Cell Phone Unlocking Doesn’t Stifle Innovation

Michael Moroney is out with a confusing piece in Roll Call today arguing against allowing consumers to unlock their cell phones and use them on other plans. Earlier this year, the White House sided with a grassroots petition that received more than 114,000 signatures to allow cell phone unlocking. A current bill in Congress proposes to do just that but for the moment, it is still illegal. In his column today, Moroney argues that such regulation allows tech companies to recoup the huge amounts of money they spend towards R&D to create such products:

The DMCA is supposed to prevent digital piracy by making it illegal to disable digital rights management software, and it applies to the device locks that carriers put on cellphones — primarily to prevent phones they sell from being used on other carrier networks. When tech companies spend billions of dollars on research and development, they have to recoup those costs and make a profit to stay on the cutting edge of innovation.

Moroney continues on to note that the exclusivity agreement Apple had with AT&T allowed Steve Jobs’s firm to recoup their investment while AT&T had the ability to sell its customers high-cost data plans. Did Apple really need the exclusivity deal with AT&T to profit off the iPhone? Of course not! It makes a huge profit margin on the product alone. Moroney’s basic argument is that without the ability to agree to such deals, Apple would have had no incentive to invent the iPhone and consumers would be worse off today.

Does anyone actually believe that?

All that exclusivity deal did was force consumers to pay higher data fees, part of which AT&T paid to Apple in the form of subsidies as part of the agreement. Consumers are the main losers. In a world where cell phone unlocking is legal, consumers can shop around for the best data plan and carriers must compete on price. Apple earns less without the exclusivity deal, but it still makes a tidy profit that encourages them to continue investing in new products. Consumers save a bit of money overall and no innovation is lost. This is how intellectual property laws are supposed to function.

Instead, our copyright laws protect the profits of Apple and AT&T at the expense of consumers. The companies’ desire to keep cell phone unlocking illegal is pure rent-seeking. Moroney’s article only helps them get away with it.


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