How 114,000 People Fought to Legalize Cellphone Unlocking
The Most Important Change in Mobile Policy in Nine Years
As of 2003, consumers have had the right to change providers while keeping their wireless number. Since 2007, consumers have also had the right to “unlock” their wireless device. But an agency recently made a bureaucratic ruling eliminating consumers’ right to use their own device after their contract expires.
This Congress is now forced to act to protect the rights of the owners of wireless phones to use them as they choose.
Unlocking is a simple technique where a patch is installed on the phone or a code is entered to allow the phone to use SIM cards from a different carrier. This technology, while lawful in other countries, and acknowledged by market experts as beneficial, is now illegal for Americans to use. This ruling hurts consumers, hinders competition and stifles innovation and makes millions of average Americans felons punishable by 5 years in prison and a $500,000 fine. Overall, it’s a classic example of crony-capitalism, where a few market dominant companies, each with significant lobbying assets (two of which are in top 10 in lobbying $ in DC), succeeded in changing the “law” for their own pecuniary benefit, thereby creating higher barriers to entry for their competitors.
Why innovate when you can change the rules of the game to ensure that your competitors can’t compete against you?
At the time, even the Commerce Department had recommended in favor of keeping unlocking as lawful because this free market technology benefits businesses and the consumer. But the regulator decided in favor of the mobile carriers, and decided to ban this useful and widely used technology. And that regulator was the Librarian of Congress.
Digital Generation Responds
When the Librarian’s ruling made unlocking illegal, the digital generation responded (both young and old alike) and created a White House petition on this issue. Sina Khanifar and I advocated heavily on this issue. Within a month, 114,000 people signed the White House petition (created by Sina) to reverse this incredible ruling. It was the first petition to meet the new 100,000 threshold for a response.
Within days there was swift action. On February 28, 2013, the FCC announced an investigation and on March 4, 2013, the White House formally reversed their position and endorsed unlocking. FCC Commissioner Ajit Pai (Republican appointment) become a particularly outspoken advocate of restoring the free market to the mobile industry, calling for a simple solution: permanently legalizing cellphone unlocking for businesses to sell and consumers to use – exactly the premise of our mass campaign:
So what’s the right response? To borrow the tag line from AT&T’s new commercials,:“It’s not complicated.” Let’s go back to the free market. Let’s allow contract law — not copyright or criminal law — to govern the relationship between consumers and wireless carriers. . . in a free market, once a consumer’s contract expires, she should be able to take her device to another carrier. The government shouldn’t tilt the scales with legal penalties; it should leave the mobile marketplace alone.
It’s a basic issue of property rights, if you own your own phone, you should be able to install your own software, call whomever you choose, and pop out the SIM card and switch carriers without permission from any bureaucrat.
As Ajit has mentioned, “it’s absurd that we’re even discussing this issue. How did we get to the point where a consumer could be criminally prosecuted for unlocking his cellphone?”
Idea + Movement + Effort = Legislation
The White House and FCC’s endorsement cascaded into support from outside groups on the left and right including Freedomworks, R Street, Tea Party Nation, Young Americans for Liberty, National College Republicans, Public Knowledge, Electronic Freedom Foundation, Consumers Advocacy, the Competitive Carriers Association, Free Press and scholars from Mercatus and the Competitive Enterprise Institute.
And, eventually, Congress acted.
Within a month of the Librarian’s decision going into effect, no group could be found that was publicly in favor of the ruling, even those that lobbied for it; it had become politically toxic. Rarely has a mass movement caused such a substantial change in policy so quickly and rarely has a mass movement had such bipartisan support. Multiple bills were introduced and on August 1st, the House Judiciary Committee approved Chairman Goodlatte’s (H.R. 1123) unlocking legislation.
This legislation, as amended, is a win for innovators, the free market and the consumer. Overall, cellphone unlocking is an important issue because a free society should not require its citizens to petition their government to allow access to technologies that are ordinary and commonplace. And unlocking is truly commonplace, a technology that exists around the world. A free society should not ban technologies unless there is a truly overwhelming and compelling governmental interest.
As I mentioned in my Judiciary Committee testimony:
“Banning technologies is an extreme step by government, a truly incredible reach of Federal power. . . I would petition this body to be [careful in delegating] the authority of what technologies to ban to a quasi-regulatory agent when, in these and many other circumstances, there is no compelling governmental interest.”
The unlocking campaign represents the continuation of digital activism and reform that was engaged in the 2012 SOPA/PIPA protest. The support of 114,000 petition signatories which drove this campaign demonstrates that the American people will respond to real reforms that are pro-market, pro-innovation, pro-liberty, pro-consumer and pro-internet freedom.
This critical issue affects millions of Americans and ultimately the future of the wireless market, hence why many have called fixing this issue “the most important change in mobile policy in nine years.” This legislation’s final passage will restore competition to the mobile market, leading to more innovation and lower prices for consumers.
