[Senate Report 113-212]
[From the U.S. Government Publishing Office]
113th Congress Report
SENATE
2d Session 113-212
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UNLOCKING CONSUMER CHOICE AND WIRELESS COMPETITION ACT
_______
July 17, 2014.--Ordered to be printed
_______
Mr. Leahy, from the Committee on the Judiciary,
submitted the following
R E P O R T
[To accompany S. 517]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to which was referred the
bill (S. 517), to promote consumer choice and wireless
competition by permitting consumers to unlock mobile wireless
devices, and for other purposes, having considered the same,
reports favorably thereon, with an amendment, and recommends
that the bill, as amended, do pass.
CONTENTS
Page
I. Background and Purpose of the Bill...............................1
II. History of the Bill and Committee Consideration..................5
III. Section-by-Section Summary of the Bill...........................5
IV. Congressional Budget Office Cost Estimate........................7
V. Regulatory Impact Evaluation.....................................8
VI. Conclusion.......................................................8
VII. Changes to Existing Law Made by the Bill, as Reported............9
I. Background and Purpose of the Bill
A. BACKGROUND
As of January 2014, 90% of American adults own a cell
phone, 58% percent own a smartphone, and 40% own tablets.\1\
Wireless devices like cell phones, smart phones, and tablets
empower consumers, facilitating communication, education, work,
and entertainment for Americans of all ages. Network carriers
that operate voice and data networks often sell these devices
in conjunction with service contracts, at a reduced cost in
exchange for the consumer's agreement to use the carrier's
voice or data plan for a predetermined period, often two years.
Carriers typically place software on the device that prevents
it from being used on another carrier's network.\2\ This is
often referred to as ``locking'' the device; efforts to alter
this software are typically referred to as ``unlocking'' the
device.
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\1\See Mobile Technology Fact Sheet, Pew Research Internet Project
(January 2014),
http://www.pewinternet.org/fact-sheets/mobile-technology-fact-sheet.
\2\See Consumer and Governmental Affairs Bureau, Consumer Guide:
Mobile Phone and Device Unlocking FAQ's, Federal Communications
Commission (Feb. 24, 2014), http://www.fcc.gov/
device-unlocking-faq (``Unless you purchased a phone or device
specifically sold as `unlocked' at the point of purchase, you should
assume that it is locked to a specific service provider's network. This
is true whether you purchase the device from a service provider, at a
general retail outlet (in person or on the web), or through a third-
party.'').
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Consumers whose contracts with their original carrier have
expired, or who have otherwise complied with the applicable
contractual terms, may wish to continue using their old devices
with new carriers who may offer better prices or better
coverage. Alternatively, they may wish to give their old phone
to a family member or friend or sell it to another consumer.
Smart phones and tablets, for example, can cost many hundreds
of dollars--sometimes more than $500 each--and many consumers
would like to choose which network they connect to without
incurring the substantial cost of purchasing a brand new
device. From 2006 until 2012, an exemption to the Digital
Millennium Copyright Act (DMCA) expressly permitted cell phone
users to ``unlock'' their cell phones when their contract
expired, allowing them to connect to their chosen wireless
network. The Unlocking Consumer Choice and Wireless Competition
Act restores that exemption to promote consumer choice.
Some carriers, including the four largest national
carriers, have established principles under which they will
help consumers unlock their phones, and the Committee expects
that most unlocking will continue to be done by wireless
carriers at the request of their customers.\3\ There are,
however, circumstances in which additional avenues for
unlocking may be preferable over attempting to unlock through
the carrier. For example, some carriers require customers to
bring their devices to the carrier's physical store to have
them unlocked.\4\ For those customers who do not live near the
carrier's retail location--perhaps because they live in a rural
area, because they have limited mobility, or because the device
was a gift from a friend or family member who lives in another
part of the country--this requirement may prevent them from
being able to get their devices unlocked.
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\3\Consumer Code for Wireless Service, CTIA--The Wireless
Association, http://www.ctia.org/docs/default-source/default-document-
library/ctia-consumer-code-for-wireless-service.pdf; see also Letter
from Steve Largent, President and CEO, CTIA--The Wireless Association,
to Thomas E. Wheeler, FCC Chairman, and Mignon L. Clyburn, Jessica
Rosenworcel, Ajit Pai, & Michael P. O'Reilly, FCC Comm'rs (Dec. 12,
2013), https://apps.fcc.gov/edocs_public/attachmatch/DOC-324664A1.pdf.
