[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
UNLOCKING CONSUMER CHOICE AND
WIRELESS COMPETITION ACT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
COURTS, INTELLECTUAL PROPERTY,
AND THE INTERNET
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
ON
H.R. 1123
__________
JUNE 6, 2013
__________
Serial No. 113-27
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
HOWARD COBLE, North Carolina ROBERT C. ``BOBBY'' SCOTT,
LAMAR SMITH, Texas Virginia
STEVE CHABOT, Ohio MELVIN L. WATT, North Carolina
SPENCER BACHUS, Alabama ZOE LOFGREN, California
DARRELL E. ISSA, California SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia STEVE COHEN, Tennessee
STEVE KING, Iowa HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona Georgia
LOUIE GOHMERT, Texas PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio JUDY CHU, California
TED POE, Texas TED DEUTCH, Florida
JASON CHAFFETZ, Utah LUIS V. GUTIERREZ, Illinois
TOM MARINO, Pennsylvania KAREN BASS, California
TREY GOWDY, South Carolina CEDRIC RICHMOND, Louisiana
MARK AMODEI, Nevada SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
------
Subcommittee on Courts, Intellectual Property, and the Internet
HOWARD COBLE, North Carolina, Chairman
TOM MARINO, Pennsylvania, Vice-Chairman
F. JAMES SENSENBRENNER, Jr., MELVIN L. WATT, North Carolina
Wisconsin JOHN CONYERS, Jr., Michigan
LAMAR SMITH, Texas HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE CHABOT, Ohio Georgia
DARRELL E. ISSA, California JUDY CHU, California
TED POE, Texas TED DEUTCH, Florida
JASON CHAFFETZ, Utah KAREN BASS, California
MARK AMODEI, Nevada CEDRIC RICHMOND, Louisiana
BLAKE FARENTHOLD, Texas SUZAN DelBENE, Washington
GEORGE HOLDING, North Carolina HAKEEM JEFFRIES, New York
DOUG COLLINS, Georgia JERROLD NADLER, New York
RON DeSANTIS, Florida ZOE LOFGREN, California
[Vacant] SHEILA JACKSON LEE, Texas
Joe Keeley, Chief Counsel
Stephanie Moore, Minority Counsel
C O N T E N T S
----------
JUNE 6, 2013
Page
THE BILL
H.R. 1123, the ``Unlocking Consumer Choice and Wireless
Competition Act''.............................................. 3
OPENING STATEMENTS
The Honorable Tom Marino, a Representative in Congress from the
State of Pennsylvania, and Vice-Chairman, Subcommittee on
Courts, Intellectual Property, and the Internet................ 1
The Honorable Melvin L. Watt, a Representative in Congress from
the State of North Carolina, and Ranking Member, Subcommittee
on Courts, Intellectual Property, and the Internet............. 5
The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia, and Chairman, Committee on the Judiciary 11
WITNESSES
Steven K. Berry, President and Chief Executive Officer,
Competitive Carriers Association
Oral Testimony................................................. 15
Prepared Statement............................................. 17
Michael Altschul, Senior Vice President and General Counsel,
CTIA--The Wireless Association
Oral Testimony................................................. 23
Prepared Statement............................................. 25
George P. Slover, Senior Policy Counsel, Consumers Union
Oral Testimony................................................. 29
Prepared Statement............................................. 31
Steven J. Metalitz, Partner, Mitchell Silberberg & Knupp LLP
Oral Testimony................................................. 40
Prepared Statement............................................. 42
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable Melvin L. Watt, a
Representative in Congress from the State of North Carolina,
and Ranking Member, Subcommittee on Courts, Intellectual
Property, and the Internet..................................... 7
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan, and
Ranking Member, Committee on the Judiciary, and Member,
Subcommittee on Courts, Intellectual Property, and the Internet 13
Material submitted by the Honorable Zoe Lofgren, a Representative
in Congress from the State of California, and Member,
Subcommittee on Courts, Intellectual Property, and the Internet 59
APPENDIX
Material Submitted for the Hearing Record
Material submitted by the Honorable Zoe Lofgren, a Representative
in Congress from the State of California, and Member,
Subcommittee on Courts, Intellectual Property, and the Internet 100
Prepared Statement of Derek S. Khanna, Founder, Disruptive
Innovation, Visiting Fellow, Yale Law School, Information
Society Project................................................ 102
Prepared Statement of the Library Copyright Alliance............. 119
UNLOCKING CONSUMER CHOICE AND WIRELESS COMPETITION ACT
----------
THURSDAY, JUNE 6, 2013
House of Representatives
Subcommittee on Courts, Intellectual Property,
and the Internet
Committee on the Judiciary
Washington, DC.
The Subcommittee met, pursuant to call, at 10 a.m., in room
2141, Rayburn Office Building, the Honorable Tom Marino (Vice-
Chairman of the Subcommittee) presiding.
Present: Representatives Coble, Goodlatte, Marino, Chabot,
Chaffetz, Holding, Watt, Conyers, Johnson, Chu, Deutch, Bass,
DelBene, and Lofgren.
Staff present: (Majority) Joe Keeley, Chief Counsel; Olivia
Lee, Clerk; and (Minority) Stephanie Moore, Minority Counsel.
Mr. Marino. Good morning. I want to call the Subcommittee
hearing to order. The Subcommittee on Courts, Intellectual
Property, and the Internet will come to order.
Without objection, the Chair is authorized to declare a
recess of the Subcommittee at any time, and that is going to
happen very, very shortly because we are going to be called to
vote here probably not much after 10 o'clock.
I want to welcome all of the witnesses here today. Thank
you so much for being here.
I think that my friend and Ranking Member and I can get our
opening statements in, and then we will see where we go from
there. So if you would allow me to give my opening statement
and then the Ranking Member, Congressman Watt.
I would like to begin this hearing by thanking the Members,
witnesses, and people in the gallery for joining us today for
this important hearing.
This morning we will hear testimony on H.R. 1123, the
``Unlocking Consumer Choice and Wireless Competition Act,''
introduced by Chairman Goodlatte, Ranking Member Conyers,
Subcommittee Chairman Coble, and Subcommittee Ranking Member
Congressman Watt.
The bipartisan legislation restores the ability of
Americans to legally unlock their cell phones, an important
consumer issue. As everyone knows, cell phones have become
universal devices that are relied upon by Americans to
communicate with family, conduct business, and stay in touch
with friends. Although cell phone companies have subsidized the
purchase of a cell phone through lower upfront costs, should be
able to ensure that consumers meet the terms of their contract,
providing consumers with an easy way to switch to a cellular
provider of their choosing is important to ensuring a
competitive marketplace. H.R. 1123 reinstates an earlier
exemption for consumers to be able to switch their cellular
providers by unlocking their phones.
H.R. 1123 also directs the Register to look at other
similar wireless devices, such as tablets, to determine whether
an exemption is warranted there as well.
Testifying before the Subcommittee this morning are four
participants in the 2012 section 1201 Copyright Office
rulemaking. Each brings a unique perspective to this issue, and
the Subcommittee appreciates their making the time available to
appear today.
Finally, I recognize that there are other sections in
interest that may be surfacing throughout the hearing, and a
few Members and some of the audience may want to hear those
issues as well. I am sure these issues will be among many
raised during the Committee's comprehensive review of our
Nation's copyright laws.
Again, I thank everyone for being here today and I look
forward to hearing your testimony.
Then I hand it over to the Ranking Member, Congressman
Watt.
[The bill, H.R. 1123, follows:]
__________
Mr. Watt. Thank you, Mr. Chairman, and thank you for being
here substituting for our Chairman from North Carolina, Mr.
Coble. I hope he is well.
I am not quite as prepared, I would have to say, as I
usually am for hearings of this kind, primarily not because of
my circumstances but there was an explosion down the street
right across from my staff person's house, and she could not
quite get out to get my opening statement to me. So I am
struggling a little bit this morning because I am reading an
opening statement that I have not had as much opportunity to
edit and review, as I normally do. So forgive me.
It did not go unnoticed to me, though, that because of the
explosion across from her house, the very first sentence in the
opening statement has the word ``explosion'' in it. [Laughter.]
Maybe she was a little distracted too. So that is a good
segue into the statement, however.
It says individual cell phone use worldwide has exploded
over the past decade. In the United States, the Pew Research
Center estimates, as of last month, 91 percent of adults in
this country own a cell phone. Moreover, the increasing
popularity of smart phones that enable consumers to access a
variety of services and perform multiple functions from a
single device heightens the importance of public policy
surrounding cell phone use.
The relevant policy choices, in turn, involve a web of
communications, competition, and copyright law. Current law
prohibits the circumvention of access controls that protect
copyrighted works. Because software contained in cell phones is
often protected by copyright law, an exemption is required to
legally circumvent those protections measures. Because Congress
understood that in the field of technology, there are, quote,
unknown unknowns, and also to comply with our treaty
obligations of the 1998 Digital Millennium Copyright Act,
required a multiple review called the 1201 proceeding to
provide a process to determine whether exemptions to the
prohibition against circumvention were warranted for various
categories of works, that task was assigned to the Copyright
Office and the Librarian of Congress.
