House Passes Bill to Allow Consumers to Unlock Their Cell Phones

February 25, 2014. The House passed a revised version of HR 1123 [LOC | WW], the "Unlocking Consumer Choice and Wireless Competition Act", by a vote of 295-114. See, Roll Call No. 64.

Summary of this Article.
   Introduction.
   Unlocking.
   Pending Bills.
   Summary of HR 1123.
   Floor Debate.
   Reaction.

Introduction. Republicans voted 200-20. Democrats voted 95-94. Those who voted against the bill included Rep. Jared Polis (D-CO), Rep. Anna Eshoo (D-CA), Rep. Zoe Lofgren (D-CA), and Rep. Doris Matsui (D-CA).

As revised, this bill would reinstate the Copyright Office's (CO) prior exemption for unlocking cell phones for personal use. However, the bill adds that nothing in the bill "shall be construed to permit the unlocking of wireless handsets or other wireless devices, for the purpose of bulk resale".

The House considered this bill under suspension of the rules, which meant that no amendments were in order, and that a two thirds majority was required for passage.

There are related bills pending in the Senate. However, the Senate has yet to pass this bill, or another bill.

Unlocking. Unlocking is the circumvention of computer programs on mobile phones or tablets to enable such devices to connect to alternative wireless networks. Some carriers sell consumer phones at discounted prices, in return for the consumers signing wireless service contracts with a minimum fixed term. Carriers use locking to, among other things, prevent these consumers from switching service providers. Locking has also been used to keep consumers from switching providers after contracts have expired.

There is no law that prohibits cell phone or tablet unlocking. However, there are contracts between service providers and consumers. Also, there is the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA), which are codified at 17 U.S.C. § 1201. Unlocking of wireless devices may violate the anti-circumvention provisions of the DMCA. Some argue that it never violates the DMCA.

The DMCA directs the Librarian of Congress to conduct a proceeding every three years to adopt rules that create exemptions to the ban on circumvention. Nominally, the rules are adopted by the Librarian, but in practice the Register of Copyright, Maria Pallante, and her staff attorneys write these rules. These triennial rules are codified at 37 C.F.R. § 201.40.

The CO's fourth triennial rules contained exemptions related to unlocking. See, story titled "Copyright Office Releases 4th Triennial DMCA Exemptions" in TLJ Daily E-Mail Alert No. 2,115, July 30, 2010. The CO's fifth set of rules, now in effect, ended the exemption for unlocking phones at the end of January of 2013. See, story titled "Librarian of Congress Adopts 5th Triennial § 1201 Exemptions" in TLJ Daily E-Mail Alert No. 2,467, October 24, 2012. Hence, there is now no exemption.

Pending Bills. Members of Congress have been working for over a year to undo the CO's fifth round determination. However, there is much debate as to what should be the precise nature of any Congressional fix.

There are numerous approaches, such as reinstating the CO's fourth round exemption (which HR 1123 would do), amending the DMCA to create an exemption, and giving the Federal Communications Commission (FCC) rulemaking authority to direct unlocking. There is also the matter of what types of devices are covered. (The CO's fourth round exemption covered "wireless telephone handsets".) There is also the question of who can unlock devices. There is also the matter of the duration of any fix.

On March 13, 2013, Rep. Bob Goodlatte (R-VA), Chairman of the House Judiciary Committee (HJC), Rep. John Conyers (D-MI), the ranking Democrat on the HJC, and others, introduced HR 1123. As introduced, it would merely have reinstated the CO's fourth round exemption into the fifth round of triennial rules, and directed the CO to conduct a rulemaking proceeding to examine whether or not to also "include any other category of wireless devices in addition to wireless telephone handsets".

On May 8, 2013 Rep. Lofgren introduced HR 1892 [LOC | WW], the "Unlocking Technology Act of 2013", a bill that would broadly limit the reach of the anti-circumvention regime created by the DMCA. Rep. Polis and Rep. Eshoo are cosponsors. It was referred to the HJC. Neither the HJC nor the House have passed this bill.

