We recently reported that Congress had passed a bill designed to overrule a 2013 decision by the Librarian of Congress which severely limited the ability of cell phone owners to “unlock” (legally, at least) the software in their phones in order to move from one network to another. That bill has now been signed into law by the President, a development which FCC Chairman Wheeler promptly applauded.
You ask: why is this even a question?
Thanks to action by Congress – something we don’t get to say often, these days – it will soon once again be lawful to “unlock” your cell phone so as to use it with a different carrier.
You ask: why is this even a question?
Because of an earlier act of Congress – the Digital Millennium Copyright Act (DMCA), to be specific – whose Section 1201(a)(1)(a) provides that:
[n]o person shall circumvent a technological measure that effectively controls access to a work protected under this title.
The software in a phone is a “work protected under this title.” The locking software is a “technological measure that effectively controls access” to the phone. So to “circumvent” the software by unlocking it violates the DMCA. Even a first offense, if done “willfully and for purposes of commercial advantage or private financial gain," can draw a fine of up to $500,000 plus up to five years in the federal penitentiary.
The DMCA allows the Librarian of Congress, the official in charge of copyright matters, to make exceptions to the law. And indeed, he used to have an exception on the books that covered cell phone unlocking. Located in 37 C.F.R. § 201.40(b)(3) (2012), it permitted the "circumvention of technological measures that effectively control access to copyrighted work", i.e., "unlocking" of
[c]omputer programs, in the form of firmware or software, that enable used wireless telephone handsets to connect to a wireless telecommunications network, when circumvention is initiated by the owner of the copy of the computer program solely in order to connect to a wireless telecommunications network and access to the network is authorized by the operator of the network.
Note the requirement that unlocking (“circumvention”) be initiated by the “owner of the copy of the computer program” – i.e., the owner of the software in the phone. That’s you, right? When you’ve bought a phone, haven’t you also bought the software inside it? That’s what a reasonable person might think.
But judges do not necessarily conform to the usual standards of reasonableness. Three federal appeals judges in the Ninth Circuit, back in 2010, ruled that the purchaser of a device that included software did not also purchase the software, but only a license to use it. Delighted, the wireless phone companies took this decision to the Librarian of Congress, who duly issued an order, effective on January 27, 2013, that limited the above rule to handsets purchased before that date. Unlocking a phone acquired on or after January 27, 2013, became illegal, subject to the full weight of the DMCA and its five-year prison term.
The public – or the subset that pays attention to these things – was outraged. A White House petition reached 114,322 signatures before the White House responded favorably. The FCC Chairman weighed in to ask if the Librarian of Congress should be making these decisions. So did the tech blogs, many of them using far stronger language. But in fact there was not much the White House, the FCC, the courts, or even the bloggers could do. The only practical recourse lay with Congress. And Congress did not look like a good bet. Paralyzed by partisan gridlock and the upcoming November elections, it has recently managed to pass very little substantive legislation.
But Congress surprised us. Both houses recently passed a bill that overrules the Librarian of Congress, undoing his rule change and reinstating the previous exception, quoted above, to allow unlocking handsets for the purpose of changing providers.
The bill also directs the Librarian of Congress to conduct a rulemaking on whether the exemption should expand to include “any other category of wireless devices in addition to wireless telephone handsets” – presumably tablets and the like.
The President has promised to sign the bill into law. (Rusty on how this works? Review here.) We will let you know when he does. In the meantime, you can be researching other carriers’ coverage and pricing plans.
Deal comes just ahead of a threatened FCC rulemaking.
This week the FCC had planned to consider a rule that would require cell companies to allow “unlocking” of their phones for transfer to a competing carrier. Unlocking phones used to be legal, until a 2012 ruling by the Librarian of Congress – at the cell companies’ request – made it a criminal offense. The public backlash reached the White House, on whose behalf, reportedly, the National Telecommunications and Information Administration petitioned the FCC to take the issue away from the Librarian and make unlocking legal again.
On the very day the FCC was to address the matter, the cell companies’ trade association, CTIA-The Wireless Association, sent a letter to the FCC essentially capitulating. Five major carriers – AT&T, Sprint, T-Mobile, U.S. Cellular, and Verizon Wireless – have now agreed to unlock a phone on request after fulfillment of the (usually) two-year contract required when buying a subsidized phone through the carrier, or within one year of buying a prepaid phone. Matter closed.
Or maybe not.
While a definite improvement, CTIA’s action solves only part of the problem. If I buy a subsidized phone from Carrier A, I certainly owe them two years of payments on the phone. But I should be able to keep up just the phone payments, and stop paying Carrier A for service as well, if I want to take the phone to Carrier B for service. CTIA’s position does not allow this. T-Mobile is the only major company so far that properly separates the phone and service payments. We hope the others follow its lead.