We appreciate the hard work and dedication of the Copyright
Office and the Librarian of Congress in this most recent 1201
rulemaking, the fifth since passage of the DMCA. Our hearing
today is not designed to call into question any aspect of that
critically important process but instead to explore the
specific policy issue of cell phone unlocking, which could not
be fully addressed through the limited 1201 rulemaking
proceeding.
The 1201 proceeding concluded that, for phone purchases
prior to January 26, 2013, owners could unlock their phones to
use on another network without fear of penalty. For all phones
purchased after that date, however, the Librarian of Congress
concluded that due to changes in the marketplace, namely the
widespread availability of unlocked phones, and based on the
evidence submitted in the proceeding, an exemption was not
warranted. In other words, consumers would not be permitted to
bypass access controls that protect copyrighted works because
their choices in the market had expanded. Over 14,000 people
signed a petition criticizing the decision and demanding that
unlocking be exempt from the prohibition.
I am a cosponsor of H.R. 1123 because I support providing
consumers the freedom to use their cell phones on another
network after their contracts have expired even though I am a
strong supporter of protecting copyrights. I do so without
prejudice to the various business models of wireless carriers,
including those that provide locked phones at deeply subsidized
rates. I believe that practice allows many in the underserved
community access to quality cell phones that they otherwise
would not have. It also enhances competition. However, because
not all consumers are world travelers and may be unaware of
whether a phone is or is not unlocked, I believe that providing
the exemption to phones purchased beyond January 26 will expand
consumer options even further beyond what the changing market
already provides.
But I also support a process that routinely evaluates the
options and technological advancements available to consumers
to ensure a healthy, competitive marketplace and also protects
copyrights. While it is important that we not be tone deaf to
the voices of a significant number of American citizens, it is
equally important that we not allow a fraction of the millions
of cell phone users to drive policy outcomes or upend the
process mandated by the DMCA.
The cell phone unlocking debate raises important issues of
consumer protection and choice. Although these issues also
implicate broader copyright law, we should not react
reflexively on the basis of one of many issues considered in
the 1201 proceedings. Cell phone unlocking merits more
immediate attention and should be considered separate and apart
from our ongoing copyright review work. I believe H.R. 1123 is
the appropriate response to the issue at hand but that we need
to continue to work on the other issues involved.
Mr. Chairman, I will submit my full opening statement for
the record and I welcome the witnesses and yield back.
Mr. Marino. Without objection, thank you, Congressman Watt.
[The prepared statement of Mr. Watt follows:]
__________
Mr. Marino. I now recognize the full Committee Chairman,
Mr. Goodlatte of Virginia, for his opening statement.
Mr. Goodlatte. Thank you, Mr. Chairman.
Three months ago, I introduced H.R. 1123, the ``Unlocking
Consumer Choice and Wireless Competition Act,'' to ensure that
consumers continue to be able to unlock their cell phones.
Americans who have completed their phone contracts or have
purchased a used phone want to be able to use their device on
their network of choice. They have made that preference loud
and clear, and Congress has listened. H.R. 1123 restores the
previous authority for cell phone unlocking and adds a new
rulemaking process for related wireless devices such as tablets
and other cellular connected devices.
The witnesses today have indicated their support of
unlocking. I recognize that there are some who would prefer a
longer exemption. However, in the interest of helping consumers
today and not running afoul of several of our Nation's free
trade agreements, H.R. 1123 reinstates an exemption for cell
phone unlocking until the next rulemaking process.
I have often spoken about the need to protect the creator
and how theft of their works affects not just that creator but
our Nation's economy as a whole. An important part of helping
creators is to enable them to protect their works from theft in
the first place by using technological protection measures. I
believe that section 1201 is an important tool that helps
creators protect their works from theft.
However, an important safeguard, the triennial rulemaking
process, was built into section 1201 to recognize when
technological protection measures might adversely affect
noninfringing uses of copyrighted works. The Register's
authority to recommend an exemption is limited by the record
that is presented to her by proponents of any exemption. In
prior rulemakings, the record was sufficient to justify an
exemption for cell phone unlocking. That was not the case in
2012, leaving it to Congress to determine if such an exemption
was warranted. Today we will hear from several witnesses, all
of whom participated in the 2012 rulemaking, who do feel such
an exemption is warranted.
I also recognize that some may prefer changes to the
underlying statutory language of section 1201. Whether or not
such changes would have the support of this Committee is a
question for another day. I have already announced a
comprehensive review of our Nation's copyright law, and there
will, no doubt, be a future opportunity for interested parties
to discuss section 1201 in more detail.
I also look forward to hearing the testimony of our
witnesses.
And, Mr. Chairman, I yield back. Thank you.
Mr. Marino. Thank you, Chairman Goodlatte.
I now recognize the full Committee Ranking Member,
Congressman Conyers of Michigan, for his opening statement.
Mr. Conyers. Thank you, Mr. Chairman.
I am a cosponsor of the bill and I ask unanimous consent to
insert my statement into the record.
Mr. Marino. Without objection.
[The prepared statement of Mr. Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, Ranking Member, Committee on
the Judiciary, and Member, Subcommittee on Courts, Intellectual
Property, and the Internet
I am a cosponsor of H.R. 1123, the ``Unlocking Consumer Choice and
Wireless Competition Act,'' because it would restore the ability of
consumers to unlock their mobile phones so that they can readily switch
from one wireless carrier to another.
There are several reasons why this flexibility that is the heart of
this legislation is critical.
First and foremost, this bipartisan legislation enhances consumer
choice and competition in the cell phone market.
Unlocked phones should remain affordable and consumer choice should
not come at too high a price.
H.R. 1123 ensures that consumers will be able to unlock their cell
phones without risking criminal or other penalties.
In addition, this bill would enable consumers to take advantage of
lower rates if they decide to switch carriers.
Another reason why I support this legislation is that it
effectuates a balanced approach.
For example, the White House and the Federal Communications
Commission have both urged Congress to overturn the decision by the
Librarian of the Congress.
I believe this bill addresses these concerns in an appropriate
manner that reinstates the previous exemption by repealing the October
2012 change and reinstating the 2010 exemption.
In addition, H.R. 1123 directs the Copyright Office to determine
whether similar treatment should be given to other wireless devices.
In the past two triennial rulemaking proceedings pursuant to
section 1201 of the Digital Millennium Copyright Act (DMCA), the
Librarian of Congress included an exemption for unlocking wireless
handsets. Unfortunately, the Librarian of Congress did not renew this
exemption in October 2012.
Although the Copyright Office argues that cell phone makers offer a
range of unlocked phones on the market and consumers no longer need an
exemption to unlock their phones, I want to hear the views of our
witnesses today about this matter.
Finally, I support this bill because it will help ensure
competition in the wireless marketplace, which ultimately will benefit
consumers.
The ability of consumers to be able to transfer their cell phone
services to different wireless carriers will encourage market
innovation and provide incentives for the industry to develop less
expensive products.
Although unlocked mobile devices have become more widely available
for purchase, the exemption is still warranted because some cell phones
sold by carriers are permanently locked.
Additionally, many unlocking policies contain restrictions and may
not apply to all of a wireless carrier's cell phones.
This bill provides us with a meaningful opportunity to help
consumers by leveling the opportunity for competition.
Accordingly, I urge my colleagues to support this legislation and I
look forward to hearing from our witnesses today.
__________
Mr. Marino. That is it? There is some time, Congressman.
There is some time if you want to make a statement.
Mr. Conyers. Well, that is all right. It has all been said
only three times so far. [Laughter.]
Mr. Marino. I have never known you not to take advantage of
what we said and then just really put us in our place.
Mr. Watt. That is because his Ranking Member and his Chair
are so eloquent. [Laughter.]
Mr. Marino. Thank you, Chairman.
Without objection----
Mr. Watt. And coincidentally I agree with him. [Laughter.]
Mr. Marino. Without objection, other Members' opening
statements will be made part of the record.
At this time, I am going to call a recess. We must go vote.
We have, I think, five or six votes. It could be anywhere from
20 to 30 minutes. So I apologize but we will be back and relax.
Thank you. A recess is called.
[Recess.]
Mr. Marino. The Subcommittee on Intellectual Property will
come to order.
Thank you so very much for your patience, both our
witnesses and our audience. I did fail to mention to you that I
gave you congressional time, 20 minutes. Reality, you just
multiply that by 2.
We have a very distinguished panel today. I will be
swearing in our witnesses before introducing them. If you would
please all rise and raise your right hand.
[Witnesses sworn.]
Mr. Marino. Please let the record reflect that the
witnesses have answered in the affirmative, and you may be
seated, gentlemen, thank you.
Each of the witnesses' written statements will be entered
into the record in its entirety.