The carriers that established the unlocking principles have agreed to
fully implement them by early 2015. The principles do not address
questions related to unlocking phones by third parties for bulk resale.
See Letter from Senators Richard A. Blumenthal, Amy Klobuchar, Cory A.
Booker, Mark R. Warner, and Edward J. Markey to Thomas E. Wheeler, FCC
Chairman (April 29, 2014), www.blumenthal.senate.gov/download/letter-
to-fcc-on-bulk-unlocking; Letter from Thomas E. Wheeler, FCC Chairman
to Senator Richard A. Blumenthal (June 17, 2014),
www.blumenthal.senate.gov/download/fcc-reply-to-bulk-unlocking-letter-
from-sen-blumenthal.
\4\See Consumer and Governmental Affairs Bureau, Consumer Guide:
Mobile Phone and Device Unlocking FAQ's, Federal Communications
Commission (Feb. 24, 2014), http://www.fcc.gov/ device-unlocking-faq
(``Contact your mobile wireless service provider. Devices can be
unlocked with unlock codes or other software updates provided to you by
your provider. Some providers will complete the unlocking process in-
store, others will unlock your device remotely and automatically.'').
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While it is not particularly difficult for a tech-savvy
phone owner to unlock her device independently, it is possible
that those who unlock their own devices to connect to their
chosen network may violate Section 1201(a)(1) of the DMCA,
which prohibits the circumvention of technological measures
that control access to copyrighted works.\5\ Because of the
availability of civil or criminal sanctions under the DMCA,
consumers with a legitimate interest in unlocking their
wireless devices may be afraid to do so.
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\5\17 U.S.C. 1201(a).
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From 2006 until 2012, because of an exemption granted by
the Librarian of Congress pursuant to Section 1201(a)(1) of the
DMCA, consumers had a guarantee that they were not breaking any
laws when they unlocked their own cell phones simply in order
to connect to their chosen network. The DMCA gives the
Librarian of Congress the authority to conduct a triennial
review process through which it may grant exemptions to anti-
circumvention measures in Section 1201(a)(1). Beginning in
2006, the Librarian granted an exemption that allowed users to
unlock their own cell phones in order to connect to their
chosen network, provided that the carrier authorized the
connection. The Librarian's exemption was narrowly focused on
cell phones, which were then the dominant mobile digital
devices on the market. The exemption was also granted by the
Librarian in 2010.\6\
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\6\See Exemption to Prohibition on Circumvention of Copyright
Protection Systems for Access Control Technologies, 71 Fed. Reg. 68472
(Nov. 27, 2006); Exemption to Prohibition on Circumvention of Copyright
Protection Systems for Access Control Technologies, 75 Fed. Reg. 43,825
(July 27, 2010).
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In its 2012 rulemaking, the Librarian chose not to
recognize an ``unlocking'' exemption for new cell phones
purchased after January 26, 2013, finding that an adequate
record had not been established pursuant to the Librarian's de
novo review requirement.\7\ The Librarian's decision prompted a
strong public reaction: a ``We the People'' petition on the
White House website opposing the Librarian's decision garnered
over 110,000 signatures.\8\ On March 4, 2013, in response to
the ``We the People'' petition, the White House said that it
would ``support a range of approaches'' to permitting mobile
phone unlocking.\9\
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\7\See Exemption to Prohibition on Circumvention of Copyright
Protection Systems for Access Control Technologies, 77 Fed. Reg. 65260
(Oct. 26, 2012); id. at 65266 (``[I]n light of carriers' current
unlocking policies and the ready availability of new unlocked phones in
the marketplace, the record did not support an exemption for newly
purchased phones.'').
\8\Make Unlocking Cell Phones Legal, The White House: We The
People, https:// petitions.whitehouse.gov/petition/make-unlocking-cell-
phones-legal/1g9KhZG7.
\9\R. David Edelman, It's Time to Legalize Cell Phone Unlocking,
The White House: We The People (March 4, 2013), https://
petitions.whitehouse.gov/response/its-time-legalize-cell-phone-
unlocking.
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On March 11, 2013, Senators Leahy, Grassley, Franken, Lee,
Hatch, and Klobuchar introduced the bipartisan Unlocking
Consumer Choice and Wireless Competition Act, S. 517, to
restore the exemption for cell phone unlocking that had been in
effect in previous years. Senators Thune and Whitehouse were
also cosponsors. Chairman Goodlatte subsequently introduced
identical legislation in the House of Representatives, and the
House passed a modified version of the legislation in February
2014 (H.R. 1123).
