There was a landmark case about this same issue in 1936 concerning IBM punch cards.[1] IBM leased its machines to customers, and they also sold punch cards, which they argued were effectively part of the machine.

The pricing was an important component of their business model. IBM wanted to get the machines into skeptical customers' buildings before they had a chance to be shocked by the sticker price so that they could discover how useful computing really was. The per unit price of punch cards however increased with the volume of punch cards purchased—which arguably made sense if the customers got more value out of each punch card once they got rolling on how to use the machines.

Anyway, the US Supreme Court said that was too bad, and enjoined IBM from dictating that they must be the exclusive supplier for all punch cards as a condition of lease agreements.

The principle here seems like it should even be more clear. Are you leasing you phone, or promising to use purchase their service for 24 months at an agreed rate? You get to pay a hefty cancellation fee if you choose to cancel the service, but you are not required to return the phone.

IANAL, but it seems like the Clayton Act(1914)[2], was pretty clear about "tying", and it was affirmed by the Supreme Court. While that does not mean that cell phone providers need to help you unlock your phone (unless separate legislation affirms that responsibility), it seems both anti-competitive in spirit, and contrary to the doctrine of firs sale to legally prohibit customers from tinkering and developing their own capabilities and uses for their property.

[1] http://www.law.cornell.edu/supremecourt/text/298/131#writing... [2] http://www.law.cornell.edu/uscode/text/15/14

The really interesting thing to me is what (I assume was) one of IBM's biggest customers -- Germany -- for its punch card/punch card machine business was doing with those punch cards.

But you're not breaking your agreement.

You're still paying your monthly bill like a good customer. You're just replacing the SIM for a couple weeks.

You could certainly achieve the same result by buying a second phone just for traveling. But you already have a phone. In the rest of the world (and in the US until tomorrow), that's all the phones you need.

> You could certainly achieve the same result by buying a second phone just for traveling. But you already have a phone. In the rest of the world (and in the US until tomorrow), that's all the phones you need.

If you got your phone subsidized, then no, you don't have a phone. You don't get to unlock this not-paid-for phone the same way you don't get to change out the drive train on a leased car. At the end of the lease, after the dollar buyout, go wild. After your contract is over, unlock away. It's yours, do as you wish.

I believe the carrier owns the phone until you've satisfied your subsidy contract.

Similarly, I believe an unsubsidized phone should come unlocked.

Not quite. You have bought your phone effectively with a loan. It's not rented, it's bought with a loan and you're paying that loan back in monthly fees. You can't give the phone back and receive the part of the loan you paid, so it must be your phone. Leasing is just a special kind of loaning money, where you're loaned money for the sole purpose of purchasing a given product by the same merchant that sells you that product. If the telecom expects that you will use the phone only on their network, they can trivially add a "minimum monthly charge" so they'll cover the cost of the phone regardless. In fact, I believe all of them already do it.

As a country with an economy built around loans (i.e. credit cards and so on), making things bought on credit not really yours seems insane.

No, the carrier does not "own your phone"--they're taking a risk that you'll abide by the contract.

Even if you get out of your contract early, you have to pay a termination fee, which is effectively the remaining part of your carrier subsidy. AT&T is going to get their money one way or another.

Also, going to Europe for 2 weeks doesn't mean you stopped paying your AT&T bill for those weeks, either. It's perfectly reasonable to expect your phone to not be carrier locked.

I wasn't clear. I didn't mean the carrier literally owns your phone. I prefixed with "I believe" intending to convey how it seems to work, not the technical fact. I should have written, "It's as though the carrier owns your phone".

But the technical fact is all that matters. What you "believe" is irrelevant.

I believe Jason's point is that you're still paying off the phone subsidy. Nothing's changed, as far as that's concerned.

You may be avoiding exorbitant surcharges, such as roaming fees.

Well... why are those surcharges so exorbitant?

Pay through the arse. Or toss another disposable phone into a landfill. People are starting to think that "some law" doesn't necessarily make it "right".