Impact of Banning Unlocking Upon the Market:
The prohibition against unlocking has already hurt the market. Here is an anecdote from The Atlantic – The Law Against Unlocking Cellphones Is Anti-Consumer, Anti-Business, and Anti-Common Sense:
I started unlocking phones after a typical entrepreneurial experience: I had a problem and was forced to find a solution. I’d brought a cell phone from California to use while attending college in the UK, but quickly discovered that it wouldn’t work with any British cell networks. The phone was locked. Strapped for cash and unable to pay for a new phone, I figured out how to change the Motorola firmware to unlock the device.Realizing that others were likely having the same problem, I worked with a programmer to create an application that allowed people to quickly and easily unlock their Motorola phones and use them with any carrier. After my first year of college ended in summer of 2004, I launched a website (Cell-Unlock.com) selling the software. It was a make-or-break moment for me personally. I was in a major financial crunch.
At first sales were slow, but during my second year at college Motorola released the extremely popular RAZR V3, and my website became a success.
It was then that I received Motorola’s cease and desist letter. It claimed that I was in violation of the DMCA, a crime punishable by up to $500,000 in fines and five years in jail per offense. I was 20 years old and terrified; my immediate reaction was to shut down the business.”
And Kyle Wiens (the CEO of Ifixit):
“My business, iFixit, is a free, open-source repair manual for everything, including cell phones. The anti-circumvention measures of the DMCA has a material impact on our business, preventing us from helping people start businesses to unlock and repurpose cell phones. . .Please, protect consumer freedom. Fix this blatant misuse of copyright law by legalizing cell phone unlocking.”
This prohibition has inhibited the development of new market models in the mobile sector. From my testimony to the House Judiciary Committee:
“Republic Wireless offers a competitive new product for consumers, unlimited voice, text, internet and data for only $19 a month. Their secret? Their service “off-loads” calls, text and data to wireless when the phone is in a wireless area and it uses Sprint when it is not in a wireless area. This market model undercuts the market by 60-80% and has the added benefit of being an innovative part of the solution to the spectrum crunch (off-loading will be a critical part in weathering the continuing explosion in consumers’ data usage).
Their problem? They are a newer market participant and don’t have the relationships with the handset providers necessary to offer the latest and greatest device technologies with their service. In an unlocking world, a consumer could bring their old iPhone, Samsung Galaxy, Blackberry Q10, Nokia 420 over to Republic Wireless and be on a $19 per month all you can use plan.
According to Greg Rogers, Deputy General Counsel of Republic Wireless’s parent company:
‘If consumers can legally unlock their phone, and if businesses can legally offer services for phone unlocking, both consumers and companies like ours will benefit from the competitive forces such laws would unleash — particularly if it is done on a permanent basis. Allowing customers to bring their favorite devices to their chosen provider after their contract has expired will spur more competition in the wireless market and boost market models like ours as a result. Our goal is to be able to offer our service on a level playing field and let the consumer decide what service works best for them.’”
Wait, the Librarian Has Banned a Whole Bunch of Technologies?
The general public deserves better than cronyism making millions of Americans felons for using beneficial technologies – they deserve the free market.
The Librarian of Congress’s decisions effect nearly every American in the United States. Unlocking is not the only technology that Congress has allowed the Librarian of Congress to ban with no substantive review. If legislation is to address the unlocking issue, then Congress has an obligation to assess other beneficial technologies that are banned as well. Perhaps there are reasons for these technologies to be banned, but those conversations should be on the record. It is well past time for Congress to have an evaluation on whether the technologies that the Librarian bans are so extreme and dangerous that the only acceptable solution is to ban them.
So far Congress has never had a hearing on the record on why these technologies are banned, and if that’s somehow a desirable outcome.
Among the effected technologies:
· Read-aloud functionality that would help over 21.2 million blind Americans is illegal.
· Close-captioning functionality that would help over 40 million deaf Americans is illegal.
· Technology to allow Americans to back-up DVD/Blu-Rays they have legally purchased to their PC.
· Technology to allow Americans with Linux (Ubuntu) computers to watch legally purchased DVD/Blu-Rays.
· Jailbreaking (rooting) phones and tablets. There are an estimated 23 million jailbroken iOS devices.
All technologies that do not have an infringing purpose, and have nothing to do with copyright, should be made permanently lawful.
A Dystopian Science Fiction Novel:
Congress can’t look the other way when they delegate Orwellian power on which technologies to ban to the “Librarian of Congress.” Such a dereliction of duty is akin to a scenario from a dystopian science fiction novel. In sum, it is a fundamental violation of our natural rights: society never consented to give up their right to use technology that don’t harm other people.
Banning technologies is an extreme step by government, a truly incredible reach of Federal power. Decisions on what technologies to ban should be made in public, by Congress, with all sides represented, and with the onus on the other side to prove that a technology is so harmful that the only public policy solution is to make using that technology a federal crime. Of course, that is not what happened here.
These laws, as currently implemented, serve to protect the interests of a few companies and create and maintain barriers to entry, and thereby distort the market, inhibit innovation and hurt the consumer.