Two additional caveats: First, CTIA’s newly announced policy is not yet in effect. According to CTIA, the policy must first be formally adopted into the “CTIA Consumer Code for Wireless Service”. The letter does not indicate how long such adoption might take, but once it’s happened, part of the policy will be implemented within three months and the rest within 12 months. The letter does not indicate which parts are on the three-month fast track and which aren’t.
Second, CTIA’s letter points out the technical limitations on “unlocking”:
“[U]locking” a device will not necessarily make a device interoperable with other networks – a device designed for one network is not made technologically compatible with another network merely by “unlocking” it. Additionally, unlocking a device may enable some functionality of the device but not all (e.g., an unlocked device may support voice services but not data services when activated on a different network).”
Most modern smartphones will not be subject to these limitations, as the same hardware will support nearly every carrier almost anywhere in the world. But the possibility remains that an unlocked phone may not work properly on some other carrier’s network. The only way to know is by checking with the destination carrier.
(To those curious about the initials “CTIA,” we defer to this footnote by Justice Scalia of the U.S. Supreme Court in City of Arlington, Texas, v. FCC: “CTIA is presumably an (unpronounceable) acronym, but even the organization’s website does not say what it stands for. That secret, known only to wireless-service-provider insiders, we will not disclose here.”)
Sister agency asks FCC to adopt a rule requiring carriers to unlock phones on a customer’s request.
We reported earlier this year on a decision by the Librarian of Congress that overnight made it illegal for consumers to unlock their cell phones – that is, to run software that lets the phone work with a different wireless carrier. The Librarian’s decision discourages customers from straying to a carrier’s competitor because doing so, if your phone is locked, usually means having to pay for a new one.
Almost everyone thought the anti-unlocking rule was a bad idea: the FCC chairman, the White House, 114,000 petition signers, and vast numbers of outraged bloggers. The only fans of the rule, it seems, are the Librarian himself and the wireless carriers that requested the change.
Now the National Telecommunications and Information Administration (NTIA), which represents the White House on spectrum-related matters, has filed a Petition for Rulemaking asking the FCC to adopt a rule that requires a carrier to unlock a phone (or tablet) at the customer’s request. The rule would apply even while the customer is under the usually mandatory contract that goes with buying the phone from the carrier at a discount. (Adoption of the rule might require the carriers to separate their phone-selling contracts from their service contracts, a step T-Mobile has already taken.) The rule would also apply if the customer has completed the contract or paid an “early termination fee” to end it prematurely.
NTIA argues the rule will increase competition among service providers, assist persons traveling outside their usual coverage area, promote the market for used phones and tablets, and encourage the donation of used phones and tables to charity.
One could ask why the White House went through NTIA, instead of just telling the FCC what to do. Most federal agencies, including NTIA, in fact report to the President. The FCC is different, though, having been created by Congress as an “independent agency.” The President appoints its Commissioners, with the advice and consent of the Senate, but otherwise has no control over the FCC’s actions. NTIA had to send in its petition just like we do for our clients.
One could also ask why NTIA filed its petition with the FCC, not with the Librarian of Congress, who is, after all, the source of the problem. His justification for phone locking arises from copyright law, not communications law. The problem is that NTIA did make its arguments to the Librarian, who went ahead anyway to issue the ruling that got everybody’s knickers bunched up. NTIA’s new petition is thus something of an end-around play, seeking to enlist the FCC (whose officials have already expressed sympathy for NTIA’s position) in an effort to bypass the effect of the Librarian’s decision.
According to NTIA, the FCC’s broad authority to regulate wireless carriers enables it to mandate phone unlocking. There is nothing in principle that stops different agencies (the Librarian and the FCC) from having authority under different statutes (the Copyright Act and the Communications Act) over the same behavior (unlocking cell phones) by the same parties (the wireless carriers). It will be interesting to see how the FCC views the scope of its own powers in this situation.
FCC and NTIA personnel routinely collaborate on matters relating to the radio spectrum, and indeed, NTIA was careful to frame its request as one coming under the FCC’s spectrum responsibilities. It is rare, though, for NTIA to involve itself in the business dealings of the FCC’s regulatees. It remains to be seen whether the wireless carriers will oppose the new rule, which is probably their initial impulse, or take the outrage to heart and go along gracefully with the change.
Even if the FCC ultimately sides with NTIA, don’t expect the predicted benefits any time soon. Rule changes typically take the FCC at least two years, and sometimes twice or even three times that. At this point, the FCC has not even agreed to open a proceeding in response to NTIA’s petition. Before any rules can be adopted, the FCC ordinarily would take comments and reply comments on the petition, and then issue a notice of proposed rulemaking, accept more comments and reply comments in response, and eventually issue a report and order. Still, it’s a reasonable assumption that a petition from NTIA may go through the process more quickly than a petition filed by most anybody else. We will keep you posted as the matter progresses.