When I went traveling, I called T-Mobile and they provided me an unlock code without any bellyaching.

It took me several days to get an unlock code from T-Mobile, for a phone I'd paid for unsubsidized. And, they make a big deal out of the process, and make a lot of noise about possibly being unable to provide unlock codes if they don't have them.

That's not to say T-Mobile isn't better than some other carriers. As I understand it, they are. But, I shouldn't have to ask permission to use my phone, that I paid $600 for, in Mexico for a few weeks, while I continue to pay for my US service.

Making unlocking a phone yourself illegal is anti-consumer and pro-corporate in ways that I find extremely distasteful and it makes me angry that the US state serves corporate interests so much more enthusiastically than individual interests.

----- I want to fight this -----

HN, my brother is just about to relaunch an unlocking site I made in 2002 (mockup here: http://j.mp/WRfm6A).

I really want to help him fight this ruling.

I'm guessing that petitioning the librarian is the best idea. Any ideas or thoughts on how to go about this would be very, very much appreciated.

And if anyone's willing to help, email me (email in profile).

if you paid for the phone unsubsidised, why was it even locked in the first place?

They are locked, by default. I bought it in a T-Mobile store, because my Nexus 1 died while I was travelling and needed something quick (it's an HTC Sensation 4G, which is the worst phone I've owned, possibly ever). Maybe they'll unlock it immediately if you ask them to, I dunno.

Hey I don't know why, but the same happened to me in the UK. Bought a phone outright from Three, then later paid them to unlock it. Silly.

So you can only use it with the vendor you bought it from? I guess the OP means bought with no plan. This is the primary use case for locking.

I went travelling this past December and wanted to unlock my iPhone 5. I was told by AT&T I would have had to wait 2 years before I could get the phone unlocked...

You should have bought an iPhone 5 if you wanted to own one.

I buy my iPhones, and the first time they sync, I get the message, "Congratulations, your phone is unlocked."

As it stands, AT&T owns your iPhone until you finish your contract just like the dealer owns your leased car.

That might be how it works in the US, but why roll over and accept that when literally the rest of the world doesn't.

In Australia, subsidised androids on 2 year plans aren't locked at all, and for iPhone its as simple as ringing the carrier for the unlock code, you can do it the day you get your phone.

They're going to get the full value of the contract anyway, why pay them insane roaming fees too.

I've worked in telco in Australia for a number of years now, we are better off: the phones cost is built into the plan these days (hence why an iphone on a $35 plan is an extra $23 per month).

It used to be worse. They used to come locked, and getting unlocked was an exercise in pulling teeth. Thankfully things are better now.

To those that say it's a lease, it's not: you cannot give the phone back and receive the money you've paid for it. It is your handset. You cannot even request a new one if it doesn't suit you (here in Australia anyway). Unlocking the phone does not cancel the contract: you still pay that monthly fee.

On a lease, you also can't give the car back and receive the money you've paid for it. Nor can you swap the car for a different one. Even if you left the car at the dealer, you'd still pay your monthly lease fee. It's a contract.

Do you pay $300 extra for the privilege? I don't believe AT&T offers unsubsidized discounts.

The reason they gave you a code is because they have competition in unlocking - you could just go to an iPhone unlock website and do it yourself.

Once it becomes illegal to unlock your phone by any other method it won't take long for them to start charging for this 'premium service' or not allowing it at all.

AT&T also has this policy. Sprint and Verizon will not, but CDMA phones don't work in most places around the world anyway.

All it took was one short call to Sprint to get my iPhone 4S unlocked for international SIM cards. Domestic cards still say invalid, but everything else works.

That was about 6 months into the contract.

It all depends on how long you've been a customer, how long you've had your phone, and the status of your current contract.

You are not paying the roaming charges if you unlock your phone. Thus breaking your agreement.

You're also not using their service. Is turning your phone off and leaving it in a drawer for a month also breaking the agreement?