I ask that each witness summarize his testimony in 5
minutes or less, and I will politely tap the gavel if you are
going over the 5 minutes. To help you stay within the time,
there is a time light on your table. When the light switches
from green to yellow, you will have 1 minute to conclude your
testimony. When the light turns red, it signals that the
witness' 5 minutes have expired.
Our first witness today is Mr. Steven Berry, President and
Chief Executive Officer of the Competitive Carriers
Association. Prior to joining CCA, Mr. Berry was Managing
Director of Government Affairs at Merrill Lynch and also held
positions at the National Cable and Telecommunications
Association and at CTIA. Mr. Berry received his J.D. from
George Mason University Law School and his B.A. from Emory and
Henry College.
Our second witness is Mr. Altschul, Senior Vice President
and General Counsel at CTIA--The Wireless Association. Mr.
Altschul joined CTIA in 1990 after having served with the
Antitrust Division of the United States Department of Justice
for 10 years. And I served with Justice myself. Mr. Altschul
received his law degree from New York University School of Law
and his B.A. from Colgate University. Welcome.
Our third witness is Mr. George Slover, Senior Policy
Counsel at Consumers Union where he oversees telecommunications
antitrust and competition policy issues. Mr. Slover has 3
decades of Federal service in all three branches of Government,
including 9 years here at the House Judiciary Committee. Mr.
Slover received his J.D. from the University of Texas Law
School and B.A. from Vanderbilt University. It is a pleasure to
have you back.
Our fourth and final witness is Steve Metalitz, Partner at
the Washington, D.C. office of Mitchell Silberberg & Knupp LLP,
where he counsels clients on domestic and international
copyright issues. Mr. Metalitz--Metalitz--I will get it right,
sir, just give me a couple times. I apologize--previously
served as General Counsel to Information Industry Association
and as Chief Counsel of the Senate Judiciary Committee on
Patents, Copyright, and Trademark. He received his J.D. from
Georgetown University Law Center and his B.A. from the
University of Chicago.
Welcome to you all, and we will start with Mr. Berry for
his opening statement. Thank you, sir.
TESTIMONY OF STEVEN K. BERRY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, COMPETITIVE CARRIERS ASSOCIATION
Mr. Berry. Thank you. Thank you, Mr. Chairman, Ranking
Member Watt, and Members of the Subcommittee. Thank you for
inviting me to testify and thank you for your work to ensure
that all consumers can unlock their wireless device.
I am here today on behalf of the Competitive Carriers
Association, the Nation's leading association of competitive
wireless carriers with over 100 carrier members ranging from
small, rural providers to regional and national providers
serving millions of customers. We also represent almost 200
associate members, small businesses, vendors, and suppliers
that support the wireless ecosystem and employer constituents.
We support the Committee's efforts to remove the barriers
to competition. Accordingly, we support H.R. 1123, the
``Unlocking Consumer Choice and Wireless Competition Act.''
CCA supports unlocking for every consumer that has met the
terms and conditions of their contract and/or service
agreement. A consumer who wishes to switch carriers should be
allowed to do so if they have met their carrier commitments.
Unlocking is particularly important for rural and regional
small carriers that lack the scale to gain access to the latest
and most iconic devices directly from the equipment
manufacturer which, in turn, prevents millions of consumers,
your constituents, from accessing the latest devices.
Competitive carriers face many challenges gaining access to
the resources necessary to provide mobile broadband service,
including interoperable spectrum, interconnection, and roaming
relationships and, of course, devices. In an industry where the
largest two carriers control critical inputs, unlocking devices
and unlocking provides one small, but very important,
opportunity for the competitive carriers to distinguish
themselves in the marketplace and provide innovative services
and rate plans to customers that do not wish to give up
previously purchased devices, applications, or the associated
content on those devices.
I commend your work on H.R. 1123 as a positive first step
to restore the previous exemption. The Librarian of Congress,
or the LOC, should have extended the exemption in the first
place as NTIA had recommended and as CCA testified in support
of continued exemption. The Librarian just got it wrong. Even
the FCC Commissioner Ajit Pai today, in the New York Times
article, indicated he was puzzled by the decision and supported
the unlocking process before the Committee.
I also strongly support the bill's direction to the LOC to
revisit the determination to extend the exemption to other
wireless devices. Consumers do not differentiate between a
handset and what is a device, and neither should the Library of
Congress. Long gone are the days when handsets were used for
only voice calls, and in an all-IP world, there will no longer
be a difference between voice and data. There are many forms of
smart phones now, devices, tablets, and even phablets. Further
blurring the difference between a handset and a wireless device
and the potential for consumer confusion is real.
We support the Goodlatte-Leahy bicameral bill as an
immediate fix to correct the Librarian of Congress' poor
decision. CCA welcomes continued discussion on ways authorized
unlocking will continue to promote consumer choice. The
Committee must remain vigilant, for there are other ways that
devices may be impaired, including technologically designing
devices with particular specifications in order to permanently
lock the device, making it nonoperable with other carriers just
because you can, configuring devices so that even when
unlocked, the device may only work on a particular carrier's
network, and potential for software updates that might relock
and unlock the device.
Finally, while Congress must move forward to enact the H.R.
1123 with full haste, I would also offer some recommendations
for further conversation, such as including the consumer's
agent in the exemption. Consumers should not have to be a
virtual MacGyver in order to unlock their handsets. Consider
shifting the burden of proof in the statute to the opponent and
adding a presumption to extend the existing exemption unless
shown otherwise. Lastly, the exemption should also change
``telecommunications network'' to ``communications network.''
Consumers do not differentiate between types of access. Neither
should policy.
Mr. Chairman, CCA supports your work and encourages swift
passage of H.R. 1123, and I welcome your questions. Thank you.
[The prepared statement of Mr. Berry follows:]
Prepared Statement of Steven K. Berry, President and
Chief Executive Officer, Competitive Carriers Association
__________
Mr. Marino. Thank you, Mr. Berry. You came in under the
wire.
Mr. Altschul, please.
TESTIMONY OF MICHAEL ALTSCHUL, SENIOR VICE PRESIDENT AND
GENERAL COUNSEL, CTIA--THE WIRELESS ASSOCIATION
Mr. Altschul. Thank you, Chairman Marino, Ranking Member
Watt, and Members of the Committee, for the opportunity to
participate in today's hearing on H.R. 1123 and allowing CTIA
to add its voice to the choir supporting this bill.
My name is Michael Altschul, and I serve as the Senior Vice
President and General Counsel of CTIA--The Wireless
Association. Membership in CTIA includes wireless carriers and
their suppliers, as well as providers of wireless data
services.
When the DMCA was enacted, Congress could not have known
the technologies and markets that have become commonplace
today. Accordingly, section 1201 authorizes the Librarian of
Congress to issue temporary exemptions during a rulemaking
process that occurs every 3 years. The triennial rulemaking was
intended to be a safety valve to the anti-circumvention
provisions of the DMCA and it can serve as an important
barometer for issues such as this one that may be ripe for
further discussion. Because the rulemaking process does not
permit the Librarian to change the terms of the DMCA, only
Congress, through the legislative process, can address these
issues.
In the 2006 triennial rulemaking cycle, the Librarian of
Congress granted an exemption for cell phone unlocking. This
exemption was renewed in 2010. However, in the 2012 rulemaking,
the Librarian determined that the exemption for unlocking was
not necessary because the largest nationwide carriers have
liberal publicly available unlocking policies and because
unlocked phones are freely available from third party
providers, many at low prices. If you go to our website or Best
Buy or many other retailers, you can see close to 200
individual wireless phones that are available unlocked for sale
to the public.
While the Librarian's order was clearly justified by the
market circumstances and the requirements of the DMCA, CTIA in
its comments stated that we would not oppose a narrowly
tailored exemption that allows bona fide individual customers
to use their own phones on a different network. This bill would
create such a rule.
We did, however, oppose any broader exemption out of
concern that broader relief would serve to permit the bulk
commercial purchase of new phones in order to free ride on
carrier subsidies and arbitraged sale of these phones, either
in the United States or abroad. We were pleased that the
Register recognized this potentiality in its 2010 ruling noting
that bulk reselling of new mobile phones by commercial ventures
is a serious matter. There is no justification for the result
of this rulemaking proceeding to condone, either expressly or
implicitly, the illegal trafficking of mobile phones. Such
illicit practices raise the cost of doing business, which in
turn affects the marketplace for mobile phones and the prices
consumers pay for such devices.
Moreover, continuing the prohibition on bulk unlocking
makes our streets just a little bit safer by making it harder
for large scale phone trafficking syndicates to operate in the
open and buy phones, unlock them, and resell them either in the
U.S. or in foreign markets. Making it illegal to unlock devices
without carrier consent adds another barrier to these fencing
operations and may help dry up the demand for stolen phones.
But because we are not seeking to limit individuals'
noncommercial ability to unlock their own devices and because
the bill preserves the important limitations against bulk
unlocking included in the Librarian's 2010 decision, CTIA
supports H.R. 1123, which is narrowly tailored and appropriate
to alleviating consumer confusion that may have arisen as a
result of the Librarian's most recent decision.
