Unlocking Smartphones: Just a Start

I was quite pleasantly surprised when the Obama administration responded quickly for allowing cell phone users to unlock their phones.

There has been some misunderstanding about what unlocking a cell phone means. It basically only means that you can prevent the phone from being carrier-specific as they are manufactured and released to be. This actually has very limited application, however, because in the United States, the carriers are generally incompatible with one another anyway. That’s one of the reasons that despite the current prohibition against unlocking, most of the carriers will let you do it anyway. Most Verizon phones cannot be unlocked to run on AT&T. No AT&T phones can be reworked to get onto Verizon’s network. Really, of the four major carriers, only T-Mobile plays really nice.

Derek Khanna, the GOP wonderkind who was fired from a thinktank Republican congressional caucus for advocating a reworking of copyright laws and who initiated the petition, wrote a follow-up in The Atlantic stating that allowing the unlocking and jailbreaking/rooting* of phones is not enough:

Currently there is an exception for personal jail breaking (allowing individuals to install unapproved applications by altering the OS), but developing, selling, trafficking, or discussing the underlying technology is still illegal and there is no personal exceptions for tablets or other devices. This is unbelievable, especially when according to @Saurik, 23 million iOS devices are running a version of Cydia – a rough barometer of the number of devices jail broken. Until recently, personal jail breaking was illegal as well – meaning that all of the owners of those devices could be criminally liable. Unlocking new phones, as previously explained, is now illegal in all circumstances.

Accessibility technology has received an exception, but it is so narrow that it is nearly useless for persons who are deaf or blind. This exception was not the one requested on behalf of persons who are deaf and blind. And like the jail breaking, while there is a narrow exception for personal use — developing, selling, trafficking, or discussing the underlying technology is still illegal. What use is an exception for accessibility for personal use, if no one can develop the tools?

Technology to backup legally purchased DVDs and Blu-Ray discs for personal use is widely available and widely used but is completely illegal (in the US) – thus making millions of Americans criminals for a what most would consider non-infringing activity (if they own the content).

I agree with every one of his recommendations. I would, however, go a step further. The biggest problem in limiting legitimate smartphone usage is untouched by allowing jailbreaking, rooting, and unlocking. Namely, it’s the degree of control carriers exert over the phones in the first place. Daily Dot touches on it:

There’s another reason why Congress needs to step up to the plate: Open mobile devices and networks are key to future innovation. We’ve seen this before: In the 1960s policymakers finally put a stop to this kind of corporate nonsense in the landline market by allowing customers to attach their own devices to the network. The FCC’s “Carterfone” decision in 1968 ended AT&T’s practice of squelching attempts to innovate on its network or the devices that connected to it. The decision forced AT&T to allow unapproved devices to connect to its network—in this case, a device that helped increase the reach of rural telephone networks. More importantly, the move unleashed a wave of innovation in the U.S. and around the world. Telephone handset prices plummeted, answering machines and cordless phones became commonplace and computer modems were invented, ushering in today’s Internet era.

Once upon a time, I had a job that involved working on prototype smartphones. I primarily worked with devices that were under development from two sources. Both are names you would recognize. Both had a good product. Some of us preferred one, some of us preferred the other. Only one of these two companies would you associate with smartphones. The company that had the phones I preferred never released it in the United States, despite the fact that it was a fully operational device when I tested it. Why did one of these highly successful companies succeed in becoming a fixture in the smartphone world while the other remains just another electronics company? Because one of the companies got their devices onto the carrier networks. The other didn’t. So it wasn’t a question of which one made the better phone. It was a question of the carrier playing favorites.

To some extent, this is unavoidable. Carriers cannot endorse every every phone made by somebody somewhere. Even if they mean well. Except our carriers don’t. Unless you’re Apple, your phone only gets picked up by a carrier if it meets certain requirements that benefit the carrier and not the customer.

But companies that depend on the carriers are forced to play along — and as a result, they’re not allowed to compete on equal footing with giants like Apple and Samsung. The HTC One X is a high-end flagship device designed to compete squarely with the iPhone and Samsung’s Galaxy S III, but Verizon and Sprint aren’t carrying it: instead, Sprint offers a variant called the Evo 4G LTE, and Verizon is selling a downgraded device called the Droid Incredible 4G that simply doesn’t match up to higher-end competition. How is HTC to compete for Verizon customers with a weaker device? Why should HTC depend on struggling Sprint to market and sell a custom phone when it could just leverage its existing One X campaigns to take on Apple directly?

