in an age of huge trend patterns which can suddenly turn. The product might sell in tens of millions in which case design cost is neglegable, or in the tens of thousands in which case the cost might indeed end up to be $750 [including the sales and marketing investments] and therefore be a loss maker. If we are talking about average cost, fair enough, almost certainly over-priced at $750, but so are many things overpriced....depends on what the profit targets are set at.

jboursales_2964's picture

I happen to know for sure that those high prices are correct because of my relationship with an executive of one of the carriers.