While enactment of H.R. 1123 should alleviate consumer
confusion about whether unlocking his or her wireless phone
will subject them to possible criminal penalties, it is
important to note that no one should view enactment of this
legislation as enabling a universal phone that can be easily
moved from one network to another. Unlocked phones are not the
same as interoperable phones, and it would be a mistake to
conflate the two. While there are circumstances in which a
device can be unlocked and moved from one carrier to another,
differences in technology and differences in spectrum
assignments limit or preclude seamless movement of devices
between most carriers. And even if some features will work on
another carrier's network, unlocked handsets can result in a
degraded customer experience since all the carrier's services
may not be supported by the device.
And with that, thank you again for the opportunity to
participate in today's hearing.
[The prepared statement of Mr. Altschul follows:]
__________
Mr. Marino. Thank you, sir.
Mr. Slover, please.
TESTIMONY OF GEORGE P. SLOVER,
SENIOR POLICY COUNSEL, CONSUMERS UNION
Mr. Slover. Thank you, Mr. Chairman, Ranking Member Watt,
Members of the Subcommittee. It is a pleasure to be here on
behalf of Consumers Union, the policy arm of Consumer Reports,
the largest independent, not-for-profit product testing
organization. Our mission is to work for a fair and just
marketplace for consumers.
And we believe consumers should have the right to unlock
their mobile device to use on another network, to switch
carriers, or to use their device abroad, or to sell or give it
to someone else. Consumers should be able to use the mobile
device they bought, as they see fit.
As wireless takes over as the predominant way of
communicating, we want consumers to be free to choose service
and product offerings that suit their needs in a competitive
marketplace. And being able to switch carriers to get a more
suitable and affordable plan, without having to start over and
purchase a new phone, can make a big difference.
And consumers agree. In a nationwide survey by Consumer
Reports 2 years ago, 96 percent of those with long-term
contracts said that, when we change carriers, we should be able
to keep using the mobile phones we already have.
Until last October's decision by the Register of Copyrights
and the Librarian of Congress, consumers had the legal right to
unlock. Then in one fell swoop, unlocking went from legal right
to felony.
But the unlocking we are talking about here has nothing to
do with copyright infringement in any traditional sense, and
has no business getting caught up in the dragnet of a law
intended to help stop copyright infringement. It is far too
blunt an instrument for protecting material that is actually
copyright protected from actual infringement. It creates a zone
of protection far wider than is needed or justified. It is like
having a cake that you do not want your teenager cutting into
and devouring with his friends. But instead of just telling him
not to eat the cake, you tell him he is grounded for life if he
even sets foot in the kitchen.
Mobile phone unlocking is a perfect candidate for DMCA
exemption, as the Register and the Librarian readily concluded
in 2010. Their reversal this time is hard to reconcile.
However, if you parse their rationale, the result is a legal
ruling that impairs competition and consumer choice, and will
render millions of perfectly good mobile devices useless, left
to gather dust in a drawer, or to slowly decompose in a
landfill, or to be discarded into a recycling bin.
The lock benefits carriers, by propping up the long-term
bundled contract. And it benefits mobile device manufacturers,
by artificially inflating demand for new devices through forced
retirement of used ones.
But for consumers, it means less competition, less choice,
more expense, and more waste. That is not a fair tradeoff and
it does not belong in the copyright laws.
Pealing this misfit legal armor off the lock is a key step
on the road to more competition. If consumers could shop for
the best deal on each of these two purchases separately, they
would get lower prices, improved quality, and greater
innovation and variety that more competition would encourage
among mobile device manufacturers and wireless carriers alike.
Some carriers now are offering alternatives to the bundled
contract, a healthy development that would be sped up by
restoring the right to unlock.
We are heartened by the interest in Congress, with a number
of bills taking various approaches to a solution. While we
would like to see a permanent solution, to make sure mobile
phones cannot be put on lockdown again, we appreciate that a
temporary solution can be an effective stopgap while the
permanent solution is in the works.
If you opt for the temporary solution expressed in H.R.
1123, while you work on the permanent solution, we think it
would be helpful to make a few clarifications now, without
waiting, to ensure that the DMCA exemption as reinstated works
in today's world, and to reduce the risk of unnecessary and
unwarranted legal obstacles. Our recommended clarifications are
in our written statement and in our comments to the Register.
For example, consumers should not be denied the right to
unlock because the device they purchased does not carry with it
the software inside it, but only carries a license to use the
software. And consumers who use a tablet as their phone should
have the same right to unlock as consumers who use a handset.
Mr. Chairman, thank you for including us in this hearing on
an issue of great importance to consumers. I would be happy to
answer any questions.
[The prepared statement of Mr. Slover follows:]
__________
Mr. Marino. Thank you, sir.
Now, for the third time, Mr. Metalitz.
TESTIMONY OF STEVEN J. METALITZ, PARTNER,
MITCHELL SILBERBERG & KNUPP LLP
Mr. Metalitz. That is right, Mr. Chairman.
Mr. Marino. Thank you.
Mr. Metalitz. Good morning and thank you very much for
inviting me to testify before the Subcommittee.
In all five rulemaking proceedings that have been held
under the Digital Millennium Copyright Act, I have represented
a broad coalition of copyright industry organizations. Because
the bill before you today addresses a decision made in the most
recent DMCA rulemaking, I hope I can provide some useful
context. I am not here to advocate a position on whether the
Librarian of Congress' decision on the cell phone unlocking
issue was right or wrong. Our coalition was neutral on that
during the rulemaking.
I am here to say that if Congress concludes that the
Librarian's decision was not the right policy outcome, then
H.R. 1123 is an appropriate and well considered way to change
it. It restores the status quo ante without undermining an
important provision of title 17 that has done so much to
benefit creators, distributors, and consumers of copyrighted
works. That provision is section 1201. It protects the
technological measures that copyright owners use to control
access to their works. Since it was enacted in 1998, it has
helped to launch three important trends.
First, in nearly every industrialized country in the world
and in many other countries, similar legislation has been
adopted. Some follow the U.S. model closely, others take a
somewhat different approach, but they all recognize that access
control technologies should be encouraged to better serve the
public.
Second, responding to this encouragement, copyright owners
have increasingly launched innovative new services that depend
on access controls. Everyone in the software world is talking
about cloud computing today. Cloud computing depends on access
controls. These controls are also essential in upgrading the
security of computer networks and reducing their vulnerability
to attacks. Access controls have also enabled cloud services
for delivery of all kinds of copyrighted materials--software,
games, video, books, music, and so forth.
The third trend is as a result of the rapid proliferation
of these services, more consumers today enjoy authorized access
to more copyrighted works in more diverse ways and at more
affordable price points than ever before. Access control
measures have been indispensable to achieving this.
Now, perhaps the best part of the story is this. This
Committee and the rest of Congress anticipated that this might
happen. In enacting the DMCA 15 years ago, Congress foresaw
that technological protection measures could be used not only
to prevent piracy but also to support new ways of disseminating
copyrighted materials to users. Congress was also wise enough
to realize that not all of the consequences of these new legal
protections could be anticipated. So it created the triennial
rulemaking process whose purpose is to identify specific
factual situations in which access controls have had unexpected
negative consequences.
Now, again, our copyright industry groups that have
participated in these rulemakings do not agree with every
decision that has come out, or everything in the way the
Copyright Office has approached it, but overall we think the
rulemaking process has fulfilled the functions that Congress
intended for it. I point out some of these reasons for saying
so in my written testimony.
First, instead of the Copyright Office ranging the field to
regulate uses of access controls that a government official
might think are problematic, it relies on private parties to
step forward to identify exactly where the exemptions are
needed.
Second, exemptions are reserved for situations in which
they are necessary or it is impossible or extremely burdensome
to make a noninfringing use without circumventing access
controls.
Third, all the exemptions expire after 3 years. So the
Copyright Office and the Librarian take another look at that
point. That makes sense, given the pace of technology and pace
of change in market developments.
And fourth, the Copyright Office has consistently provided
detailed explanations of its recommendations. We do not always
agree with them, but they provide a lot of useful guidance.
Now, H.R. 1123 is tightly focused on changing the decision
issued by the Librarian of Congress on the single issue of cell
phone unlocking. It does so without tampering with the
structure of section 1201 or with the key ingredients for
success of the rulemaking that I have just summarized. It
simply restores the status quo ante, the cell phone unlocking
exemption that the Librarian recognized in 2010 but decided to
phase out in 2012. It places this restored exemption back into
the existing rulemaking framework. It directs the Copyright
Office to initiate a new rulemaking on the question of whether
that exemption ought to apply to other devices, and both these
exemptions would be reviewed again after 3 years under the same
procedures the Copyright Office has developed.
In short, H.R. 1123, if enacted, would be the most
effective and focused way for Congress to correct what it
considers an erroneous outcome of the last DMCA rulemaking, and
it would inflict the least possible disruption on the
rulemaking process and keep intact this provision, section
1201, that has served American creators and consumers so well.