And because success in the wireless marketplace can only come with carrier support, innovation is stunted as companies design their future products around what they think carriers might want, not where the market or consumer behavior is heading. “Companies build phones that the carriers ask for instead of taking risks and testing new concepts in the marketplace,” says Vizio’s McRae. “The result is a collection of handsets that are fairly homogenous from a small number of brands.”

It’s worth noting here that not all carriers are equally closed. T-Mobile plays nice, by and large. AT&T is also at least somewhat flexible (though it’s tougher to get one with 4G connectivity from a non-approved device). On the other end, Verizon will not let any phone onto their network that isn’t branded for them and they place significant demands on what they’ll activate.

In addition to the innovation issue, there is also the customer freedom angle. Which is to say that the carriers are erecting their own barriers-to-exit. Even if I relocate to an area where T-Mobile is an option, as a Verizon customer I will have to replace all of my phones and tablets to make the transition. That’s a bigger barrier than any contract I’ve signed. It’s not just that my specific phone cannot work with AT&T’s network, but that I couldn’t purchase – and Samsung couldn’t make – one that would allow me to do so. Now, maybe in a competitive market such phones still wouldn’t exist, but cross-network compatibility is not a novel concept and it’s the carriers that have a lot of incentives to prevent it from happening. It doesn’t matter whether T-Mobile plays nice if nobody else does. An open phone is just a T-Mobile phone by default, or a crippled AT&T one.

There are a couple arguments against forcing carriers to open their networks to non-approved phones. The first is one of free markets, the second one of quality assurance.

The free market argument goes that if T-Mobile is playing nice, but Verizon isn’t, if this is important to consumers they will flock to T-Mobile. The market will work itself out. Or, alternately, the government simply shouldn’t get involved because it’s simply not the government’s place. The problem with both of these arguments is that we are facing a natural (though government-assisted) oligopoly. The capital costs are prohibitive for a new entrant to set things right. T-Mobile is open in part because they lack the capital costs to be a technically competitive network. Their policies are, I suspect, borne more of necessity and desperation than actual goodwill. Since we’re stuck with only four carriers, there is a public interest argument for disallowing competitive behavior that is made more strong by the fact that they exist on the shoulders of government-assigned frequency spectrum. It’s hard for a really free market to exist in this sort of environment.

The quality assurance argument is relatively weak and ultimately can be worked out. The argument here goes that Verizon disallows unauthorized phones because it reflects poorly on them if someone buys a cheap phone and thus gets crappy service. This is true, but only to an extent. This, however, applies to a whole bunch of areas where we do trust consumers to know the difference. If I buy a crappy television and DirecTV’s signal looks poor, that may reflect negatively on DirecTV but we wouldn’t allow DirecTV to demand that only their approved TV sets can be used with their service. If they tried to do that, we would probably respond to them the same way we responded when landline telco tried to do that.

I am sympathetic to Verizon et al demanding that phones they don’t approve of can’t be branded with their name. I’d even support some limitations on how those phones can be advertised (perhaps the requirement of a disclaimer stating that while the manufacturer makes the claim that it works on Verizon’s network, Verizon makes no such claim).

There is a third argument, but it’s a non-starter. That argument goes that if people can take their phones from one carrier to the next, it will kill the subsidization model where people pay a steeply discounted price for a phone with the condition of a two year contract. If only this were true! I hate the subsidy model. There are better ways even for cash-strapped customers who cannot easily afford the full price of a new phone. But the primary stick of the carriers is not locked phones, but rather early termination penalties. All they need is for those to reflect the subsidies, or go the T-Mobile route and have people purchase the phone in installments (all payments due upon service termination).

The solution, as far as I am concerned, is that the providers must provide handset makers the technical specs for compatibility with their network and are forced to either rely entirely on a SIM card for operability, or alternately that they have an automatic registration system for devices.

Lenovo is looking at entering the American market. Lenovo is the current maker of ThinkPad computers, of which I am a devotee. Whether Lenovo can succeed here on its merits is an open question. The ThinkPad brand is better known than the Lenovo brand and other computer makers – such as HP and Dell – have tried and failed in the North American market. But whether they succeed or fail should not depend on the customers, not the cooperation of four corporations here.

* – Unlocking means breaking the lock that connects a specific phone to a specific carrier. Often confused with unlocking, jailbreaking and rooting a device removes the barriers that prevent people from making unauthorized customizations of the device, ranging from installing carrier’s software to installing unauthorized or system-modifying software.