Special interest lobby groups made this beneficial technology (unlocking) illegal, and a well-known DC ploy is to wait out the clock, waiting for the impetus for action to fade away; we are witnessing that now. But the 114,000 people who signed the White House petition still demand action and the recent filing by the NTIA to the FCC proved that the Administration is still engaged in this fight.
The Short Term Solution (H.R. 1123):
Chairman Goodlatte’s legislation (H.R. 1123) addresses the short term problems affiliated with unlocking alone, but then allows the Librarian to rule once again, thereby placing the onus on Congress to permanently legalize unlocking. Congress ought to vote without delay on H.R. 1123, and then get to work on the permanent solution.
Merely allowing the Librarian of Congress to rule all over again, as H.R. 1123 does, is not an acceptable permanent solution.
The Librarian of Congress issued a statement as a response to the White House petition, which appears to doubles down on his ruling to ban unlocking. He notes that his decision to ban unlocking is a decision limited by specific statutory criteria rather than a broad public policy analysis:
“The rulemaking is a technical, legal proceeding and involves a lengthy public process. It requires the Librarian of Congress and the Register of Copyrights to consider exemptions to the prohibitions on circumvention, based on a factual record developed by the proponents and other interested parties. The officials must consider whether the evidence establishes a need for the exemption based on several statutory factors . . . As designed by Congress, the rulemaking serves a very important function, but it was not intended to be a substitute for deliberations of broader public policy.”
The White House further explained that this Librarian of Congress’s method for temporary exceptions “is a rigid and imperfect fit for this telecommunications issue.”
The Librarian of Congress has specific statutory mandates on what to assess in whether to allow certain technologies. Congress, on the other hand, can take a holistic and thoughtful view on this issue. The Librarian of Congress’s mandate is to ban these technology by default unless there is a vital market need for the technology – therefore continuing this system will predictably lead to future problems.
Unlocking should be resolved by Congress, not punted to a pseudo Legislative/Executive regulatory agent that manages the nation’s preeminent library.
The Need for Legal Certainty:
Venture capitalists need certainty before investing. Entrepreneurs need certainty before they leave their current job or drop out of college (as Mark Zuckerberg, Bill Gates, and Steve Jobs did) and launch their next venture.
Imagine, you are an entrepreneur and you are developing this unlocking technology. You meet with angel funders and venture capitalists and you explain your product, your targeted demographic, your team and your monetization strategy. The potential funders then ask:
· “All that seems great, but what will happen after January?
· Which way will the Librarian rule this time?
· How can I invest in your technology if it may be illegal next year?”
Greg Kidd is an angel funder who was one of the first investors in Twitter and Square, when asked about this issue, whether he would invest in technology that may or may not be lawful next year, he responded:
“Here in the valley, we have a great appetite for taking calculated technical and business risks. But to add a jump ball of uncertainty over whether an opportunity that is legal one day might become illegal the next, for no other reason than a political or regulatory whim, is a red flag that shuts down my willingness to invest.”
And the process is uncertain. There appears to be no logic or internal consistency in the Librarian of Congress’s rulings. Until 2010, jail-breaking iPhones was illegal, but jail-breaking iPads is now illegal as of 2013. What will you do as an entrepreneur if the Librarian of Congress changes the rules? This regulatory uncertainty is one of the most destructive forces for innovation and is a genuine threat to the free market.
A more complete solution would address this issue permanently. As Ajit Pai explains:
“Let’s fix this problem permanently. We don’t need to have the exact same debate every three years, like an extended version of the movie Groundhog Day. I can assure you that the case for criminalizing cellphone unlocking isn’t going to get any stronger with time.”
Businesses need certainty, and kicking the can back to the Librarian of Congress will not address the rampant growth of the Administrative state that threatens our economy and freedom.
The Permanent Solution (H.R. 1892):
Another piece of legislation introduced by Reps. Lofgren, Massie, Eshoo and Polis (H.R. 1892) is the only bill that deals with the unlocking problem permanently and also legalizes other beneficial pro-competitive technologies. H.R. 1892 has already been endorsed by FreedomWorks and R Street and is the true conservative solution: it restores the free market, provides legal certainty, and is a small part in dealing with the epidemic of federal over-criminalization.
Congress Must Act Without Delay:
· Every day that Congress fails to act, our service members get sent abroad and have to choose between breaking the law to unlock their phone, or not being able to use their device.
· Every day that Congress fails to act, millions of Americans commit felonies punishable by 5 years in prison and a $500,000 fines.
· Every day that Congress fails to act, international travelers pay higher prices for using their phones abroad.
· Every day that Congress fails to act, we continue to inhibit the free market and harm competition which ultimately drives up costs for all consumers.
If you see your Member of Congress, ask them:
“Why does Congress delegate these decisions to a quasi-regulatory agent? Isn’t it time to put the Librarian of Congress back to his task of managing the nation’s preeminent library rather than deciding what technologies to ban?”