B. PURPOSE OF THE LEGISLATION
The Unlocking Consumer Choice and Competition Act, S. 517,
ensures that individual consumers are not prevented from
unlocking their phone for the legitimate purpose of connecting
to a wireless network of their choice. While many network
carriers already sell unlocked phones, or will unlock phones
for consumers under the terms of their contracts, the Committee
recognizes that many consumers want the ability to unlock their
cell phones themselves--or receive assistance doing so--for
purposes of connecting to a network of their choice. The
exemption created by the Librarian of Congress from 2006-2012
permitted users to unlock their cell phones for this purpose
without fear of penalties under the DMCA. The Unlocking
Consumer Choice and Competition Act restores that exemption
until the Librarian of Congress' next triennial rulemaking
under the DMCA, promoting flexibility for consumers and
enhancing competition in the wireless market. A further
provision instructs the Librarian of Congress to consider,
during its next rulemaking, whether to allow unlocking for
wireless devices other than cell phones, such as tablets.
The legislation provides two ways that cell phones may be
unlocked, in addition to authorized unlocking by a device
owner's wireless carrier. First, it restores the Library of
Congress' 2010 exemption so that consumers may unlock their
cell phones themselves in order to change carriers consistent
with the terms of their contracts, provided that access to the
chosen network is authorized. Second, the legislation ensures
that cell phone owners who lack the technological understanding
to unlock their phones can direct others to do the unlocking
for them, solely to enable the owner or a family member to
connect to a new wireless network.
Neither of the methods for unlocking recognized by the
legislation excuses owners from compliance with applicable
service agreements they may have with the wireless carriers
that service their phones. Such agreements may, for example,
require fulfillment of an applicable postpaid service contract,
device financing plan, or payment of an applicable early
termination fee. Moreover, nothing in the bill permits third
parties to unlock devices independently of the device owner's
direction, or for a purpose other than allowing the owner or a
family member to connect to a new wireless network. As the
Librarian of Congress explained with respect to the scope of
permissible commercial activity under the 2010 determination
that is reinstated by the bill, ``the designation of this class
will not benefit those who engage in the type of commercial
activity that is at the heart of the objections of opponents of
the proposed class: the `bulk resellers' who purchase new
mobile phone handsets at subsidized prices and, without
actually using them on the networks of the carriers who market
those handsets, resell them for profit. The type of commercial
activity that would be permitted would be the resale of used
handsets after the owners of the handsets have used them and
then given or sold them to somebody else, who then resells them
just as a used bookstore sells used books.''\10\
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\10\Exemption to Prohibition on Circumvention of Copyright
Protection Systems for Access Control Technologies, 75 Fed. Reg.
43,825, 43,831-32 (July 27, 2010).
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The legislation also creates no new obligations for cell
phone manufacturers or wireless carriers, such as how a carrier
may choose to process unlocking requests or provide unlocking
codes to third parties.
Section 2(b) of S. 517 instructs the Librarian of Congress
to consider, as part of its next triennial rulemaking under the
DMCA, whether to allow unlocking for wireless devices other
than cell phones, such as tablets, many of which may also be
locked by carriers. This instruction acknowledges the growing
importance of tablets and the potential for consumer harm if
used tablets cannot be taken to a network of the consumer's
choice, while respecting the independence and judgment of the
Librarian of Congress and the rulemaking process established
under existing law for exemptions to the anti-circumvention
prohibitions of the DMCA.
While there are larger ongoing debates about the scope and
application of Section 1201 of the DMCA, as well as other
aspects of phone unlocking, those issues are not addressed by
the legislation, which makes no changes to Section 1201 of the
DMCA. The bill respects the independence of the Library of
Congress under existing law to conduct the triennial
rulemakings set forth in Section 1201(a)(1) and does not alter
the authority of the Librarian in future rulemakings. Instead,
the legislation takes a narrow, targeted approach to protect
consumers and promote competition in the wireless market by
allowing consumers, and those acting at their direction, to
transfer their phones to alternative providers as described in
the bill.
II. History of the Bill and Committee Consideration
On March 11, 2013, Senators Leahy and Grassley introduced
the Unlocking Consumer Choice and Wireless Competition Act.
Senators Franken, Hatch, Lee, and Klobuchar were original
cosponsors. The bill was referred to the Committee on the
Judiciary.
