TracFone to challenge cell phone unlocking rule

RCR Wireless News ^ | 11/30/06 | Jeffrey Silva

[conservative in nyc]

TracFone Wireless Inc., the nation’s largest pre-paid wireless company, said it is considering filing suit in federal court to repeal a new Library of Congress rule exempting mobile phone locking software from U.S. copyright law.

The ruling essentially allows an individual to unlock his or her cell phone from the wireless service that it was sold with, thereby allowing the phone to work on other carriers’ networks. Previously, unlocking a phone violated U.S. copyright law.

“Although TracFone believes that the exemption to the Digital Millennium Copyright Act … was not intended to apply to prepaid wireless service, we are nevertheless concerned that its ambiguous language may be exploited in a way that will be extremely harmful for consumers and the public at large,” said James Baldinger, outside counsel to Miami-based TracFone.

The suit could be filed early next week in Florida federal court.

The Library of Congress on Monday issued a final rule on the handset locking software exemption, accepting the Nov. 17 recommendation from the U.S. Copyright Office. Register of Copyrights Marybeth Peters refused to consider late-filed comments from TracFone and cellular association CTIA in her recommendation.

TracFone has used copyright law in court to halt small firms from buying and unlocking large quantities of TracFone handsets.

“This new regulation may force TracFone and other providers to substantially increase their retail prices for wireless phones, making it more difficult for many of the most vulnerable members of society to obtain this often life-saving service,” said Baldinger. “In addition, criminals who purchase large quantities of wireless phones to be hacked and sold overseas may use this regulation as a shield to attempt to protect themselves from civil and criminal liability for their illicit activity. TracFone has aggressively pursued legal action and worked with law enforcement to combat that activity, and will continue to vigorously pursue those efforts regardless of the outcome of its court challenge to the exemption.”

CTIA said the Library of Congress rule does not prevent operators from continuing to lock handsets, but merely removes copyright liability for unlocking them.

The largest U.S.-based mobile phone manufacturer offered a somewhat ambiguous reaction to the Library of Congress decision.

“Motorola is reviewing the implications of the recent ruling by the U.S. Copyright Office. We are working to ensure that any actions we take support consumer needs while complying with any contractual obligations,” said a Motorola Inc. spokeswoman.

A spokesman for Nokia Inc., the world’s largest mobile phone supplier, said he did not expect the ruling to have a significant impact in the near term.

[conservative in nyc]

Remember the story about Muslims buying up Tracfones over the summer? One explanation for why they were doing it was to remove the lock that forced the phones to only use Tracfone's service, and sell them to a middleman for profit. Whether this was legal was questionable back then. It appears that the U.S. Copyright Office has green lighted the practice, at least with respect to the DMCA and your own cell phone. Tracfone feels otherwise, with respect to their phones, even under the new exemption, and is suing. Their business model of selling phones at a loss with the hope that people will pay for their arguably overpriced service might be blown out of the water.

Why would anyone want to unlock a cell phone? Well, for one, if you go overseas, it's often cheaper to roam on a local carrier's network than use a U.S. carrier. Plus, it allows you to use your same cell phone on another compatible network if you become dissatisfied with your current pre-paid service.

See also:
DMCA Exemptions Allow You to Unlock Cell Phones (ABC News/PC Magazine)
Text of Register of Copyright's Recommendations

[Gorzaloon]

Why would anyone want to unlock a cell phone? Well, for one, if you go overseas, it's often cheaper to roam on a local carrier's network than use a U.S. carrier. Plus, it allows you to use your same cell phone on another compatible network if you become dissatisfied with your current pre-paid service.

Here is another reason. I have had a Verizon account for a long time. I picked up a new phone, a Motorola V710. Nice phone, Bluetooth features, USB access, etc.

Then I discovered that Verizon sabotaged many features, essentially crippling the phone, to force their customers to use their expensive messaging, "Get It Now", etc. rather than allow users to enjoy the phones' features.

They did lose a Class Action over it. What this meant is that the users got $25, and no further features, and the lawyers pocketed the gains.

Of COURSE I bought hacking software. When companies pull this kind of bait-and switch they deserve no quarter at all.

[angkor]

Two issues here:

1) TracFone's business model is entirely dependent upon the locking of their GSM phones to their own GSM network. If you unlock the phone, you can use it on any network, and there's no TracFone contract to worry about. If you buy a $20 GSM TracFone at Wal-Mart, unlock it, and ship it anywhere outside the U.S., the phone can probably be retailed for $100 (that's what my unlocked 2001 Motorola WorldPhone was worth in SE Asia last year).

2) U.S. GSM carriers - T-Mobile and Cingular - are double covered by the locking and by a contract. If you unlock the phone you still have a 1 or 2 year contract obligation.

I've been using T-Mobile for years. Their policy is to provide you with the unlock code on your phone after you've been a customer for 90 days. So I can be on a T-Mobile contract in the States, and swap to a Vinaphone pay-per-minute when in Vietnam, simply be swapping the SIM chip (which takes 10 seconds).

[angkor]

ell, for one, if you go overseas, it's often cheaper to roam on a local carrier's network than use a U.S. carrier.

Correction: it's ALWAYS cheaper to install a local pay-per-minite SIM chip than to use the GSM roaming of, say, Verizon or T-Mobile.