See and hear Mitchell Lazarus bypass his limited typing skills with a short video interview on cell phone unlocking.
Following up on his recent post on the cell phone unlocking ban, our colleague, Mitchell Lazarus, had the opportunity to speak with Colin O'Keefe of LXBN on the matter. Happily, the interview was recorded and is now available for all to see - just click on the video below. In the brief interview, Mitchell explains the latest developments and offers his thoughts on why Congress is likely to take action on the ban soon.
White House, FCC gang up on Librarian of Congress, seek reversal of recent rule.
If you buy something, it’s yours, to do with as you want. Right?
Don’t be silly.
We first encountered the concept of limited ownership with purchases that lacked any physical existence, like e-books and online music. If I buy an online movie from Amazon, I can watch it on my Kindle Fire forever – but I can’t donate it to my local library. I can buy a book for my Kindle reader, but having read it, cannot pass it on to my wife. We don’t fully own these things because they’re not really things. They are made of bits, not atoms. What we buy is only a license for particular uses.
But when we buy an actual thing, made of atoms, then it’s ours, and we can use it in any way that we want.
Not any more. Not if the thing is a cell phone.
Most people buy a phone at much less than the real price. I paid Verizon $200 for mine, which actually costs more like $700. Over the next two years Verizon will recoup the difference out of my monthly payments. If I leave Verizon before the two years are up, they will charge me an “early termination fee” to make up the shortfall. That’s part of the deal that got me a $700 phone for $200.
But now let’s say my two years are up. The phone is paid for. My contractual obligations to Verizon are satisfied. Now I can walk away from Verizon and use the phone with Sprint-Nextel’s service instead. Right?
Until a few days ago, the answer would have been yes. Not any more. Worse, disconnecting the phone from Verizon is not just a breach of my contract with Verizon. It’s a violation of federal law. Specifically, a violation of the Digital Millennium Copyright Act (DCMA) – the same statute that allows draconian limits on electronic books, movies, and music. In principle, at least, moving the phone to a Verizon competitor could bring jail time.
A phone configured for a particular carrier is said to be “locked.” Before it can be used with a different carrier, it must be “unlocked.” It is possible to buy an unlocked phone and take it to the carrier of your choice. But that has a downside: you will pay full price for the phone ($700, in my case) and probably pay the same monthly carrier rate as someone who bought the same phone at a steep discount. It is also possible to unlock the phone you already have, just by downloading and running software from the Internet. Not hard to do – but it might get you hauled up before a federal district judge.
(Unlocking is different from “jailbreaking” an iPhone – what Android users call “rooting”. Jailbreaking and rooting are software changes giving access to internal software files which, if mishandled, can render the phone an inert brick. They void the warranty, for obvious reasons, and they block automatic updates. But they also make it possible to use certain sophisticated apps that won’t run on an unmodified phone.)
The unlocking problem starts with this one sentence in the DCMA:
“No person shall circumvent a technological measure that effectively controls access to a work protected under this title.” 17 U.S.C. § 1201(a)(1)(a).
The term “work” here covers the software in the phone. Unlocking the phone “circumvents a technological measure” that limits access to a particular carrier. So the DCMA prohibits unlocking.
But the DCMA also authorizes the Librarian of Congress to make exceptions to the law. One such exception authorizes jailbreaking (or rooting). It allows “[c]omputer programs that enable wireless telephone handsets to execute lawfully obtained software applications, where circumvention is accomplished for the sole purpose of enabling interoperability of such applications with computer programs on the telephone handset.” 37 C.F.R. § 201.40(b)(3). Oddly, however, this exception does not apply to tablets. In the Librarian’s view, “the record did not support” extending it to tablets. So jailbreaking your tablet remains a federal offense.
There used to be a parallel exception that allowed unlocking phones. It permitted “[c]omputer programs, in the form of firmware or software, that enable used wireless telephone handsets to connect to a wireless telecommunications network, when circumvention is initiated by the owner of the copy of the computer program solely in order to connect to a wireless telecommunications network and access to the network is authorized by the operator of the network.” 37 C.F.R. § 201.40(b)(3) (2012).
But in an order dated October 22, 2012, which took effect on January 27, the Librarian limited this exemption to handsets bought before January 27. Unlocking a phone acquired after that date is illegal.
How did the Librarian explain the sudden change? Unlocking a phone entails modifying its software. Until 2010, most people would agree that when you bought a phone, you also bought the software inside it, so the software was yours to modify. But a decision by the U.S. Court of Appeals for the Ninth Circuit that year suggested otherwise. As the Ninth Circuit saw it, the phone buyer acquires only a license to use the software, not ownership. The wireless phone industry, which opposes unlocking, used this case to argue that the carrier still controls the software after the sale. It also insisted that many unlocked phones are available on the market, so there is no need (it said) for consumers to unlock the ones they buy from carriers. (This does not make much sense to us, either.) The rationale for letting people unlock “legacy” phones is hard to make out, but may simply reflect a reluctance to disturb the rights people thought they had when they made the purchase.