If you turn off the phone and leave it in a drawer you will pay the minimum fees. The phone companies are aiming for the maximum. That is having you go over the limits, pay roaming etc. By letting you unlock the phone it opens the door for always receiving only the minimum. This is what they want to avoid.

next big thing:

Credit card companies lobby to make debit cards illegal

Yes they want you to overspend. Their revenue strategy should not depend on it.

You could argue that because the phone is locked to AT&T's network, part of the agreement is that you'll use AT&T's service if you take the phone abroad. Basically, by selling a phone that only works on its network, AT&T is bargaining for the right to any international usage of that particular phone, if there is any.

This is a very common contractual scenario--you get a discount for agreeing to only use one particular vendor, to the extent that you have a need for the particular kind of service they provide.

Well, not only are you not using their service, you're using somebody else's service when theirs is available.

As per your binding contract, you agree to only use their service in return for getting the phone at a subsidized price. Their incentive to charge you less for the handset (incurring a loss on the sale) is that you agree to guarantee doing business with them.

And if that's a problem, unlocked phones are still always an option.

"As per your binding contract, you agree to only use their service in return for getting the phone at a subsidized price."

You mistakenly believe that contracts are in perpetuity.

You're suggesting Protectionism. An industry won't innovate or provide realistic pricing based on their actual costs, so you suggest we protect their income through artificial means. Sure, I'd love some protectionism - how big do I have to be before the government will invent some laws for me to make sure you can only use my service, and not yours?

Honestly I'm not suggesting anything. All I'm saying is that this contract is optional. People can buy full price and say fuck-you to the contract. In fact I have gotten iPhones cheaper from AT&T by buying locked and immediately buying out the contract than buying unlocked from Apple.

>In fact I have gotten iPhones cheaper from AT&T by buying locked

In which case I'm sure we'd all consider it reasonable to first ensure AT&T covers it's cost by increasing its contract buyout amount. We're talking here about the price of roaming being artificially high. You step across the border and come back to an inflated bill because of termination 'agreements' between providers.

>Carriers agreed to give you a shiny new smartphone for a massively subsidized prize in return for you being locked to their network.

Another way to look at things is that carriers subsidize the cost of your phone in exchange for you signing up to a fixed-length phone contract with a set monthly price.

Whether or not you can unlock your phone really has nothing to do with this, as you're committed to the contract either way.

The real issue is what happens after you've completed the 18 or 24 month contract. The carrier recouped their subsidy on the phone and has profited from your contract. But you can't use your phone (which you have more than paid for) on any other network.

>The real issue is what happens after you've completed the 18 or 24 month contract. The carrier recouped their subsidy on the phone and has profited from your contract. But you can't use your phone (which you have more than paid for) on any other network.

I'm not so sure this is true. Carriers will allow you to unlock your phone once your contract is up, and according to this DMCA law, it is legal to unlock your phone if your carrier allows you to do so.

What if the carrier refuses to allow you to unlock the phone? Just because they do today doesn't mean they will tomorrow if nothing compels them to. One cannot assume the good intentions of companies that exist to make money.

The reason such a law is beneficial to carriers is that if they decide to not allow the unlock, the phone is likely only good for their service. If the phone is only good for their service then you might as well renew your contract. Right?

AT&T has been unlocking off-contract iPhones for less than a year (of the over 5 years they've carried it):

http://www.theverge.com/2012/4/6/2930642/att-sim-unlock-ipho...

And who knows if they'll change their mind again in the face of T-Mobile's spectrum refarming?

Unlocking your phone has nothing to do with taking advantage of the carrier subsidy. If you are under contract and "unlocked" you are still bound to pay your monthly fee to your carrier unless you pay the ETF or early termination fee.

It has got everything do with carrier subsidy. If you don't want the subsidy they will sell you a unlocked phone. Problem solved.

No, they they have damaged the free market for phones and phone service using these subsidies to create bundles, so you will pay an inflated price for both your phone and your service.