Verizon (while not a GSM network) will set you up with a UK Vodaphone account and phone and forwarding for overseas travel. Then they'll ding you $1.50 per minute in SE Asia (flip side: that single Vodaphone SIM will work in dozens of countries on your Verizon/Vodaphone account, so it's no-fuss, no-muss).

T-Mobile also has a global roaming feature, but it's also a pricey $1.50 per minute, while you could get a locak pay-per-minute SIM in Bangkok or Jakarta or Saigon which would be 30 cents or less per minutes to the States.

Unlocked GSM phones go for a premium anywhere in the world. My unlocked 2001 Motorola WorldPhone was going for $100 last year on eBay.

[spudsmaki]

Everything you say is true.

I have both the GSM and CDMA models and the CDMA signal coverage and voice quality is far superior, especially west of the Mississippi. CDMA does not currently use the separate chip, but it could and there is a proposal to do just that. Don't think it will go anywhere.

The CDMA Tracfones are completely reprogrammed and likely never could be reflashed as a generic Alltel/Verizon phone, even if they would have it.

What I think will happen is the US GSM phones would be redesigned to just not use the chip and just embed the smarts like is done with CDMA. Lots of ways to skin this cat to keep the entry cost down. I don't think anybody want to see a $500 prepaid phone, least of all any big box retailer.

[conservative in nyc]

TracFone's business model is entirely dependent upon the locking of their GSM phones to their own GSM network. If you unlock the phone, you can use it on any network, and there's no TracFone contract to worry about. If you buy a $20 GSM TracFone at Wal-Mart, unlock it, and ship it anywhere outside the U.S., the phone can probably be retailed for $100 (that's what my unlocked 2001 Motorola WorldPhone was worth in SE Asia last year).

Unfortunately for TracFone, the copyright laws aren't written to protect a company's lose-money-upfront for future gain business model. They never were - Ask printer maker Lexmark (let's sell cheap printers to make future profit on toner), or the automatic garage door makers (when people lose their garage door remotes, we gouge them for a replacement).

TracFone has a shrinkwrap contract on the inside of the package that basically says by purchasing the phone, you agree to activate the Tracfone service and only use it on TracFone's network. When they sued Sol Wireless in the past, they didn't solely make claims under the DMCA - they also claimed things like trademark violations (the TracFone marks were still on the phone). Sol Wireless settled with TracFone, and agreed to a court-approved settlement that TracFone was hoping would serve as a precedent in future cases.

It's not 100% certain that TracFone wouldn't still claim non-DMCA violations against resellers, even if the exemption is upheld. The exemption would likely weaken their case a bit, though.

[oceanview]

these prepaid phones should be outlawed - they are a huge security risk.

[conservative in nyc]

these prepaid phones should be outlawed - they are a huge security risk.

Not always. Prepaid phones give those who usually don't use cell phones the added security of having a phone if things go bad. Some people put them in their glovebox to use if they have an accident. Not everyone uses their cell phone enough to justify having an expensive monthly contract. There are more legitimate uses for these phones than illegitimate ones.

[oceanview]

pay as you go is fine - but the lack of identity verification is the problem.

[Fierce Allegiance]

That's just dumb.

[oceanview]

why is that?

we are living in an environment where thousands in the military are giving life and limb to fight terrorism, where law enforcement is working to intercept and thwart their activities, we have airline security searching shampoo bottles.

yet, we allow a terrorist to walk into best buy, pay cash for an activated phone, and be able to walk outside and start using it - totally anonymously, untraceable.

there is no constitutional right to use a cell phone anonymously.

this makes zero sense.

[Fierce Allegiance]

So big brother should know everything every one of us does?

[Fierce Allegiance]

There is nothing to make me have to produce dentification to use a phone. Why should their be as long as I pay the vendor?

How many case of terrorism has the US seen involving prepaid phones? How many peoples civil liberies would be trampled if ID were required.

[oceanview]

there can't be loopholes in the system. that doesn't mean that everyone's phone is monitored all the time, or everyone's house is bugged. it simply means that with due process, warrants et al, the government should be ABLE TO monitor communications. if we allow some glaring loophole to exist (and for what purpose mind you, should we allow anonymous cell phones to exist?), then our efforts on other fronts are belittled by that.

you can't get a home telephone line, or cable TV, anonymously. you can't open a bank account anonymously. you can't fly on a plane anonymously. you can't use an automobile without plates. OK, you can still use the postal service anonymously - which is why the anthrax mailers chose that path.

[oceanview]

try and get a home phone line installed in your house - anonymously. let me know how you make out.

[oceanview]

why is anonymous use of a cell phone, all of a sudden some new civil right? what you say on that cell phone is still constitutionally protected, government's ability to wiretap you is still governed by due process - you've lost none of those rights.

[Moonman62]

Tracfone has great deals on phones. I hope they win.

[conservative in nyc]

Tracfone has great deals on phones. I hope they win.

A win for Tracfone isn't necessarily a win for consumers in the long run.

[Extremely Extreme Extremist]

Guns should be outlawed. They're a huge security risk too.

[discostu]

They could also find one of the few payphones (I know where some are) and use them. Or business courtesy phones. BFD. the idea that all cellphone calls should be tracable to the caller is psycho police state paranoia and beneath the American ideal.