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Press release brings to light new House prepaid bill

Yesterday afternoon this press release hit my inbox. It related to Tracfone, so I thought it was relevant. That the company’s president and CEO was responding to a recently proposed House bill made it even more interesting. Yet when trying to find the Wireless Prepaid Access Device Enforcement Act of 2009 on Google, the only thing to come up was this very press release. Sad that it’s the only place I could find such proposed legislation. As far as content, it’s what one would assume.

To wit, it “would make it a Federal crime to knowingly purchase new prepaid handsets in the U.S. for the purpose of modifying the phones’ software which prevents their use as intended on the U.S. carriers’ networks for which they were manufactured and sold (unless the manufacturer or the U.S. carrier authorized such practice). The Act would also prohibit a person from knowingly reselling or distributing new prepaid phones outside the U.S.” This makes sense, considering Tracfone’s recent history.

Prepaid carriers do not like it when people buy their phones in bulk, and then unlock and sell them on the market. Why? Because those prepaid phone packages you see in stores are subsidized. They’re cheap because the company takes a loss on the device itself. The hope is that once you buy the package, you’ll purchase enough minutes to offset the subsidy. This doesn’t always work out, but it works out in the company’s favor in the long haul. When people buy the phones in bulk but then never buy minutes, the company loses big time.

Should this be a law? It goes against an addendum to the DMCA, which allows consumers to break carrier locks on phones. However, the idea behind this provision is for consumers to use the phone on another network. These prepaid phone traffickers don’t have that purpose in mind. They want to sell the phone for a profit to someone else — who, incidentally, will be using the phone on another network.

It’s not an easy question to answer, for sure. People are allowed to unlock handsets. Eventually that unlocked handset will connect to another network. That’s allowed by word of the DMCA. The question here is of whether the middle man is legal.