The bill was placed on the Committee's agenda on June 26,
2014. The Committee considered S. 517 on July 10, 2014.
Senators Leahy and Grassley offered a substitute amendment
which added a provision allowing consumers to seek help
unlocking their devices from a third party. Senators Coons and
Blumenthal were added as cosponsors of the bill during
Committee consideration of the substitute amendment.
The substitute amendment was accepted by a voice vote
without objection.
The Committee then voted to report the Unlocking Consumer
Choice and Wireless Competition Act, with an amendment in the
nature of a substitute, favorably to the Senate by voice vote.
III. Section-by-Section Summary of the Bill
Section 1--Short title
This section provides that the legislation may be cited as
the ``Unlocking Consumer Choice and Wireless Competition Act.''
Section 2--Repeal of Existing Rule and Additional Rulemaking by
Librarian of Congress
Subsection (a): This subsection repeals Paragraph (3) of 37
C.F.R. Sec. 201.40, as amended and revised by the Librarian of
Congress on October 28, 2012 and replaces that text with the
equivalent paragraph that was in effect on July 27, 2010.\11\
In so doing, the subsection repeals the Library of Congress'
2012 cell phone unlocking exemption, and reinstates the
exemption that was granted pursuant to the triennial rulemaking
conducted by the Librarian of Congress in 2010. The exemption
created by the bill will remain in effect until the Library of
Congress conducts its next triennial rulemaking and reaches a
new decision on whether or not the record supports such an
exemption. This subsection does not alter any other section of
the Librarian of Congress' 2010 or 2012 rulemakings, nor does
it alter the authority of the Librarian of Congress in future
rulemakings.
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\11\Exemption to Prohibition on Circumvention of Copyright
Protection Systems for Access Control Technologies, 75 Fed. Reg. 43,825
(July 27, 2010).
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Subsection (b): This subsection directs the Librarian of
Congress to consider, as part of its next regularly scheduled,
triennial rulemaking, whether to extend an unlocking exemption
to ``other categor[ies] of wireless devices.'' The subsection
instructs the Register of Copyrights to consult with the
Assistant Secretary for Communications and Information at the
Department of Commerce before presenting a recommendation on
this matter to the Librarian of Congress, as is required under
17 U.S.C. Sec. 1201(a)(1)(C). The Librarian's determination
shall be conducted as a part of and subject to the applicable
rules governing the Librarian's triennial rulemaking under 17
U.S.C. Sec. 1201(a)(1).
Subsection (c): Some consumers may find it challenging to
unlock their devices. Accordingly, Subsection (c) allows owners
of mobile devices to seek help unlocking their devices from a
third party, and provides that they will likewise be able to do
so under any future exemption applied to other wireless devices
under Subsection (b), or future unlocking exemptions granted by
the Librarian of Congress as described in Subsection (c)(2). In
authorizing consumers to seek unlocking assistance, the
Committee notes the limited circumstances under which phone or
mobile device unlocking will occur. Unlocking a cell phone or
other wireless device enables the device owner to connect his
or her device to a wireless telephone network of his or her
choice, and does not enable the device owner, or a third party
on an owner's behalf, to engage in other activities that
infringe copyrighted works. Unlike many other situations where
an exemption from the circumvention prohibition may be sought
or granted, unlocking a cell phone to connect to a wireless
network typically does not facilitate copyright infringement.
The ``direction of the owner'' extension is limited in
scope. A person authorized by an exemption to unlock their
wireless telephone handset or other wireless device may
authorize a third party to unlock the device for them where:
(1) the circumvention is done solely to connect to a wireless
telecommunications network; (2) the person directing the act of
circumvention is the owner of the device; (3) the person
connecting to the new wireless network is either the owner of
the device or a family member of the owner; and (4) access to
the new wireless network is authorized by the operator of the
network. This section does not authorize circumvention in order
to enable other unauthorized or harmful actions, such as
removing or impairing security features that limit access to
personal data or by exposing copyrighted content in ways that
enable copyright infringement. Nor does the ability to seek
help from a third party to unlock a device alter the
contractual relationship between a consumer and that consumer's
wireless carrier. Directing a third party to unlock his or her
device does not excuse a consumer from complying with his or
her contractual obligations in any underlying service
agreement.
