October 23, 2009 | By Jennifer Granick

Prepaid Providers Seek to Put Locks On Your Phone and Their Hands In Your Pocket

As the deadline nears for a decision from the Copyright Office on EFF's request for a renewal of the 2006 exemption from DMCA liability for handset unlocking, prepaid phone companies have opened a new front in the war on consumer choice with a bill called the Wireless Prepaid Access Device Enforcement Act of 2009. If passed, this legislation would make it a crime to purchase or "handle" a prepaid handset for the purpose of modifying the software that ties it to the network, or to sell the handset outside the U.S.

EFF represents three phone recyclers in the DMCA rulemaking. These businesses take used handsets and, if possible, refurbish and resell them. The used handsets allow people around the globe to afford the benefits of mobile phones, while keeping functional technology out of landfills and the heavy metals they contain out of our water supply. But our clients are thwarted in finding homes for these perfectly good phones if the devices are locked to networks that purchasers do not want or cannot access, or if they cannot sell unfashionably old handsets in other countries.

Moreover, the average mobile phone user wants to know that if she buys a handset and doesn't like her provider, she can switch to a company that gives better service. Customer choice drives quality and innovation. Over 8000 people signed EFF's petition in support of phone exemptions for exactly this reason.

So, who would support a bill to prohibit unlocking? Prepaid providers like TracFone and Virgin Mobile subsidize the cost of the handsets they sell, and hope to make up the difference through monthly service fees. But some "bulk unlockers" buy up all the subsidized handsets they can find, unlock them, and sell them at market rates, pocketing the difference. Both prepaid companies have successfully brought a variety of unfair competition claims against bulk unlockers -- demonstrating that neither this bill nor the DMCA prohibitions that threaten phone recyclers and consumers are required to protect prepaid providers' interests.

With this legislation, the prepaid wireless service companies would push the expense of protecting their business model onto the shoulders of the American taxpayer by making the FBI and the Justice Department investigate and prosecute handset unlocking for them. Moreover, the bill does nothing to distinguish bulk unlocking arbitragers from phone recyclers or from customers who simply want to switch providers or sell their phones. Here's the choice this bill presents: Congress can force taxpayers to pay the cops to help TracFone and Virgin collect their month-to-month contract fees, or Congress can reject the bill and allow the public to keep the right to unlock their mobile phones, switch their providers, and recycle their handsets. In our opinion, this should be an easy decision.

EFF will be watching this bill closely to make sure that we keep prepaid providers' handsets out of landfill, and their hands out of your pocket.

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