The PhoneBoy Blog

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Reselling a Mobile Phone is Bad?

I saw this story about mobile phone makers not liking people to resell their products. What’s happening in this case is that people are buying cheap Tracfones in droves, giving them to a middleman who then unlocks the phones, repackages them, and sells them. The phones, which can be had for as little as $20 retail, are being resold for twice that.

I personally have no sympathy for Tracfone. They are taking a product and selling it at a loss in order to get people to sign up for their overpriced prepaid service. If someone has figured out how to repurpose their phones and sell them to others at a profit, good for them.

Now where I have the problem, and probably where Nokia has the problem (though I obviously don’t speak for them) is in the representation of how these phones are sold. When you buy a phone from a carrier, certain software is loaded on it. Each carrier has their own customizations that the phone manufacturer will load on it that will “brand” the phone. For example, a Cingular-branded phone will have references to MEdia Net, a T-Mobile phone will have references to t-zones. Features will be enabled and disabled depending on carrier preference. A Cingular-branded Nokia 6010 is, therefore, going to give a slightly different experience from a T-Mobile-branded Nokia 6010, even though they are exactly the same hardware.

When individuals sell their phones on eBay, most of the reputable people will happily tell you that their phone is, for example, a used Cingular-branded phone, but has been unlocked for use on all networks (or maybe it’s not unlocked). You know that you are getting a phone with Cingular customizations. That is a fair an accurate representation of what you are getting.

On the other hand, it appears what these folks are doing is something different. From the article:

A lawsuit filed in January by Nokia Corp. accuses Pan Ocean Communications of Pompano Beach, Fla., of buying $20 cell phones from Wal-Mart, Sam’s Club and Target Corp. stores, disabling their software, then reselling them for $39 as legitimate Nokia handsets. The company sold them to distributors, wholesalers, exporters and flea market booth operators, the lawsuit said.

I did a little research on how Tracfone-branded phones work. They are fitted with custom software that supports their prepaid service. Even if you were to simply unlock the phone–Nokia’s are notoriously easy to unlock without any special hardware–the software would prevent the phone from being able to make calls because the phone thinks it has no airtime. In order to disable that software, they either have to figure out how to disable the software, or much more likely, reflash the phones with new software. This new software would, in effect, change the phone into a stock, “unbranded” Nokia 1100.

I’m not sure what they exactly mean by “legitimate Nokia handsets,” but I am guessing they are putting the phones in new retail packaging that makes it look like Nokia is selling an unbranded handset. This company is, in effect, using the Nokia trademarks in an unauthorized manner, and certainly Nokia has recourse under the law for these violations.

What really strikes me in this story is how Nokia and other companies are completely missing an opportunity to sell unbranded phones to people who obviously want them. No, I don’t mean the high end, fancy-schmancy phones, I mean simple, cheap phones like these repurposed Tracfones.

The reason a “black” or “grey” market exists for any product is because there is demand for a product and the conventional market isn’t satisfying the need. As we learned with prohibition in the US in 1920s, the best way to kill the black market for something is to create a legitimate one for it. That means selling cheap, genuine, unlocked, unbraded Nokia phones legitimately. Sell them in the same places you can get Tracfone and other prepaid phone services. In the retail package, provide instructions for signing up with prepaid or postpaid service with a number of GSM carriers in North and South America. Maybe you can even get a carrier or two to include a coupon for a deal on prepaid or postpaid service.

Am I offbase in my thinking here?

#Cybersecurity Evangelist, Podcaster, #noagenda Producer, Frequenter of shiny metal tubes, Expressor of personal opinions, and of course, a coffee achiever.