Subsection (d): This subsection sets forth two rules of
construction to clarify and ensure that the legislation does
not alter the scope of any party's rights under existing law,
and that the legislation does not alter the authority of the
Librarian of Congress under Section 1201(a)(1) to engage in the
rulemaking process created by the DMCA. Nor does this bill
affect the scope and applicability of other aspects of Section
1201, including the prohibitions of Sections 1201(a)(2) and
1201(b), which remain critical components of the DMCA.
Subsection (e): This subsection defines terms that appear
in the legislation. The terms ``commercial mobile data
service'' and ``commercial mobile radio service'' are intended
to cover what are typically known as data plans and voice
plans. The terms ``wireless telephone handset'' and ``wireless
device'' mean a handset or other device that operates on a
wireless telecommunications network.'' Smartphones and
wireless-enabled tablets are two examples of the types of the
devices that are covered by these respective definitions.
IV. Congressional Budget Office Cost Estimate
The Committee sets forth, with respect to the bill, S.517,
the following estimate and comparison prepared by the Director
of the Congressional Budget Office under section 402 of the
Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 17, 2014.
Hon. Patrick J. Leahy,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 517, the Unlocking
Consumer Choice and Wireless Competition Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
S. 517--Unlocking Consumer Choice and Wireless Competition Act.
CBO estimates that implementing S. 517 would have no
significant effect on discretionary spending over the 2015-2019
period. Enacting S. 517 would not affect direct spending or
revenues; therefore, pay-as-you-go procedures do not apply.
S. 517 would repeal a rule published in October 2012 by the
Librarian of Congress (LOC) that limited the ability of certain
owners of wireless telephone handsets to ``unlock'' their
phones, that is, to circumvent software protections that
prevent the owner from connecting to a different wireless
network. The bill would reinstate an earlier rule that provided
broader authority to circumvent such protections. S. 517 also
would direct the LOC to consider whether to extend that broader
authority to other categories of wireless devices in addition
to smartphones. Based on information from the LOC, CBO
estimates that implementing the provisions of the bill would
not have a significant effect on the agency's workload.
S. 517 contains no intergovernmental mandates as defined in
the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments.
S. 517 would impose a private-sector mandate by eliminating
an existing right of action for wireless carriers (and others),
who are currently able to pursue legal action against those
who, without permission, circumvent the access controls on
certain wireless telephone handsets. The cost of the mandate
would be the forgone net value of settlements and damages in
such cases. A search of the literature suggests that few, if
any, of those types of lawsuits have been brought against
individual consumers. Because such claims would probably be
uncommon in the future and the damage awards allowed in such
cases would be relatively small, CBO estimates that the cost of
this mandate would be small and fall below the annual threshold
established in UMRA for private-sector mandate ($152 million in
2014, adjusted annually for inflation). If the Librarian of
Congress decides to broaden the exemption allowed under the
bill to cover other types of mobile devices, such an action
would eliminate additional rights of action. The cost of that
expansion would depend on what devices the Librarian would
include under the exemption and the forgone net value of
settlements and damages. CBO has no basis to estimate the cost
of such mandates as it would depend on the regulatory actions
taken by the Librarian. On November 5, 2013, CBO transmitted a
cost estimate for H.R. 1123, the Unlocking Consumer Choice and
Wireless Competition Act, as ordered reported by the House
Committee on the Judiciary on July 31, 2013. The provisions of
both pieces of legislation are similar, as are the CBO cost
estimates.
The CBO staff contacts for this estimate are Susan Willie
(for federal costs) and Marin Burnett (for the private-sector
impact). The estimate was approved by Theresa Gullo, Deputy
Assistant Director for Budget Analysis.
V. Regulatory Impact Evaluation
In compliance with subsection (b) of paragraph 11 of rule
XXVI of the Standing Rules of the Senate, it is hereby stated
that the passage of S. 517 will require the Librarian of
Congress to make a determination concerning an exemption for
wireless devices other than cell phones during its next
triennial rulemaking conducted pursuant to 17 U.S.C. 1201(a).
The Committee finds that no significant regulatory impact will
otherwise result from the enactment of S. 517.
VI. Conclusion
The Unlocking Consumer Choice and Wireless Competition Act
will ensure that consumers will be able to take their cell
phones with them to the network of their choice after
satisfying their contracts without violating the copyright
laws.
VII. Changes to Existing Law Made by the Bill, as Reported
Pursuant to paragraph 12 of rule XXVI of the Standing Rules
of the Senate, the Committee finds no changes in existing law
made by S. 517, as ordered reported.