Thank you very much. I would be ready to answer any
questions.
[The prepared statement of Mr. Metalitz follows:]
__________
Mr. Marino. Thank you, gentlemen, for keeping your initial
comments to 5 minutes.
The Chair now recognizes the Chairman of this Subcommittee,
the gentleman from North Carolina, Congressman Coble.
Mr. Coble. Thank you, Mr. Chairman. I appreciate you and
the gentleman from North Carolina covering for me. I apologize
to the witnesses for my belated arrival. Today was one of those
days when I had to be at five places simultaneously. You all
have never had that happened to you before, have you? I am sure
you have. Thank you, Mr. Chairman. I appreciate that.
Starting with Mr. Berry, and then including all of the
witnesses, what is the current state of the unlocked cell phone
market? And do consumers have a growing number of choices for
unlocked handsets and providers than ever before, or is the
marketplace limited?
Mr. Berry. Hi, Mr. Chairman. You are correct. There are a
lot of choices for the consumer, but there are also a lot of
unique circumstances where the phone is a very personal device
and we believe that consumers should have the choice whether or
not to continue to use that particular phone. I think it
actually enhances the competition or competitive elements in
the market. Many of the small carriers, six or seven of them in
your congressional district, have a difficult time getting
access to the iconic devices and unlocking gives them an
opportunity to retain that customer that may come into their
area that wants to keep their iconic device. And I think it is
a choice that consumers enjoy having and gives us, the smaller
carriers, an opportunity to distinguish themselves in the
marketplace.
Mr. Coble. Thank you, sir.
Mr. Altschul. There are close to 200 different devices
available on an unlocked basis to consumers in the United
States. Just one store, Best Buy has on their website as of
last night 146 different devices from the latest Apple and
Galaxy phones to very simple feature phones, and Best Buy is
just one of the retail outlets that are available to customers
that are interested in buying unlocked phones and being free to
take the appropriate phone to the carrier of their choice.
Mr. Coble. Thank you, sir.
Mr. Slover. I would say that the focus should also be on
the consumer who has got a phone already, and has a chance to
get a new one if he wants and to give the old phone to
somebody, else or to sell it, or he has got a phone that he
likes, but he wants to switch it to another network. It is not
just whether there are phones out there in the market that are
available to consumers who want to buy them. A lot of those
phones that we have been talking about are new phones. The used
phones are going to be gradually phased out now--if the
Register's decision stays in place, that has been phased out
now. And so over time, there will be fewer and fewer used
phones available, and they will be older and older used phones
that are available.
So I think it is also important to focus on the consumer
who has got a cell phone in his hand and what his choices are,
what he can do with that phone.
Mr. Coble. Thank you, sir.
Mr. Metalitz. I do not have anything to add, Mr. Chairman,
on the state of the market, but just to note that if the
consumer has the phone in his hand, under the current
exemption, if he bought it prior to January, then he is
certainly free to exercise the exemption that exists now.
Mr. Coble. Thank you, sir.
Let me try one more question before my time expires.
Gentlemen, how is the unlocking issue dealt with in other
Nations, and more specifically, is this only a U.S. issue or is
it an issue elsewhere? Either of you.
Mr. Berry. I am certainly not an expert on all the markets
globally, but unlocking is a problem in some countries. I do
not think it is quite the same in the United States. In the
United States, we subsidize phones and some of the iconic
phones are exclusive to a particular carrier, and that carrier
obviously wants the customer to meet their commitments. Many of
the countries overseas, Europe, they do not subsidize phones,
and they have more of a standard technology. So that is a
little easier to switch out SIM cards and actually use a phone
across carrier networks. It is a little different than in the
United States. Again, it is a very personal device, and I think
having an unlocking opportunity--capability--allows you to do a
lot of different things with that used phone that you would not
otherwise be able to do.
Mr. Coble. I thank you, sir.
Mr. Metalitz. Mr. Chairman, if I could just add on the
international dimension. As I mentioned in my statement, many
countries now have similar laws protecting access controls--and
as, I believe, Chairman Goodlatte mentioned in his opening
statement--we have obligations under our free trade agreements
with regard to these types of protections. But I think the good
news is that H.R. 1123, as I read it, is consistent with our
obligations under those free trade agreements. If it were
enacted, I do not think it would create a problem of compliance
with the free trade agreements.
Mr. Coble. I thank you, sir.
Mr. Chairman, I see my red light is illuminated. I yield
back.
Mr. Chabot. Mr. Chairman, could I make a unanimous consent
request over here on this side?
Mr. Marino. Yes.
Mr. Chabot. Thank you, Mr. Chairman.
I would just like to ask unanimous consent to submit a
couple of questions in writing for the panel's response at a
future time.
Mr. Marino. Without objection.*
---------------------------------------------------------------------------
*The Subcommittee did not submit post-hearing questions to the
witnesses.
---------------------------------------------------------------------------
Mr. Chabot. Thank you.
Mr. Marino. The Chair now recognizes the gentleman from
North Carolina and the Ranking Member, Mr. Watt.
Mr. Watt. Thank you, Mr. Chairman.
As has become my policy as the Ranking Member, I generally
have decided to go last in the questioning so that if any of my
other colleagues need to leave, they can before the hearing is
over, especially on the last day of the week when they are
trying to get out of town. So I am going to defer to Mr.
Johnson, and I will go last.
Mr. Marino. The Chair recognizes Mr. Johnson.
Mr. Johnson. Thank you, Mr. Chairman. I believe Mr. Watt
just loves to hold back and wait until I ask my questions
because they are so good, and then he gets to clean up behind
me. [Laughter.]
I believe that is what the real deal is.
But thank you all for coming today.
Strong copyright protections are the backbone of
innovation, creativity, and the public good. Copyright theft
hurts everyone. Song writers and artists depend on royalties
for their livelihood. Companies depend on protection so that
they can make new content and products, and consumers want to
know that when they download an app, it is not counterfeited or
full of malware.
As this Committee looks to update areas of copyright law, I
think it is important to leave room for companies to provide
innovative solutions while protecting copyright owners. For
instance, one of the great success stories of copyright law is
the DMCA intermediary safe harbor. One major example of this
success story is Google, which receives 17 million takedown
requests monthly and processes each of these, on average,
within 6 to 8 hours.
Today's hearing represents another opportunity for
innovative solutions in the marketplace. As a cosponsor of the
bipartisan H.R. 1123, the ``Unlocking Consumer Choice and
Wireless Competition Act,'' I recognize that we need solutions
that bolster competition while empowering consumer choice. And
as a parent who--sometimes I drop my mobile phone and crack the
screen on it, and I do it every so often. But then my kids tend
to do it more often. So they end up being the recipients of my
phone. And both have accounts with other cell phone service
providers. So it presents a dilemma that I am faced with.
I look forward to the testimony of our witnesses today.
I applaud my colleagues from across the aisle for coming
together on this pro-consumer legislation.
And, Mr. Slover, in your written testimony you indicate--
you referred to a nationwide survey of consumer views on
unlocking mobile phones. Could you share with us the results of
the survey? And thereafter, I would like for you to explain to
us how the 1201 exemption for unlocked devices enhances
consumer choices.
Mr. Slover. Well, the survey was done 2 years ago, and one
of the highlights was that 96 percent of those we polled who
have wireless handheld devices believed that consumers should
be able to keep their handset when they switch carriers. And
the figure actually went up to 98 percent for people who had
smart phones. The margin of error on that survey was 3 percent.
So that is virtually 100 percent of everybody who we surveyed
thinks that consumers should have that right. So to them, it is
just common sense that they should be able to keep their cell
phone with them as they switch carriers. So that was the
highlight of the survey.
There were other figures in there, too. There was one,
about three-quarters of the people surveyed said that they
thought that cell phones should be interoperable across all
networks and that if necessary, Government laws and policies
should be instituted to require that.
As to your question about the 1201 process, that is a
broader issue than just how it applies in the phone unlocking
context. In the phone unlocking context, we do not think it
should have gotten caught up in that at all. I think it was a
surprise to everybody--nobody was planning in 1998 that the
anti-circumvention restrictions were going to help reinforce
the long-term bundled package where you get your cell phone as
part of your long-term contract. That is just how it worked
out. And what we want to see is for that to be pulled out and
separated from that.
The broader issues about 1201 are very interesting and
certainly deserve attention, and we look forward to being a
part of that discussion in the months to come.
Mr. Johnson. Thank you.
Mr. Marino. Thank you.
The Chair recognizes the gentleman from North Carolina, Mr.
Holding.
Mr. Holding. Thank you, Mr. Chairman.
Mr. Altschul, you were talking about some of the concerns
if the rule were overbroad, concerns about the arbitrage of
phones, the demand for stolen phones, fencing of phones. I am
curious about what the business model is for the arbitrage of
phones. If you could, kind of explain how that would work and
how much are these phones worth if they are completely able to
be unlocked and so forth.