Whether you buy it locked or unlocked you are being ripped off. They essentially learned it from the US employment/health insurance co-bundle.

Given that several branches have to spend considerable time reviewing just how noncompetitive the wireless industry is, it is kind of absurd for one to hand them another tool to continue competing on everything except price and service.

False. I haven't taken a carrier subsidy since 2007 and I have to jump through hoops to get my phones unlocked.

If you buy a prepaid phone at full price with no subsidy many carriers have policies on how long you must be a customer of theirs before they give you the unlock code.

Additionally, if you buy a used phone on Ebay/Craigslist - aka nothing to do with carrier subsidies - this now requires you to break the law in order to unlock your phone.

Convinced?

No, not convinced. I haven't taken a subsidy on the last 3 iPhones or Android phones and I've had no hoops at all to jump through, neither on AT&T nor on T-Mobile.

The iPhones, I simply demanded at the Apple store to pay full price (this is before the officially unlocked version was being marketed), and the first time I plugged the phone into iTunes, I got a dialog congratulating me on unlocking my phone. This was not widely reported, but always worked.

The Android phones, I can simply pull out the T-Mobile SIM and put in an AT&T one and I've never talked to anyone about it.

Both types work with pay as you go SIMs in Europe. I've never spoken to AT&T or T-Mobile about any of them.

Convinced?

T-mobile prepaid requirement: "you have a minimum of 60 consecutive days of active service with T-Mobile"

http://support.t-mobile.com/docs/DOC-1588

AT&T prepaid is much worse:

http://forums.att.com/t5/Prepaid/Unlocking-PrePaid-Phones/td...

"Requirements for prepaid wireless plans with AT&T branded phones: You have had AT&T service for six months or longer You can provide a receipt or other proof of purchase"

The last line illustrates how carriers are dictating policy in an effort to subvert the secondary phone market.

Even more frustrating in the same link you will see that certain AT&T phones are "ineligible" for unlocking presumably due to some arbitrary restriction.

They'll gladly sell you an unlocked phone, but they won't reduce the monthly rate.

T-mobile is going to stop offering subsidized phones this year--either pay up front or rent-to-own. Their monthly plans will decrease accordingly, so non-contract customers aren't getting hosed.

In fact, this was the key argument made by the copyright office: that the landscape has changed since the original exemption, and now it is commonly possible to purchase unlocked phones in the US (even the weird recent "no unlock ever" phones, such as the iPhone, can now be purchased unlocked), so there is no longer a need for a specific exemption on unlocking.

>it prevents people from taking advantage of the carrier subsidy...Carriers agreed to give you a shiny new smartphone for a massively subsidized prize in return for you being locked to their network.

Aren't you contractually locked? What does locking your phone have to do with your contract?

I'm not sure why there should be criminal penalties if you took advantage of a carrier subsidy anyway. Gaming consoles are a clear example of this. I know XBox used to make up the subsidy on game sales.

att didn't unlock initial iPhones (e.g. 3GS) even after contract was over, not until April 2012 - nearly a year after contract was expired. I wish we had laws declaring that practice illegal. Keeping phone locked beyond the contract seems way "exploitative" to me.

But it's not exploitative to charge monthly fees that high, or require one to pay extra for tethering, or force one to pay extra to blacklist phone numbers from calling one, etc.? If they cannot afford to subsidize phones like that because too many people hate their service so much that they switch, quite frankly; fuck them. I'd much rather they need to compete instead of granting them monopolies and legislating against leaving their service with your phone.

I feel like it's not just about taking advantage of a subsidy. I'm a canadian, so I'm not sure about what happens when you early terminate in the US, but here if you early terminate you have to pay a fee. So you mean to tell me that if I leave the carrier for whatever reason, and pay $250 to do so, I then am not allowed to use this phone again until I come back to the carrier? Sounds more like them trying to take advantage of me.

My carrier didn't subsidize my phone. I bought it from Google, and put my old SIM card in it.

Whats exploitative are the roaming fees levied by carriers.