I return to blogging; DMCA returns to subjecting mobile device owners to arbitrary copyright prosecution

After a much-needed Christmas break, I will be returning to my occasional blogging here. I suspect this semester will be rather sparse as I will be devoting most of my time to my journal note. However, I do hope to continue writing about other issues in law and tech this semester, if only to provide a mental break from the note.

 

In any event, thanks for stopping by!

 

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After his October confirmation as Chairman of the FCC, Tom Wheeler lost no time pressing Obama administration telecom priorities by pointedly suggesting that if wireless carriers do not adopt more lenient policies toward unlocking customers’ cell phones for use on other networks, the FCC may force them to do so. In October 2012, the Librarian of Congress decided to outlaw unlocking one’s phone for use on a different carrier’s network under the Digital Millennium Copyright Act (DMCA), beginning in January 2013. While the DMCA originally prohibited consumers from unlocking their phones, a later exemption to the law removed phone unlocking from the DMCA’s purview. The Librarian of Congress, who is tasked with renewing the exemption,  has decided instead to let it expire–resulting in DMCA liability for consumers who unlock their phones without permission.

 

Chairman Wheeler’s remarks come less than two months after the Obama administration petitioned the FCC to require carriers to unlock their customers’ phones for them following the termination of their original contract. Note the difference between the DMCA unlocking exemption and the Obama administration’s proposal: under the exemption, users can unlock their own phones without violating the DMCA (though it still might violate their carrier’s contract); under the administration’s proposal, carriers would be forced to unlock their users’ phones for them. Lawmakers on both sides of the aisle praised the administration’s proposal. TalkAndroid breathlessly reported that it would “certainly boost competition, consumer choice, and overall happiness in the mobile device community.”

 

Well, then. Who could possibly be against overall happiness?

 

Unfortunately, the proponents of FCC intervention overlook critical flaws in the administration’s proposal.

First, the FCC may not have authority to demand that carriers unlock their consumers’ phones. The FCC is limited to enforcing mandates set forth by Congress, like promoting competition and establishing technical standards. It is not clear that carriers’ unlocking policies fall within this purview.

 

To support its petition, the administration cited the FCC’s claim of authority to impose an anti-locking requirement of sorts on devices that operated on the “C Block,” a particular block of spectrum being auctioned at the time.

 

The FCC’s claim of authority, however, rested on a rationale that applied only to that particular block: Under 47 U.S.C. § 309(j)(3), the FCC should promote “the development and rapid deployment of new technologies.” Right or wrong, the FCC believed that dedication of the C Block to experimentation, unhindered by device locking practices, would create something of an open sandbox and spur product innovation.

 

That rationale does not apply here for a host of reasons. First, manufacturers already have a sandbox because the very order to which the administration cited has created one. Second, a blanket requirement that all carriers to unlock all cell phones is fundamentally different from creating a limited sandbox. Third, a blanket unlocking requirement in fact hinders innovation because it weakens the incentive for carriers to subsidize devices, resulting in higher prices. Higher prices lead to lower demand, and decreased incentive for manufacturers to innovate. Fourth, if the FCC has power to uproot industry norms by demanding unlocking in the “public interest,” it is difficult to imagine any limiting principle for the FCC’s power to make demands of carriers under threat of revoking their licenses.

 

Moreover, if the FCC had that authority to begin with, Senator Klobuchar’s bill conferring that power on the FCC would be superfluous. If even advocates of the FCC’s role in the phone unlocking debate felt the FCC needed independent authorization to enact those regulations, it seems likely that Chairman Wheeler may face legal hurdles if he tries to adopt rules on unlocking.

 

The second flaw in the administration’s proposal is that the FCC’s action may jeopardize the heavily subsidized prices for new mobile devices that carriers offer with their contracts. Carriers may recoup some of the their cost over the course of the customers’ contracts. But the lengths to which carriers go to ensure that phones remain locked suggest that they also make some money from the customer loyalty that locked phones encourage. Carriers will likely compensate for the money they lose in unlocking phones by reducing their contribution to new phones–causing consumers to pay more.  According to industry analyst Ryan Radia, “[g]iven the FCC’s historically limited understanding of how markets work, unleashing it on the wireless industry is especially unwise.”

 

The third flaw is that FCC involvement would not protect those who wish to unlock their phones on their own, even if they do so long after their contract expires. Those who choose to unlock their own phones rather than request that their carrier do it for them will still be violating the DMCA, and there is nothing the FCC could do to fix that.

 

As my friends at TechFreedom explained in their TechBriefing on unlocking, beyond simply desiring to switch carriers, a user may want to unlock her device to develop or experiment with open source software, update her operating system without waiting for the carrier to push out new software, or connect to another carrier’s network during overseas travel.

 

Congress can, and should, make these things legal by acting to reinstate the exemption permanently, instead of hoping that the FCC will paper over the problem by strong-arming carriers. A congressional solution would restore the rules that prevailed for years until the exemption lapsed in January, under which carriers largely did not concern themselves with the few consumers savvy enough to unlock their own phones–even if it did violate a contract. Those who really wanted to unlock their phones could do so without violating the DMCA. The FCC was spared the costs of enforcing unlocking requirements against carriers, and consumers did not need to worry about footing the bill for carriers to comply with unlocking requirements. One might even say there was overall happiness in the mobile community.

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