The major wireless carriers have a strong incentive to prevent unlocking. Carriers like Verizon or AT&T sell most of their smartphones with a very heavy subsidy, which is how you can buy a brand new iPhone for $200 instead of $650 "unlocked". Of course this is a nice incentive to have you sign a 2 year contract for at least $80 a month (the cheapest Verizon plan offered on Apple.com as of this writing--and that's a whopping 300MB of data).
Now if this is how carriers can boost sales, there's nothing wrong there. It's marketing. We're used to that.
But in an odd quirk of digital copyright law and through, of all institutions, the Library of Congress, the new prohibitions on unlocking phones appear to step over a line previously unchallenged.
The Digital Millennium Copyright Act (DMCA) is a U.S. law that enforces international treaties regarding the regulation and protection of copyright. It grants the Library of Congress power to provide exemptions for "noninfringing uses". Copyright has traditionally, and judicially, been limited by certain key exempting principles in the U.S. The most familiar is usually called the first sale doctrine. That principle states that once a consumer legally purchases an item protected by copyright--a CD or book, for example--he or she has the legal right to pass that item on without permission from the copyright holder. It's an important tenet that allows people to share books and music and develops a robust second-hand marketplace which is crucial for a smooth economy and to prevent waste. Check out this article stub for more information.
The use of the first sale doctrine has been challenged by the development of easily copyable and transferable digital information. Now consumers can break copyright by copying their legally purchased material and sending it along without relinquishing their own version.
And now these worlds collide in a smartphone. It's a product that can only be owned by one person at a time, yet the software and firmware on it is protected by copyright. And DMCA protections specifically prohibit "circumvention" technologies except in very limited cases, like creating braille versions of books for the blind. So without a specific exemption, it is illegal to circumvent the copyrighted item--the restrictive firmware--in order to sell your phone for use on a new carrier.
CTIA-The Wireless Association, a carrier trade group, has successfully lobbied to restrict the unlocking of phones under the DMCA from now on. Their principle argument is that smartphone owners do not own the associated software, they are merely licensees. And in fact, according to the Library of Congress' interpretation of recent judicial cases, the carriers can assure that smartphone consumers are only granted licensee status by stating it's a license agreement and restricting consumers' ability to modify the software. As long as it's in the fine print, it's real.
What this all results in is a complicated mess of copyright and first sale where you own the device but not the means to make it available on the broader market. This is to protect the carriers' ability to recoup their subsidy (something that is also protected by their own Early Termination Fees). Now you have to specifically ask permission from the carriers to unlock your phone, even after your two year contract is up. It may be very likely they'll do so. But if not, you'd be breaking the law to sell your phone for use on another network.
Now the caveats and extra bits of information. As The Verge points out and as is clear in the ruling itself, this does NOT apply to jailbreaking and rooting a device. These are means to allow modifications to the basic software, like iOS or Samsung's TouchWhiz. While I believe this breaks some carriers' warranties, it is upheld as perfectly legal.
Also, this ruling does not apply to new phones purchased before January 26th (90 days after the original ruling) or to "legacy" phones--old phones that may have been unused for some time.
However, it is certainly a bizarre case where a single consumer product encapsulates the balance between critical aspects of our legal system. On one hand, copyright holders are entitled to protection under the law. On the other, consumers have the right to do with their property as they see fit. And frankly, extending the same broad class of copyright protections to restrictive smartphone firmware, well.... I'm not sure it's in the same category as protecting music and literature.
Uh oh, did that just bring up software patents? Another time, perhaps.
For more entertaining information, check out this story over at Marketplace.