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10/15/2007
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California Court Lets Class-Action Suit Against T-Mobile Go Forward

The suit seeks to prevent the carrier from collecting money for early termination fees and from locking cell phones.

T-Mobile is facing a class-action lawsuit that asks a California court to prevent the carrier from collecting money for early termination fees and from locking cell phones.

California's highest court gave its go-ahead for the lawsuit late last week after T-Mobile asked it to dismiss the case. According to a report on Wired.com, the high court's seven justices turned down T-Mobile's appeal, paving the way for the case to proceed. The plaintiffs, T-Mobile customers, are seeking an injunction that would prevent T-Mobile from collecting an early termination fee of about $200 from subscribers.

T-Mobile and all of the other major carriers in the United States, including AT&T, Verizon Wireless, and Sprint Nextel, charge a fee when subscribers terminate a contact agreement that is typically signed for two years.

Additionally, the plaintiffs seek an order that would require T-Mobile to allow its subscribers to unlock their cell phones if they choose to take them to another carrier. Consequently subscribers wouldn't have to purchase a new phone if they decided to switch.

Previously two lower-courts rejected T-Mobile's position, which is why the carrier appealed to the California Supreme Court.

Cellular carriers are known as gatekeepers because they lock phones to keep subscribers on their networks, they disable features like voice-over-IP to prevent subscribers from making cheaper phone calls, and they keep subscribers using their services for an extended period of time by including hefty termination fees in their contracts.

Tim Wu, a professor at Columbia University School of Law, in February published a paper on business practices by carriers that he called unfair, arguing that they are involved in every stage of the cell phone design process. Furthermore, he wrote, the practice of locking phones doesn't allow for the same openness that consumers are used to when purchasing a house phone or any other device that can work on any network.

Apple iPhone users are the latest group to feel the heat of phone locking. Earlier this month, California resident Timothy Smith filed a class-action lawsuit against Apple, claiming that the iPhone maker violated the state's antitrust law when it "bricked" the iPhone and made it useless on cellular networks other than AT&T's. The lawsuit asks the court to issue an injunction, preventing Apple from selling the iPhone with any software lock. Some hackers say they have come up with a way to unlock the iPhone and download third-party applications without getting bricked.

Mobile device makers like Nokia have found a way to bypass the problem by selling unlocked phones in their stores, despite the fear of angering carriers. "The carriers will retaliate against manufacturers that try to fight them," said Wu in a past interview with InformationWeek.

If T-Mobile loses the lawsuit, the relationship between carriers in their customers could change drastically. It could pave the way for laws that force carriers to unlock phones upon a subscriber's request and perhaps even the end to early termination fees.

Carriers, however, argue that they subsidize the cost of mobile phones and that locking phones so they can only be used on a single network and preventing customers from using cheaper VoIP services is the only way they are able to make a profit. If those practices are banned, the carriers say consumers will have to pay much more to buy mobile phones.

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