HR 1892 would broadly amend the DMCA's anti-circumvention provisions in a manner that would impact not only cell phone unlocking, but also permit any circumvention "if the purpose of such circumvention is to engage in a use that is not an infringement of copyright". Related bills were introduced in prior Congresses, but were not passed by either body or by any committee. Representatives of copyright based industries argued that these limitations on the DMCA would render it ineffective.

On March 11, 2013 Sen. Patrick Leahy (D-VT) and others introduced S 517 [LOC | WW], the "Unlocking Consumer Choice and Wireless Competition Act", another bill to reinstate the cell phone unlocking exemption contained in the CO's 4th triennial rules. HR 1123 (as introduced) and S 517 (as introduced) are substantially identical. Neither the Senate Judiciary Committee (SJC) nor the Senate have passed S 517. See also, story titled " Sen. Leahy Introduces Bill to Reinstate Librarian of Congress's Cell Phone Unlocking Exemption" in TLJ Daily E-Mail Alert No. 2,533, March 11, 2013.

On March 5, 2013 Sen. Ron Wyden (D-OR) introduced S 467 [LOC | WW], the "Wireless Device Independence Act of 2013", a bill to amend the DMCA to create a permanent exemption to the ban on circumvention for consumers who unlock their wireless phones or other wireless devices. It was referred to the SJC. Neither the SJC nor the Senate have passed S 517. See also, story titled "Sen. Wyden Introduces Bill to Amend DMCA to Create an Exemption for Unlocking" in TLJ Daily E-Mail Alert No. 2,533, March 11, 2013

On March 6, 2013 Sen. Amy Klobuchar (D-MN), Sen. Mike Lee (R-UT) and Sen. Richard Blumenthal (D-CT) introduced S 481 [LOC | WW], the "Wireless Consumer Choice Act", a bill that would give the FCC regulatory authority with respect to unlocking of wireless devices. This bill would direct the FCC to write regulations directing wireless service providers to permit subscribers to unlock wireless devices. It would not affect the DMCA. No action has been taken on this bill. See also, story titled "Sen. Klobuchar Introduces Bill to Authorize FCC to Direct Wireless Device Unlocking" in TLJ Daily E-Mail Alert No. 2,533, March 11, 2013.

Summary of HR 1123. The expanded version of this bill passed by the House on February 25 would first restore the 4th triennial rules' unlocking exemption into the 5th triennial rules.

Second, it would direct the CO to conduct a rulemaking proceeding to examine whether or not to also "include any other category of wireless devices in addition to wireless telephone handsets".

Third, it would provide that any circumvention involving wireless telephone handsets permitted by the restored exemption, and any additional devices covered by the directed rulemaking, "may be initiated by the owner of any such handset or other device, by another person at the direction of the owner, or by a provider of a commercial mobile radio service or a commercial mobile data service at the direction of such owner or other person, solely in order to enable such owner or a family member of such owner to connect to a wireless telecommunications network, when such connection is authorized by the operator of such network".

Fourth, it would provide that "Nothing in this subsection shall be construed to permit the unlocking of wireless handsets or other wireless devices, for the purpose of bulk resale, or to authorize the Librarian of Congress to authorize circumvention for such purpose under this Act, title 17, United States Code, or any other provision of law."

Floor Debate. Rep. Goodlatte (at right) stated that "Last winter, due to an expired exemption to existing law, consumers lost the legal right to unlock their cell phones so that they could use them on a different wireless carrier. Outraged consumers flooded Congress and the White House with complaints over this change in policy that resulted in reduced marketplace competition."

He said that this bill "reinstates the prior exemption to civil and criminal law for unlocking cell phones for personal use. It also creates an expedited process to determine whether this exemption should be extended to other wireless devices such as tablets."

He predicted that "When this legislation is enacted, consumers will be able to go to a kiosk in the mall, get help from a neighbor, or see a wireless carrier to help unlock their cell phone without any risk of legal penalties. This is not the case today, which is why this legislation is necessary."

He also explained its additional provisions. The HJC "has been aware of law enforcement concerns regarding the explosive growth in smartphone thefts. Efforts by criminals to undertake bulk unlocking and transfers of stolen phones are a growing concern in America. Smartphones seem to have become crime magnets in many cities across America."

