The iPhone4: Gatekeeping Swings Both Ways

Photo by Abhijit Tembhekar

Last Friday I stumbled up to the Yorkdale Apple Store to have something looked at in my MacBook Pro. And I was suddenly reminded by the milling throng it was launch day for the iPhone 4. At one point, the lineup apparently stretched almost to the Rogers store… where there was no lineup. Just a hastily made sign warning customers Rogers might run out of units. How times have changed.

Battle of the control freaks

In the midst of the feeding frenzy, the Apple lady in charge of the front door found a Genius who wasn’t on phone duty. He pushed me past a phalanx of security guards, pronounced my MBP fan busted and ordered the replacement part. He apologized for not having the part in stock and insisted that being a month out of warranty was not a problem. Kids, don’t try that at your local cellular store.

In fact, three years ago I tried something along those lines with a handset I bought from my carrier. Even though I had been with them for over 10 years, their reward for loyalty was to lie to my face about the Bluetooth functionality in the unit. One or more profiles, including the Object Push Profile, had been crippled, probably for the purpose of forcing transfers of files like jpeg’s to run over the cell network (see ARPU). The vendor rep told me I didn’t understand how the phone worked and I should have read the 200-page manual in the store before I bought the phone.

While I was at the Apple Store, I overheard some pretty unusual snatches of conversation. My favorite was from a guy who had presumably been there for hours, who when he hit the counter to get served said in a kind of exasperated tone: What’s so great about iPhones anyway?

Well, for this release the earth-shaking news could be multitasking or FaceTime. But the industry game-changer in the Canadian market is that Apple’s selling this iPhone in its own stores and selling them unlocked. Allowing subs to swap SIM cards in and out means being able to change carriers without the heavy switching costs that have long been used to lock in customers.

IT analyst Dave Burstein has a fleeting comment on his fastnetnews Web site to the effect that “Canadian wireless prices are dropping 10-15% because of new entrants”. I can’t confirm that. But I wonder to what extent Canadian subs are going to feel their bills ease up because the SIM card will set them free – free to change plans, upgrade, avoid roaming charges and so on, as opposed to seeing rates drop as the carriers try to undercut the competition.

But just as Apple was giving Canadian carriers a kick in their gatekeeping butt last week, the company was suffering its own humiliation: the unlocking of its “ecosystem” to, horrors, third-party, unapproved software. At the stroke of a pen, the US authorities legitimized jailbreaking. Nate Anderson at Ars Technica headlined his story: Apple loses big in DRM ruling: jailbreaks are “fair use.”

This did not happen because of market forces, but because of government fiat. Every three years, the Librarian of Congress may issue a list of exemptions to the circumvention provisions of the much-despised Digital Millennium Copyright Act, the DMCA. Last week brought six exemptions, and as Anderson says, the jailbreaking exemption “was all about Apple.”

Hoist on its own petard

The Register of Copyright and Librarian of Congress threw out Apple’s breathless objections on the grounds that the company is using DRM to lock out third-party competitors, not to protect itself from copyright infringment. Now, if you jailbreak an iPhone, and do so for the purposes of allowing it to interoperate with legally acquired software, you are engaging in fair use of Apple’s code. In the United States, that is.

For the last two or three years, Apple has been trying to do to competitors, regulators and customers what Canada’s wireless carriers have long been so good at: locking down their ecosystem – the handsets, apps, the Web, roaming partners, alternative voice platforms, carrier switching, handset upgrades, so that nobody else can touch ‘em. The new walled garden. I’m amazed at how fast fortunes are changing, especially in industries where the market leaders are so hard to dislodge – until a market force like Jobs comes along.

If you want to see the regulatory originals from Washington, the Rulemaking on Anticircumvention is here. Geist has a depressing post up today on the DMCA and Bill C-32 – U.S. Move to Pick Digital Locks Leaves Canadians Locked Out.

“Three years ago, the U.S. established a specific exception to allow consumers to legally unlock their cellphones so they could keep their phones when switching providers. Last week, it extended the exception even further, granting consumers the right to “jailbreak” their phones. That move allows consumers to install applications of their choice without requiring Apple’s prior approval.

“The Canadian rules on cellphones and digital locks pale by comparison. While the inclusion of an exception for unlocking a phone was promoted as an illustration of a pro-consumer element of C-32, there is no equivalent to the U.S. rule for jailbreaking phones in Canada.”

The irony, of course, is that if you’re American and want an iPhone, you’re still tied to AT&T. You can unlock, legally, but not to switch carriers, only to run 3rd-party software. In Canada, on the other hand, we have three carriers now competing for our unlocked iPhone business – and the prospect of getting copyright legislation worse than the DMCA.