How Cell Phone Unlocking Bill Designed to Protect Consumers Will Cost Everyone More Money

A crippled bill had recently passed the U.S. House of Representative that could result in consumers getting less money for their cell phones when they trade in their used phones or try to re-sell them. Part of the appeal of unlocking a smartphone, especially ones that run on GSM networks like those operated on AT&T Mobility and T-Mobile U.S. here in the States, is that it opens up the market for these phones.

In the used phone markets, an unlocked phone can fetch more money when you try to re-sell your phone on eBay or Craigslist than one that is not unlocked. Unlocking opens up the phone to more people being able to buy them–you can now sell an AT&T phone that has been unlocked to T-Mobile and overseas customers and not just AT&T customers–and the value increases.

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Another benefit is that you can re-use your phone when you switch carriers so you don’t have to sell, toss, or trade-in your existing phone and buy an entirely new phone to work with that specific new carrier. An unlocked iPhone on AT&T could work on T-Mobile when you jump ship, for example.

So while the benefits for consumers are there, how can the U.S. government screw over taxpaying, cell-phone using consumers? As the Unlocking Consumer Choice and Wireless Competition Act, H.R. 1123, has passed the House by a narrow margin and is awaiting its fate in the Senate for approval, we shall explore the bill and its intentions in detail.

Though the bill started out with good intentions, a battle behind the scenes between consumer rights advocacy groups and special interest lobbying groups ultimately lead to the passing of H.R. 1123 where consumers would be the biggest losers in the end. 

Originally, California representative Zoe Lofgren wrote a bill that would protect consumers in the broadest terms. It would allow not only smartphones and tablets to be unlocked, but also for developers to create digital tools to do the unlocking according to a report on Wired. The bill also sought to clarify the Digital Millennium Copyright Act (DMCA) to spell out that the law seeks not to hinder consumer freedom, but to just limit piracy.

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Unfortunately, Lofgren’s bill was so favorable to consumers that lobbying interest groups for the wireless association, known as the CTIA, tried to work their magic with another representative.

CTIA and lobbyists supported a rival proposal written by representative Bob Goodlatte, which evolved to become known as H.R. 1123. H.R. 1123 still supports the unlocking of cell phones, but not tablets, though the bill makes it more restrictive and would make it illegal for developers to create tools for unlocking out of fear that these tools would spur more cell phone thefts.

Moreover, the bill would make it illegal to unlock a large number of phones. This would affect the second-hand market where services like Gazelle would buy back a phone from a customer and pay the user an amount of money. Gazelle would collect phones from many people, and then they would refurbish and unlock the phone and re-sell it on the secondary market.

Under the bill, Gazelle and its rivals would either have to recycle the phones for parts or take the phone overseas. This could potentially lower the value that Gazelle would pay to buy back an iPhone. For customers in this market, it may be more difficult to buy a refurbished phone and thus the bill would make it harder for people with limited budgets to have access to technology.

So while the spirit of the cell phone unlocking bill passed by the House was intended to protect consumers, it will actually cost us more money in the long run and potentially even hurt the environment. If Gazelle doesn’t want to buy back old phones, consumers may just toss them in the trash. Phones that could have been refurbished and sold to people who may not be otherwise able to afford a new flagship smartphone could end up in landfills.

Moreover, consumers who cannot sell their older devices may not have the luxury of upgrading as often as they do now. And when upgrade cycles slow down, the economics start to slow and we may find companies who make the phones and the parts inside the phones to have less money coming in, which could mean less investment into innovations to get the next generation of technology out the door to improve mobile computing. Less consumer spending leads to less revenues for the Apples and Samsungs, which leads to less investments into R&D leading to stifled innovation.

The bill was so bad for consumers that early supporters of cell phone unlocking later withdrew their support, including the Electronic Frontier Foundation, Silicon Valley legislators like Lofgren and Amy Eshoo, and Public Knowledge among others.

Hopefully, the Senate could amend the bill and the two houses could work together to remove the restrictions of H.R. 1123. This means allowing developers to create tools to unlock, making it legal to unlock phones in bulk, and extend unlocking protection to tablets, hotspots, and other mobile computing devices.

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So while cell phone unlocking may seemingly not affect you directly if you don’t buy or sell a phone on the second hand market, it still impacts innovation and the environment. Everyone loses at this rate.

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