Mr. Altschul. Well, we know that the U.S. is unique in
offering consumers subsidized, very deeply discounted phones
for those customers that enter into a service contract with
their carrier. To the extent that the phone is compatible in
markets overseas or in other countries, the software lock is
the only thing that keeps somebody from basically gaming the
system, from obtaining a deeply discounted phone, which the
carrier is fronting the subsidy for up front out of the
expectation that over the life of the service agreement, they
will be able to recover their costs from the customer. Phones
are small and light and are easily shipped to foreign countries
where there is no discounting. So the difference between
getting a modern, top-of-the-line feature phone or a smart
phone for $199 in the United States that more or less instantly
can be sold for $600 or $700 in another country creates the
arbitrage opportunities.
Mr. Holding. What about on stolen phones? Is there a big
market for stolen phones?
Mr. Altschul. Well, there is obviously a huge amount of
street crime where these phones are being targeted by
criminals, and it has caught the attention of the police chiefs
in this city, in New York, and San Francisco, and other cities
because of how easily fenced these phones are on the street.
And, of course, with the existing rule, there is now no legal
reason or basis for a brick and mortar storefronts to be in the
business of taking a phone that a customer brings in and
changing its identity, its software, and the ability to operate
that phone on different networks.
So one of the concerns about going beyond allowing an
individual customer known to a carrier to unlock phones
creating a broad commercial exception would be to legitimize
the ability of brick and mortar stores to be the first step of
the fencing operation.
Mr. Holding. I think we see all the time that technology is
rapidly changing, evolving, and I will posit this to all of
you. The business model we have here, as you say, heavily
subsidizing the phone on the front end--are there changes in
technology on the horizon or forecasted that would change that
business model, that would render it obsolete or not
profitable? And so we try to do something legislatively here
and before you know it, the business model has changed, and
what we are doing here is moot and a waste of time.
Mr. Altschul. Well, the business model is constantly
changing. Right now, there are the two dominant types of
service agreements, both of which are popular with consumers:
no contract phones with no service plan and typically not a
discounted device and a contract plan where there is a
discounted device. T-Mobile 2 to 3 months ago announced a
hybrid plan where they are breaking the tie between their
service and device. Other carriers said if this is popular,
they can follow a similar plan. There are prepaid offerings
that offer some discounted devices. So already the marketplace
has a mix, and consumers have shown how sophisticated they are
in selecting and choosing the most attractive combination of
service and devices that best meets their needs.
Mr. Holding. All right. Thank you.
Mr. Chairman, I yield back.
Mr. Marino. Thank you.
The Chair recognizes Congresswoman Chu from California.
Ms. Chu. Mr. Slover, I want to get the basics of cell phone
unlocking. At the end of my contract term with my wireless
carrier, how would I be able to unlock my cell phone? Would I
be able to unlock the phone myself, or do I need to seek out
the help of my wireless carrier?
Mr. Slover. Well, there are some people who have figured
out how to do it themselves. Most people would need to get help
from somebody else. And you could either get that from your
wireless carrier, your old wireless carrier; you could get it
from your new wireless carrier, or you could find one of the
people who has figured out how to do it and ask them to explain
it to you, to walk you through the steps, to maybe send you a
link to an explanation for it. There are a number of ways, and
we would like to see all those ways available.
Mr. Altschul. If I may add to Mr. Slover's answer. One of
the facts that the Librarian of Congress relied on in the
record before it in this hearing was the fact that carriers
will unlock their customers' phones once the service terms have
been fulfilled. Carriers do that. It can be done over the
phone. It involves codes the customer can follow, and there is
no charge for it.
Also, on the Internet, along with a lot of other things,
there is information how to do this. People should think twice
because it also could be a back door for malware and viruses
and other changes to the device that might not be welcome, as
well as when it is done over the Internet or through third
parties, there is a charge. If the customer goes to their
carrier, under the carrier's terms there will be no charge to
unlock the device.
Ms. Chu. Yes. Mr. Berry?
Mr. Berry. I think it is also important to note--and I
think you hit on a very important aspect, and that is, do you
have to be MacGyver to unlock your phone? Sometimes you do, and
some of the locking devices are getting more and more complex.
And that is why we recommend that an agent be authorized. If
you have locked yourself out of the house and you need a
locksmith to come in and help you open the door, I mean, that
is certainly an acceptable use of your property and it is
certainly a property right that you have. I think that it
should be recognized that locking and locking devices are
getting more complex, and you are absolutely right. The
wireless carrier sometimes does not have the code. Maybe it is
an unlocked device that you bought at Best Buy and that
particular carrier may not have that code to unlock the device
at the end of your service. So I think it is an important
question and an important issue to address. Thank you.
Ms. Chu. Yes. Are you saying then any phone could be
unlocked by any carrier or are there limits to that?
Mr. Berry. My understanding is most phones can be unlocked
by a carrier, an authorized carrier, but there are some devices
that cannot be unlocked. For example, the Apple phone. If you
do not have the code, you cannot unlock it. If you buy an Apple
unlocked phone, it is not necessarily going to work on every
carriers' network even if the carrier has the same technology
in their network. And so it can get fairly complicated. Like
Mr. Altschul said, there is no such thing as one interoperable
phone. It depends on your network, your technology, and quite
frankly, the OEM--the manufacturer that built it.
Ms. Chu. Mr. Slover, or anybody else, the Register of
Copyrights found out with respect to new wireless handsets,
there are ample alternatives to circumvention and the
marketplace has evolved to the point where there is a wide
array of unlocked phone options available to consumers. Do you
believe that consumers have meaningful options when purchasing
new unlocked phones, and why did the National
Telecommunications and Information Administration support a
broader exemption?
Mr. Slover. I think it is incomplete to look at the
question just from the perspective of what is out there in the
marketplace for consumers in general who want to buy a new
phone, and are there enough unlocked phones out there that if
they want an unlocked phone they could find one. Now, even on
that question, they may not be able to find the specific kind
of phone that they want unlocked. So it is more than just
whether there are enough phones out there in general. But that
is only one side of the equation.
And the other side of the equation is what about the person
who has got a phone, is getting a new one, wants to pass their
old one along to somebody else or wants to keep their old one
and pass their new one along to somebody else, or wants to sell
the one they are getting or the one they are giving up to
somebody else. So from that side of it, the criminal
prohibitions against unlocking the cell phone are a big
hindrance.
Ms. Chu. Thank you, and I yield back.
Mr. Marino. Thank you.
I guess it is my opportunity.
Mr. Altschul, what do the major carriers think about this
legislation, and do they have any suggestions on how to tweak
it?
And then, Mr. Berry, I am going to ask you about other
carriers as well. Same question.
Mr. Altschul. The members of our association support the
bill and they support it in the way it is narrowly drafted to
restore the exemption as it was in 2010. That returns the
situation to the status quo that the industry operated under
for the prior 3 years.
Mr. Marino. Mr. Berry?
Mr. Berry. Yes, Mr. Chairman. Our members support the
legislation, 1123. I think some of the smaller carriers, the
rural and regional carriers, would probably see much more
immediate benefit because they have more difficulty getting
access to these iconic devices or to the type of smart phone
that is very difficult for smaller carriers that have less
scale to be able to purchase. But all our carriers support the
legislation and think that something should be done
immediately.
Mr. Marino. Thank you.
Mr. Metalitz, do you know of anyone or any entity that
opposes this?
Mr. Metalitz. I am not aware of any, Mr. Chairman.
Mr. Marino. Does anyone on the panel know of any opposition
to this?
Mr. Slover, I think you testified initially in your initial
reading that you want to see this permanently established with
no time limits. Am I correct on that?
Mr. Slover. Well, we do not want our consumers to face a
situation where there is uncertainty every 3 years. I think one
aspect of that is that the de novo review that has been
followed is a complete de novo review where you start over
again, and the people who have proven that an exemption is
justified, and satisfied that burden once, have to satisfy it
each time, and you have got different people in the offices
making the decisions perhaps. I think it would work better if
there were a presumption at least that once there is an
exemption in place, the starting point, the default is that it
stays in place, and then the people who think it should be
expanded can come in and explain why, and the people who think
it should be narrowed or not renewed at all can come in and
explain why.
Mr. Marino. You are probably aware of this, but we could
have some trade issues concerning this because of the
agreements. There could be creative ways to rework those trade
issues with other countries, but I think at this point it is
inclined--I cannot imagine other countries having a problem
with this, but it still would involve some trade issues.
Mr. Metalitz?
Mr. Metalitz. Yes. Mr. Marino, if I could just say a word
about the de novo review. I think that is a positive feature of
the system. You know, a wise man said long ago you cannot step
in the same river twice. All of these areas are ones where
there is a lot of change both in technology and in markets. And
the Copyright Office and the Librarian have shown the ability
to look at these and to adjust their recommendations
accordingly. So I think that is a positive feature.
