Court OKs Phone Locking Lawsuit Against T-Mobile

Last week T-Mobile lost their attempt to get the California Supreme Court to stop a lawsuit againt the companies practice of locking their phones and charging early termination fees. This clears the path for a class-action suit seeking to bar T-Mobile from collecting a $200 early termination fee, regardless of how close the customer is to the end of the term. The lawsuit also seeks to require T-Mobile to disclose the extent of locking on their phones and require them to unlock the phone if a customer wishes to move to a different carrier.

T-Mobile saught to have the case thrown out because the customers filing the lawsuit had agreed to its terms of service when they signed the carrirer's service agreement. They argued that the agreement barred them from filing a class action lawsuit and required them to settle any disputes through binding arbitration. A superior court had ruled that the case could prceed, and an appeals court held that the prohibition of class action lawsuits in T-Mobile's agreement was "unconscionable" and "unenforceable".

This could spell big trouble for all the US carriers since they all basically have the same deal... locked phones and big termination fees that stand... usually for 2 years from the sign-up date. The problem is that anytime you get a new phone or make certain changes to your plan, the 2 year clock gets reset and so there is no way out.

Last week, two different lawsuits were filed against Apple for violating anti-trust law by locking their iPhone to the AT&T network. One claims that refusing to permit users to unlock their iPhone was a breech of California antitrust law, and the other charges that AT&T and Apple conspired to create a monopoly. While I quiestion how the iPhone is a monopoly since it doesn't do anything unique, when compared to competing products made by HTC, Palm, and others... I'm sure the Apple fans will disagree. These suits are fueled by the "bricking" of phones that Apple's firmware update created when it found that they had been unlocked.

Lawsuits against cellphone companies for locking are not new. Over the last few years I easily found lawsuits that had been filed against Sprint, T-Mobile, AT&T, and Cingular. Ironically, what I found for Verizon was the opposite. Last month Verizon Wireless filed a petition against the FCC to try and block its open access rules for its upcoming auction of 700Mhz spectrum. So I guess the best defense is a good offense!

Whats interesting about this whole thing is that it seems to have heated up around the iPhone because of the "bricking" that Apple did. It will be quite ironic if Apple ends up causing the whole locking concept to be killed in the US. I'm sure that if that happens, it will make Apple real popular with all the US carriers who's whole business model is oriented around locking their customers in for years so that they can't freely by from the service provider of their choice. The real question though, is whether locking and termination fees are good or bad? They help to subsidize the lower prices we pay for handsets, so in a sense it is a good thing. Personally, I think that choice and open competition is always good. If the carriers knew that you could leave tomorrow, then their attitude and approach to business would likely be different than it is today. But it could also have a big impact on the cost of handsets.... particularly PDAPhones.