"Because the policy issue has always focused on the ability of consumers to unlock their phones, the legislation is similarly focused on individual consumer unlocking without raising law enforcement concerns. Why would it make sense for Congress to enable criminal gangs to more easily make money off stolen phones instead of simply solving the main issue of consumers being able to unlock their own phones?"

He also said that "Some would like this legislation to go even further. However, I hope all can agree that this is a good start and a solid piece of legislation that will empower consumer choice."

Rep. Goodlatte also stated that this revised bill is a bipartisan and bicameral compromise that is supported by Sen. Patrick Leahy (D-VT), Sen. Charles Grassley (R-IA), and by the CTIA and Competitive Carriers Association (CCA).

Rep. Bobby Scott (D-NC) also spoke in favor of the bill. He said that "the inability to unlock cell phones means that the original wireless carrier has an unfair and unnecessary competitive advantage. In many instances, the sole purpose of locking a cell phone is to keep consumers bound to their existing networks. Consumers often buy a new cell phone as part of their initial purchase of service from a carrier's wireless network. Because the phone is locked into that carrier's network, at the end of the first term of service, the consumer is forced to stay with that provider, sometimes at a higher rate, or being stuck with a useless locked phone. Allowing a phone to be unlocked will allow a consumer to keep his phone and switch carriers to a more appropriate, affordable, or suitable plan and have that opportunity, without having to purchase a new phone."

Rep. Jason Chaffetz (R-UT) also spoke in support of the bill. He said that he stands with Rep. Polis and Rep. Lofgren in wanting to re-examine the DMCA, but he urged the House to take this opportunity to pass a short, sweet and simple bill that will allow consumers to unlock their phones.

Rep. Polis (at right) spoke for the opponents of the bill. He explained that the concern is the new language regarding "bulk unlocking". He said that "The new language specifically states that the bill does not apply to bulk unlocking. Now, that signals that Congress believes that it is illegal for companies, including many small businesses and start-ups, to unlock cell phones in bulk".

He continued that "this is an inappropriate use of copyright law to bar small businesses and large businesses from unlocking devices when it has nothing to do with making illegal copies of protected works, the purpose of copyright law. Again, if there is a criminal problem, we should address that within the realm of criminal law and enforcement, not within the realm of copyright."

Reaction. Sherwin Siy of the Public Knowledge (PK) stated in a release that "We're glad that the bill will allow Americans to unlock their phones. However, language recently added to the bill could be interpreted to make future unlocking efforts more difficult. We're disappointed that the House was unable to reach a compromise that would have prevented such barriers and still met the objectives of helping consumers."

The Electronic Frontier Foundation (EFF) also expressed opposition to the revised bill.

In contrast, Steven Berry, head of the Competitive Carriers Association (CCA), praised the bill as passed. He stated in a release that "Unlocking is not only beneficial for consumers, but it is also important for smaller and regional carriers who may not have access to the newest, most iconic devices. I am very pleased the House acted to reverse the Library of Congress’s unfortunate decision".

Matt Wood of the Free Press wrote in his prepared testimony for a SJC hearing on February 26, 2014 titled "An Examination of Competition in the Wireless Market" that "If wireless users could do more with devices they buy -- unlocking them, taking them to other carriers, using them easily on those networks, and protecting them against theft -- consumers would see their service choices increase and their out-of-pocket expenditures go down."

Wood also wrote that "in December 2013, FCC Chairman Wheeler obtained commitments from the five largest U.S. wireless carriers to more readily ``unlock´´ customers’ phones, at least after those customers had fulfilled any service contract or paid any early termination fee to the original carrier. The Chairman’s focus on unlocking was welcome, and clearly spurred by legislative efforts to address this problem undertaken by Senators Leahy, Klobuchar, Lee, Blumenthal, Franken, Grassley, and so many others. Yet the FCC's acceptance of voluntary commitments leaves the enforceability of such rights in question, and its focus on unlocking only after a customer has fulfilled her contract begs the question of the reason for permitting locking in the first place." (Footnote omitted.)

(Published in TLJ Daily E-Mail Alert No. 2,630, February 25, 2014.)