Mr. Marino. I am going to play a little devil's advocate
here based on my experience as a prosecutor. Do any of you
gentlemen see any complications or down side to this from those
individuals who just practice, as much as they can, hacking
into our computers, hacking into our phones? Do you see any
technical complications here that may make it somewhat more
easy for these people to get into our phones by unlocking
these? Anyone.
Mr. Berry. Mr. Chairman, going back to the bulk--you would
call bulk reselling--that is a problem. It continues to be a
problem whether you have the exemption or not, as we have seen.
And I think you should at least start from the point that this
statutory language is neither sufficient or necessary to deal
with the much larger issue of bulk reselling. And there are
numerous other activities that you--breach of contract,
infringement, copyright infringement, trademark infringement,
not to mention the criminal codes to address that. You are
always going to have those potential problems for those
nefarious people that would like to break into the device in
this case. But I do not know that it is so overbearing that the
consumer should not continue to enjoy this opportunity to
freely use their property.
Mr. Marino. Thank you. My time has expired.
I am going to move on to Congressman Jeffries from New
York.
Mr. Jeffries. Well, thank you very much. And let me also
thank the Ranking Member.
Mr. Slover, the Librarian came to the conclusion that there
was adequate consumer choice for unlocked phones on the market.
Is that correct?
Mr. Slover. That is correct that that was the conclusion
that the Register of Copyrights and the Librarian of Congress
came to, yes.
Mr. Jeffries. Now, I assume you disagree with that
conclusion.
Mr. Slover. I think it is incomplete and it is only one
side of the question. It is incomplete because not all phones
are available to all consumers in all situations, but in
addition to that, the consumer who has got a phone already--it
is all of the phones that are going to be rendered useless
because they cannot be unlocked and resold without the
potential for criminal penalties, which is going to be very
chilling, I would think. And so over time, they are going to
end up getting thrown away or left in a drawer someplace rather
than being put to use where they could be. And the consumer who
has got those, who would be able to get some benefit, either a
family member taking over the phone, or being able to sell it
for a small amount, or giving it away to some charitable
organization that is collecting phones for their clients, they
are all wasted.
Mr. Jeffries. Now, what is the state of play as it relates
to someone who is coming off contract and will be able to make
a decision as to whether to move forward with their current
carrier or switch carriers in terms of the unlocked phone
market that they would confront?
Mr. Altschul. Well, as the Librarian of Congress found on
the record, carriers will unlock a customer's phone upon the
customer's request, and they publish the requirements. You
might think it would only be at the end of the contract.
Different carriers have different policies, including just
being in good standing and saying you are going to go on a
trip, say, to Europe and you want the flexibility while
traveling to use other carriers' networks. So that was in the
record before the Librarian of Congress.
And the benefit of having the carrier do the unlocking is
that you do not go to third party sources on the Internet or
elsewhere which, in the unlocking process, increases the risk
of malware and viruses being inserted into the device.
Mr. Jeffries. Now, currently it is my understanding that
when carriers sign up a new customer to a contract, often the
cell phone or certainly in the case of a smart phone, is
offered to that customer at a very discounted price. To the
extent that this bill moves forward--and I do support the
legislation, but to the extent that the bill moves forward and
becomes law, do you anticipate that that would change in any
way in terms of perhaps a decrease in the discount that is
available or its outright elimination?
Mr. Altschul. Well, we operated under the rule that would
be restored for the past 3 years, and the choices to consumers
and the availability of discounted phones was not diminished
under the prior rule. I do not think any of us have a crystal
ball. The markets change. Consumers' tastes change. We have
seen over the past few years, even with the existing rule, the
greater popularity of no contract plans and the availability of
unlocked phones with consumers. So I cannot predict what the
future will bring, but I am fairly confident that this bill is
not going to change the business practices one way or another.
Mr. Jeffries. Thank you.
Mr. Slover, have you done any analysis on this question?
Mr. Slover. Well, we would like to see greater choices for
consumers. The idea of getting a contract where you do not have
to worry about going over your minutes or going over your other
limits, but not having to take a phone packaged in with that,
if the two purchases could be considered separately, then there
would be more transparency, the consumer would know what they
are paying for. I mean, right now, you walk into one of the
stores, and they direct you over to the display of phones that
you can get for free or at a dramatically reduced price as a
result of signing up for the contract. But it is not, ``here is
one thing you are buying, here is another thing you are buying,
do you want to buy both of them from, us or not?''
And so the greater the choices that are made available--and
to us, the lock and the penalties for getting around the lock,
for unlocking to interconnect to another network are part of
the artificial support system for the bundled contract. We are
not saying the bundled contract should not be made available.
We think it will still be made available to consumers who want
it, but there will be more transparency and consumers will have
more choices.
Mr. Jeffries. Thank you, Mr. Chair. I see that my time has
expired. I thank the witnesses for their participation.
Mr. Marino. Thank you.
The Chair recognizes Congressman Chaffetz from Utah.
Mr. Chaffetz. Thank you, and I thank the Committee for
taking on this issue. It is one that I think is important to a
lot of consumers today.
I want to start with the developers and some of the
distribution of the potential tools that could be used to help
unlock these phones. One of the problems, even with a DMCA
exception, is it does not provide immunity for making or
distributing the tools to circumvent a lock even for a lawful
exemption. If we want to make sure people can unlock their
phones, do we not need to clarify that the DMCA does not apply
to phone unlocking or somehow provide an exemption to
developing and distributing the tools in addition to just
simply using them? Maybe we could start with Mr. Berry, please.
Mr. Berry. Thank you, Congressman.
You are correct that there seems to be fewer and fewer apps
developers that will provide this technology, the coding
necessary to unlock phones. Again, I mentioned the agent. In
many instances, it is this individual or the wireless carrier
that has the unique ability to unlock phones. And I think it
would be appropriate to consider that capability, that unique
capability as an agent of the consumer to help ensure that
consumer can fully utilize their property rights. I think it is
a good idea.
Mr. Chaffetz. What is the penalty if you were to not
comply? Based on the law, the way it is now, if somebody were
to do this, what is the penalty for that?
Mr. Berry. Well, my understanding is it could be a fine up
to $500,000 and it could be criminal prosecution and potential
incarceration. So it is a felony.
Mr. Chaffetz. It seems pretty severe for unlocking a phone.
Does anybody else care to weigh in on this? Yes?
Mr. Metalitz. Yes, sir. I just wanted to make a couple of
points.
First, I know the issue of criminal penalties has come up
here several times, and I think it is important to bear in mind
that the act of unlocking a phone, even if you assumed there
was no exemption at all, would only attract criminal penalties
if it was done willfully for the purpose of commercial
advantage or private financial gain. And those are limitations
that the Congress put in in 1998 when it enacted the DMCA. So
many of the scenarios we have been hearing about about
individuals unlocking their own phones or donating a phone to a
charity, this type of thing could not be reached by that. In
fact, there have been virtually no prosecutions under section--
--
Mr. Chaffetz. Well, and that is a good reason to take it
off the books, is it not?
So would you agree, though, with Mr. Berry that the
developers or distributors of these potential tools, if we were
to enact something, should also be covered under this?
Mr. Metalitz. Well, no, I would not agree with that. I
think that is a separate question. The reason I think Congress
set up the rulemaking the way it did to only deal with the act
of circumvention was the concern about developing a marketplace
for tools to hack through access controls. And very, very few,
if any, of these tools are specifically limited to one type of
access control or to one type of use. So the concern would be
that developing a marketplace for these tools could lead to a
lot of exposure of other----
Mr. Chaffetz. But if the law was crafted such that your
goal is to allow the consumer to unlock their phone, why would
you not also protect the developer or the distributor of that
tool or app or whatever it might be and allow that to happen?
Mr. Metalitz. Well, I think the testimony has----
Mr. Chaffetz. I mean, who is going to go and develop that
if they are going, for their own financial gain, be facing a
$500,000 fine and time in jail?
Mr. Metalitz. I think the testimony has been that, first of
all, in many cases this unlocking would be taking place with
the consent of the copyright owner, which in the situations
where the carriers are doing it----
Mr. Chaffetz. What we are talking about is giving consumers
more ability to do this. So why would you not protect the
developer too?
Mr. Metalitz. Well, I think the other thing to look at is
whether between 2006 and today when this exemption has been in
place that applies to the act of circumvention have consumers
been unable to exercise it. I do not know the answer to that.
Mr. Chaffetz. Well, I do.
Mr. Chairman, as my time is expiring here, I think to truly
have an understanding of how the technology works, there need
to be--everybody in that food chain needs to be protected under
the law so that they can provide these tools and allow access
and allow more freedom for the consumers to make these types of
choices.
With that, I will yield back. Thank you.
Mr. Marino. Thank you.
The Chair recognizes Congresswoman Lofgren from California.
Ms. Lofgren. Well, thank you very much, Mr. Chairman. It
was good to hear Mr. Chaffetz's questions because I have a
similar set of questions.
First, let me say that I do support Chairman Goodlatte's
bill. I believe I am a cosponsor of the bill, and I think it is
a necessary thing.
