Prices for prepaid phones may go up

PRICES FOR PREPAID PHONES MAY GO UP
[SOURCE: USAToday, AUTHOR: Paul Davidson]
This week, TracFone, the No. 1 prepaid provider, sued to overturn the Library of Congress's Nov. 22 decision granting new exemptions to copyright law. Its ruling lets consumers remove software locks that prevent cellphones from being used on another carrier's network. The effect on carriers such as Sprint and Cingular is minimal, because subscribers get a free or discounted phone when they sign a two-year contract. But prepaid companies say the ruling has weakened their ability to sue members of roving gangs that buy truckloads of phones, remove the software and sell them for mark-ups of 100% or more in markets such as South America and Hong Kong. The black market is possible because prepaid plans require no contracts. Consumers simply buy the phones for as little as $15 in stores and pay in advance for cellphone service by using cards to load in airtime. Prepaid companies typically pay $60 to $80 for the handsets, recouping their losses when consumers buy airtime. But when resellers scoop up the devices and alter them, the providers lose their entire investment. TracFone estimates that more than 800,000 of its phones have been resold this way, according to a court filing in a federal criminal case, costing it tens of millions of dollars.
http://www.usatoday.com/printedition/money/20061207/1b_prepaid07.art.htm