Temptations of the Walled Garden: Digital Rights Management and Mobile Phone Carriers

Abstract

Content industries have long heralded Digital Rights Management ("DRM"), the use of technological protection to control and meter access to digital content, as the key to securing copyrighted expression against massive digital piracy. Yet, ironically, DRM is widely used to lock-in consumers to ancillary products and services in ways that might hamper markets for distributing cultural expression. Apple's iTunes and iPhone are two widely publicized examples. With the iPhone, Apple and its mobile carrier partner, AT&T follow a decidedly walled garden approach. They employ a combination of DRM, proprietary format, and tying both media player and communications functionality to the AT&T network, to attract and then lock in consumers to the iPhone and AT&T subscription.

The Apple-AT&T walled garden approach to locking-in consumers might be attractive for other mobile carriers as well. Mobile communications carriers have used a variety of strategies to combat customer churn. This paper considers the possibility and regulatory implications of mobile carriers' use of DRM on the digital content they make available to their subscribers in order to lock in their subscribers, as opposed to deploying DRM to protect copyright holders' rights in the content. I first consider whether consumers would and should be able to circumvent such DRM under the anti-circumvention provisions of the Digital Millennium Copyright Act. I then examine mobile carriers' use of DRM to lock in consumers from the telecommunications regulation perspective. I ask how the FCC might and should regard carrier-imposed restraints on content portability under current market conditions.

Keywords: copyright, DRM, telecommunications, mobile, Apple, AT&T, DMCA

JEL Classification: K23, L82, L96