The tech blogs were outraged at the new anti-unlocking rule, and particularly at the fact of somebody with the word “librarian” in his title making decisions about advanced technology. A petition on the White House web site to reverse the decision has drawn over 114,000 signatures. The White House itself agrees the decision is wrong. Now the FCC Chairman has stepped in as well, asking if the Librarian of Congress is the right person to be making these kinds of decisions
The Library of Congress long having been central to the U.S. copyright scheme, its Librarian has the job of interpreting the copyright statute and writing the rules. This arrangement made some sense in the days of paper and ink. Now, though, when copyright increasingly concerns the quantum-mechanical behavior of electrons in silicon, maybe some of the copyright rules should come under an agency having the needed technical expertise – such as, for example, the FCC.
In the meanwhile, if Congress can find time in its busy schedule of naming post offices, it may overcome partisan gridlock long enough to overrule the Librarian. We’ll let you know.
[Copyright © CommLawBlog 2013. All rights reserved. Any attempt to modify this post is a violation of federal law.]
But separate opinion questions CRJ’s constitutionality
The U.S. Court of Appeals for the D.C. Circuit has released its decision in SoundExchange v. Librarian of Congress, No. 08-1078, affirming the royalty rate set by the Copyright Royalty Judges (CRJ) for performance of sound recordings by satellite radio services, i.e., XM Sirius. The CRJ are the members of the Copyright Royalty Board. While there is little surprising in majority opinion, a separate concurring opinion from one member of the three-judge panel could spell trouble for any decision coming out of the CRJ for the foreseeable future.
SoundExchange had appealed a 2008 CRJ ruling requiring satellite radio services to pay royalties in the amount of six percent of their gross revenue in 2007, with the rate eventually increasing to eight percent of their gross revenue in 2012. The CRJ also had to attribute a portion of the royalty for the making of an “ephemeral copy” of each sound recording played. (The ephemeral copy is the digital copy stored by the satellite operator prior to playing the sound recording; because it is a “reproduction” of the sound recording, not a "performance" of the sound recording, a separate royalty rate is required.)
SoundExchange argued that the CRJ's decision was arbitrary and capricious. According to SoundExchange, the CRJ, in setting the rates, improperly over-emphasized some considerations and under-emphasized others. The Court disagreed, holding that the CRJ acted well within the bounds of its discretion. No surprise there.
On the issue of royalties for the ephemeral recording which is a component of satellite delivery, though, the Court remanded the case back to the CRJ for further consideration. All parties – including, curiously enough, the Librarian of Congress – agreed that the CRJ had messed up on that point. In addressing the rate for ephemeral royalties, the CRJ had essentially punted, concluding that such ephemeral recordings are of little value and, therefore, do not warrant a separate rate. The CRJ announced that, rather than set a separate rate for ephemeral recordings, it would simply treat that rate as “embodied” in the performance rate. Since the ephemeral recording rate is specifically mandated by one section of the Copyright Act while performance rates are mandated by another, it was pretty clear that the CRJ’s short-cut would not withstand scrutiny – and it didn’t. (Even the Librarian of Congress agreed on this point.)
The parties did disagree on what the Court should do about ephemeral rates. The Librarian of Congress argued that that issue should be sent back down to the CRJ so that it could take another crack. On the other hand, the adverse private parties – i.e., SoundExchange and Sirius/XM – both asked the Court not to remand; they were all for having the Court set the ephemeral rate itself. The Court declined to take that particular bait, however – it remanded the ephemeral recording rate question back to the CRJ for further consideration.
The majority decision is not particularly groundbreaking, but the concurring opinion of Judge Kavanaugh is a real eye-opener. He raises the startling point that the CRB is unconstitutional because (among other factors) of the novel selection process for its members -- the CRJ -- which does not include either appointment by the Prez or Senate confirmation. And even more startling, despite his apparent conclusion that it’s unconstitutional, he concludes that, since no party raised that issue, the Court does not need to address it. While there is a conventional judicial doctrine of avoiding constitutional questions where possible, it’s a little surprising that Judge Kavanaugh was content to take that path here. After all, the Court ends up remanding the matter to the body that is, or may be, unconstitutional. You might think that, before it ships the issues and the parties back to a particular forum, the Court would want to satisfy itself that that forum is constitutionally valid. Apparently not.
If nothing else, Judge Kavanaugh’s opinion casts a dark cloud over any decision coming out of the CRJ unless and until the question of the constitutionality of the CRB/CRJ arrangement is resolved. So while this latest Court decision does not itself directly affect broadcasters, it may provide ammunition for broadcasters finding themselves on the wrong side of a CRJ ruling.