Local businesses question laws that prohibit ‘unlocking’ of cell phones - Ahwatukee Foothills News: Money

Local businesses question laws that prohibit ‘unlocking’ of cell phones

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Posted: Thursday, October 3, 2013 6:45 am

“If you can’t modify something you’ve bought, do you really own it?”

That’s the question digital rights advocate and FixtheDMCA.org founder Sina Khanifar is asking.

It’s a question that some cell phone businesses — including a number in the greater Phoenix area — have also struggled to answer since late January.

As of Jan. 26, consumers can no longer “unlock” their mobile devices without permission from their cellular carrier, even if they own the device free and clear — contract or no contract. This came as the result of a change to Section 1201 of the Digital Millennium Copyright Act last October.

“For a carrier to dictate with whom you may use your product, a product that you own outright, is nothing short of a monopoly and should be banned completely,” said Annie Thompson, co-owner of Chandler-based business, unlockmyidevice.com.

But support for a bill currently under review by the House of Representatives, H.R. 1892 or the Unlocking Technology Act, could change the legislation.

Unlocking a phone makes it available to use on any similar network with a different carrier. Carriers like AT&T and T-Mobile are on a GSM network, meaning they use SIM cards (which can be swapped between phones), where Verizon Wireless or Sprint devices work on a CDMA network.

For example, a T-Mobile phone that is locked will only work on the T-Mobile network if the phone was purchased in the U.S. from T-Mobile; but once it is unlocked, a consumer can use it with another GSM carrier like AT&T, use the phone internationally, or with prepaid services that use a SIM card like Wal-Mart’s Family Mobile. A phone with Sprint’s service could be “flashed” or use a network access code to work on another CDMA carrier’s service, like Cricket.

Thompson and her co-owner, Greg Bingaman, support the Unlocking Technology Act and believe that they could branch out the services they offer if the bill passes.

Thompson and Bingaman’s website and business started in February.

“It (the DMCA) renders a high-dollar electronic product that you own completely useless if you want to choose to go with another service provider. That is what should be illegal,” said Thompson.

Prior to the change in the DMCA, consumers could go to third-party businesses or online sources to unlock their device so their phone can work with different carriers, sometimes without the knowledge of the carrier who sold them the phone.

But that exemption put cell phone carriers at risk for financial loss because a consumer could start a contract with a carrier in order to have a new phone without paying full retail price for their phone. For example, a 16 gigabyte Samsung Galaxy S4 is specially advertised at $199.99 with a two-year-service agreement with AT&T and normally the retail value of that same phone is $639.99 at the same carrier without a contract.

This subsidized pricing is standard practice for mobile carriers even though consumers may face a large cancellation fee as a penalty for opting out of a contract early, it’s argued that it wouldn’t cover the carrier’s loss of the phone and service fees, thus allowing the consumer to make a profit by selling their phone for retail value.

Khanifar, who lives in California, started a White House petition titled “Make Unlocking Cell Phones Legal” and accumulated 114,322 signatures after the Jan. 26 change, with 1,676 of the signatories coming from Arizona.

Khanifar made a business out of unlocking phones while an undergraduate in college. He started after unlocking his own U.S. phone when overseas in 2005 to use it on international networks. He turned it into a business, but said he eventually received a cease and desist notification from Motorola for violating section 1201 of the DMCA.

Section 1201 states that, “No person shall circumvent a technological measure that effectively controls access to a work protected under this title,” but unlocking phones was given an exemption to this measure by previous rulings on the DMCA. If a measure is circumvented, it means that the software which controls the way we can access copyrighted works on a device is bypassed.

Since Jan. 26, anyone who violates the Section 1201 ruling could be fined with up to $500,000 and/or imprisoned for up to five years for violating copyright, a felony that Ruth Carter — owner of Carter Law Firm in Phoenix, which practices Intellectual Property cases among others — says most people don’t take seriously.

Arizona Republican Sen. Jeff Flake’s communications director, Bronwyn Chester, said this summer that once the bill is introduced in the Senate, Flake would definitely take a look at it, but for now he hasn’t seen it because it is still in the House of Representatives.

Khanifar says he has also received support from 8th Congressional District representative Trent Franks.

The Unlocking Technology Act is sponsored by U.S. Rep. Zoe Lofgren , D-Calif., and six other co-sponsors. As of June 14 it was referred to the Subcommittee on Courts, Intellectual property, and the Internet in the House.

For more information on Khanifar’s White House petition, visit evtnow.com/5uz.

• Aaron Rop is a senior at the Walter Cronkite School of Journalism and Mass Communication at Arizona State University. He was an intern for the East Valley Tribune this past summer.

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