I also believe, however, that we ought to do something
further. Congressman Tom Massie and I have a bipartisan bill,
H.R. 1892, that would engage a permanent fix in the section
1201 of the DMCA that would be not instead of the Chairman's
bill but in addition to it because, as has been noted, we do
need to amend some of our trade agreements. Sometimes I hear
colleagues express concern about the role of the Congress in
many of these trade agreements. I am certainly for trade, but
they have managed to constrain the role of Congress in amending
our laws as we see fit, which is a real problem for us. But we
do direct in this bill the President to negotiate changes so
that we can, once again, have our proper role as the
legislative branch.
I would like to ask unanimous consent to include in the
record a letter to the Register of Copyrights from the
Department of Commerce recommending cell phone unlocking.
And if I could, Mr. Chairman, I would also like to ask
unanimous consent to include in the record a letter from
FreedomWorks, as well as a letter from the National Consumers
League, supporting 1892 and certainly also supporting Mr.
Goodlatte's bill.
Mr. Marino. Without objection.
[The information referred to follows:]
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Ms. Lofgren. I am really sort of in a pro-freedom place on
this. The use of copyright to preclude people from using the
phone that they bought with their own good money is just
inappropriate. It is not the Congress' role to tell people the
business model they should use. If people want to do a
subsidized phone and a long contract, fine. If they do not want
to do it, also fine. That is not our job to say how the market
should work. But once someone buys something, they should own
it.
I just think that if a carrier--you know, you have got a
contract, for example, and if someone breaks that contract, you
have a lot of remedies. I mean, you can sue them. You can
charge them a fee if you can put in your agreement. You can
brick the phone. But I do not think that using criminal law to
enforce the contract is appropriate. As a matter of fact, we
have the same problem in the CFAA and its misuse with the late
Aaron Swartz where you basically use the criminal law to
enforce a private contract. That is just a misuse, I think, of
the law.
It is good to see you, Mr. Slover, and I remember your many
years of service here to the Committee.
It seems to me that--and it has been discussed--if you
preclude individuals from using third party applications, which
Mr. Goodlatte's bill does not address--and I do not criticize
him. I think it is really not possible to do that without
looking at 1201. You really, in many cases, preclude the owner
of the phone from actually exercising their property rights,
don't you? I mean, if I have a phone and I own the phone, I
want to give it to my son, and the carrier will only unlock it
for me as the owner, doesn't that constrain my property rights?
Mr. Slover. Absolutely. We believe that the right to unlock
should include the right to get help in figuring out how to
unlock. We would ordinarily assume that that would be implicit
in the right to unlock. If it is not, we would like to see it
fixed.
Ms. Lofgren. Well, I think, you know, I am glad that
people--you know, our last vote was a while ago, and sometimes
it is hard to have hearings after the votes are over, but I am
glad that we all came back. I praise the Chairman for
scheduling this hearing. As I say, I am a cosponsor and
supporter of his bill. But I hope that we can go further and
really address the property rights issue that is present here
for American consumers and allow full property rights to attach
to them and this misuse of copyright law to enforce private
contracts to end. And I would recommend the bill that Mr.
Massie and I have introduced as a way. And we have got
tremendous support from not only FreedomWorks but the Consumers
League, Public Knowledge, and on and on--this bipartisan bill.
So I see my time is up and I yield back, Mr. Chairman, with
thanks for recognizing me.
Mr. Marino. Thank you.
The Chair recognizes the Ranking Member, the gentleman from
North Carolina, Congressman Watt.
Mr. Watt. Thank you, Mr. Chairman.
I think the Chair actually asked the question that I was
most interested in hearing the answer to, and that was whether
is there anybody in the world that is out there opposed to this
bill. You all seem to think that there is not. At least, that
was the consensus I got. Anybody in the audience maybe could
raise their hand if there is anybody opposed to it. So you all
have answered that, and I think the answer is you do not know
of anybody. Is that correct?
So the other question then I would ask is are there any
suggested revisions to H.R. 1123 that would keep it in its
current framework and deal with this issue, not the broader
issues. Are there any revisions to H.R. 1123 that any of the
panelists would suggest?
Mr. Slover. Yes, Mr. Watt. We did make a number of
recommendations in our written statement. They are the same
recommendations that we made to the Register of Copyrights in
the last review proceeding. We think those could all be done
within the framework of reinstating the exemption in the 1201
process with directives in the legislation to make whatever of
those clarifications you saw fit.
Mr. Watt. Wouldn't that put Congress in a more
micromanaging position if we started going in every time a 1201
proceeding concluded and saying, well, we agree with this and
do not agree with that? I mean, it is one thing to do it when
you have broad-based support without any opposition. It is an
entirely different thing to go in--I mean, one of the reasons
we punted that to the Librarian of Congress and set up this
process was to take into account more technical issues and give
it more expertise. So you are not suggesting that we do
legislatively now go back and change that.
Mr. Slover. Not as a larger matter. I am talking about
specifically with this one. The proposals that we made to the
Register we think are well considered and are warranted, and we
had hoped to see them implemented by the Register of
Copyrights.
Mr. Watt. And this bill gives you a shot to do that because
it requires further review of this in a fairly expeditious
time, in fact, in a shortened time frame from the 3-year time
frame.
Mr. Slover. If you are talking about the further review
that is directed as part of the legislation as introduced, I
think that just goes to one of our recommendations, which was
to include other devices----
Mr. Watt. So I take it that there are some things that you
would like for them to have done that they did not do other
than this unlocking provision that we put in this bill that
would have us second guess even other parts of what they did or
did not do.
Mr. Slover. Yes.
Mr. Watt. Okay. I got you.
Anybody else have any technical concerns about the content
of H.R. 1123, things that you would suggest we might change?
Mr. Berry. In short answer, no. I think that the bill needs
to be enacted as quickly as possible.
I think in all fairness I should mention that I too made
recommendations to the Librarian of Congress on three areas.
One is that it should be a wireless device, not a cell
phone or a handheld phone. I think that is a recognition of
where the economy has gone.
Also, I suggested changing the burden of proof in the
process itself. If you change the burden of proof so that there
is some precedential value to a previous decision of the
Librarian, then you give this opportunity to continue whatever
the process was going forward. It is hard to prove a negative,
and if you had an exemption in effect at the time that you are
trying to prove what was the harm, then I think you have sort
of a dilemma there. So we suggested, at some further discussion
and at some other time, maybe you might want to address the
burden of proof.
I do not think it gets into the problem with WTO or the
international treaties. In a previous life, I was chief counsel
of the Senate Foreign Relations Committee. We looked at every
treaty and every trade agreement that came through the Senate
to ratify it, and I do not think that changing the burden of
proof would be a significant international issue.
The de novo issue is not a statutory issue. It is a
requirement that the Committee put in via Committee reference
in the report. So it is not really addressed. What gets me
probably the most is the NTIA, specifically from this
Committee, the Committee said that the Librarian of Congress
shall consult NTIA. NTIA found that we had met the burden of
proof to continue the exemption, but the Librarian of Congress
made a decision to the contrary notwithstanding. And I would
think that the Congress put ``shall'' in there for a reason.
They did not put ``should.'' And the Librarian of Congress did
not appreciate the NTIA's recommendation, and I think that
there are some adjustments that could probably benefit
everybody 3 years from now.
Mr. Watt. I got you. But ``shall consult'' does not mean
``shall abdicate your responsibility.''
I assume you are content to have those other issues.
Hopefully we can address some of the ones Mr. Slover has
suggested in a broader copyright context.
Mr. Berry. I would like to see the Chairman's bill acted on
immediately, yes, sir.
Mr. Watt. But in this bill, you think we have found the
sweet spot.
Mr. Altschul. Well, if I could say the reason CTIA is able
to support H.R. 1123 is because it is narrow and it does not
reopen these issues, which have been fully aired in the past
and I predict will be fully aired in the next triennial review
and other bills as well.
Mr. Watt. Mr. Chairman, I am well over my time. I
appreciate your indulgence, but I want to express my sincere
appreciation to the witnesses for being here. I know a number
of them traveled distances. So we thank them for doing so.
Mr. Marino. Thank you.
I do too want to thank you for being here. Your insight and
your knowledge is very helpful.
I want to thank the citizens in the gallery for sitting
here and listening to this and having an interest in it.
And I thank my colleagues for being here because today they
are headed back to work in their district, and I am sure some
flights have been delayed because of this.
So, again, thanks to all of you.
This concludes today's hearing.
Without objection, all Members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record.
This hearing is adjourned.
[Whereupon, at 12:32 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
Material submitted by the Honorable Zoe Lofgren, a Representative in
Congress from the State of California, and Member, Subcommittee on
Courts, Intellectual Property, and the Internet
__________
Prepared Statement of Derek S. Khanna, Founder, Disruptive Innovation,
Visiting Fellow, Yale Law School, Information Society Project
Prepared Statement of the Library Copyright Alliance