A consumer watchdog group sued three cell phone companies on Monday for "locking" their phones to make it harder for customers to switch carriers.
The Foundation for Taxpayer and Consumer Rights filed suit accusing AT&T Wireless Services Inc., T-Mobile USA Inc. and Cingular Wireless, of using software in their handsets that prevents them from being used on a competitors' network.
The practice effectively thwarts recent federal regulations allowing people to retain their phone numbers when switching mobile carriers, according to the lawsuit, filed in Superior Court in Los Angeles.
The lawsuit accuses the companies of engaging in unfair and deceptive business practices under state law.
"If you can use the same phone number with other carriers, you should be able to use the same phone," said Jordan Lurie, an attorney representing the plaintiffs.
The phone companies defend their policy, saying they routinely subsidize handset cost. Companies would lose money if they allowed customers to then use those phones with another carrier.
"What we do not wish to do is subsidize the cost of a handset for another carrier," said Tony Carter, a spokesman for Atlanta-based Cingular Wireless.
Carter said he had not seen the lawsuit. T-Mobile, based in Bellevue, Wash., did not immediately return a call seeking comment.
A spokesman for Redmond, Wash.-based AT&T Wireless said he had not seen the lawsuit, but called the company's sale of handsets legal and pro-competitive.
"This subsidy is a great benefit to subscribers," AT&T spokesman Art Navarro said. "We simply can't afford to subsidize phones, however, unless they are used on our network. The FCC has previously examined this issue of bundling phones and service in this way and found that it promoted competition."
Consumers Union sent a letter to the Federal Communications Commission in March protesting the practice of locking handsets. The CU argued that consumers pay the cost of subsidizing the handset purchase over the life of a contract or through a hefty termination fee if the contract is broken early.
"After the consumer has fulfilled the terms of the contract, there is no longer any justification on the company's part to keep the handset locked," said Janee Briesemeister, who heads a campaign targeting cell phone company practices.
The lawsuit targets companies that use a particular technology called Global System Mobile communications, or GSM. Those phones contain a computer chip, called a SIM card, that links the phone to a particular network.
Consumers should be able to simply swap a SIM card from a competitor's network to change carriers.
But the lawsuit claims that Cingular will provide a code to customers to unlock the SIM card only if the customer's contract has expired. T-Mobile provides an unlocking code after the customer has subscribed for a number of months, while AT&T will not unlock the SIM card under any circumstances, the lawsuit charges.