August 20, 2017

Archives for August 2007

Debate: Will Spam Get Worse?

This week I participated in Business Week Online’s Debate Room feature, where two people write short essays on opposite sides of a proposition.

The proposition: “Regardless of how hard IT experts work to intercept the trillions of junk e-mails that bombard hapless in-boxes, the spammers will find ways to defeat them.” I argued against, concluding that “We’ll never be totally free of spam, but in the long run it’s a nuisance—not a fundamental threat—to the flourishing of the Internet.”

Does Apple Object to iPhone Unlocking?

I wrote Monday about efforts to “unlock” the iPhone so it worked on non-AT&T cell networks, and the associated legal and policy issues. AT&T lawyers have aggressively tried to stop unlocking; but Apple has been pretty silent. What position will Apple take?

It might seem that Apple has nothing to lose from unlocking, but that’s not true. AT&T can exploit customer lock-in by charging higher prices, so it has an obvious incentive to stop unlocking. But AT&T also (reportedly) give Apple a cut of iPhone users’ fees, reportedly $3/month for existing AT&T users and $11/month for new users. This isn’t surprising – in exchange for creating the lock-in, Apple gets to keep a (presumably) hefty share of the resulting revenue.

Apple’s incentive is much like AT&T’s. Apple makes more money from iPhone customers who use AT&T than from those who use other cell providers, so Apple gains by driving customers to AT&T. And it’s not pocket change – Apple gets roughly $150 per user – so even though Apple gets money for selling iPhones to non-AT&T users, they get considerably more if they can drive those users to AT&T.

Thus far, Apple seems happy to let AT&T take the blame for intimidating the unlockers. This mirrors Apple’s game plan regarding music copy-protection, where it gestures toward openness and blames the record companies for requiring restrictive technology. If this works, Apple gets the benefit of lock-in but AT&T gets the blame.

From Apple’s standpoint, an even better result might be to have iPhone unlocking be fairly painful and expensive, but not impossible. Then customers who are allergic to AT&T would still buy iPhones, but almost everybody else would stick with AT&T. So Apple would win both ways, selling iPhones to everybody while preserving its AT&T payments.

What a clever Jobsian trick – using a business model based on restriction, while planting the blame on somebody else.

iPhone Unlocked; Legal Battle Looming?

In the past few days several groups declared victory in the battle to unlock the iPhone – to make the iPhone work on cellular networks other than AT&T’s. New Jersey teenager George Hotz published instructions (starting here) for a geeks-only unlock procedure involving hardware and software tweaks. An anonymous group called iPhoneSimFree reportedly has an easy all-software unlock procedure which they plan to sell. And a company called UniquePhones was set to sell a remote unlocking service.

(Technical background: The iPhone as initially sold worked only on the AT&T cell network – the device was pretty much useless until you activated AT&T wireless service on it. People figured out quickly that you could immediately cancel the wireless service to get an iPhone that worked only via WiFi; but you couldn’t use it on any other mobile phone/data network. This was not a fundamental technical limitation of the device, but was instead a technological tie designed by Apple to drive business to AT&T.)

Unlocking the iPhone helps everybody, except AT&T, which would prefer not to face competition in selling wireless services to iPhone users. So AT&T, predictably, seem to be sending its lawyers after the unlockers. UniquePhone, via their iphoneunlocking.com site, reports incoming lawyergrams from AT&T regarding “issues such as copyright infringement and illegal software dissemination”; UniquePhones has delayed its product release to consider its options. The iPhoneSimFree members are reportedly keeping anonymous because of legal concerns.

Can AT&T cook up a legal theory justifying a ban on iPhone unlocking? I’ll leave that question to the lawyers. It seems to me, though, that regardless of what the law does say, it ought to say that iPhone unlocking is fine. For starters, the law should hesitate to micromanage what people do with the devices they own. If you want to run different software on your phone, or if you want to use one cell provider rather than another, why should the government interfere?

I’ll grant that AT&T would prefer that you buy their service. Exxon would prefer that you be required to buy gasoline from them, but the government (rightly) doesn’t try to stop you from filling up elsewhere. The question is not what benefits AT&T or Exxon, but what benefits society as a whole. And the strong presumption is that letting the free market operate – letting customers decide which product to buy – is the best and most efficient policy. Absent some compelling argument that iPhone lock-in is actually necessary for the market to operate efficiently, government should let customers choose their cell operator. Indeed, government policy already tries to foster choice of carriers, for example by requiring phone number portability.

Regardless of what AT&T does, its effort to stop iPhone unlocking is likely doomed. Unlocking software is small and easily transmitted. AT&T’s lawyers can stick a few fingers in the dike, but they won’t be able to stop the unlocking software from getting to people who want it. This is yet another illustration that you can’t lock people out of their own digital devices.