What's the first thing you would want to do if your smartphone was stolen? Chances are you'd want to do everything possible to make sure the robber could do nothing further with the phone. Now California legislators are pushing to require that all phones have a way for you to do just that in response to a hash of mobile thefts in the state.
In 2012, Los Angeles saw an increase of 12% in mobile device thefts. According to San Francisco District Attorney George Gascon, more than half of his city's reported robberies involve mobile device theft. The Federal Communications Commission reports that the theft of mobile devices now accounts for almost one-third of robberies in the United States, making it the No. 1 property crime in the country. According to Consumer Reports, approximately 1.6 million Americans had their smartphones stolen in 2012.
With these statistics in mind, California lawmakers are moving to pass legislation that would make it the first state to require that all mobile devices be sold with "kill switches," which would remotely render the device inoperable if stolen, beginning in 2015. Features of the software or hardware that will act as the kill switch include, according to the legislation, shutting down "the ability to use the device for voice communications and the ability to connect to the Internet, including the ability to access and use mobile software applications commonly known as 'apps.'"
Lawmakers have plenty to say on the matter. Los Angeles Mayor Eric Garcetti called the legislation "critical to reducing robberies." Gascon says, "The wireless industry must take action to end the victimization of its customers." And State Senator Mark Leno (D-San Francisco) says that a kill switch would eliminate the value of stolen devices on the black market.
This move is all well and good if legislators are purely looking out for the good of consumers—but could there be a business motive behind it as well?
The business ramifications of a kill switch
This legislation could have several potential impacts: an increase in consumer price, an effect on innovation and, of course, other unintended consequences, such as giving more power to burglars who know how to perform kill switches for their own nefarious purposes.
Moreover, you have to question the motives behind this legislation and whether mobile device manufacturers and wireless carriers have had a hand in its creation. First, consumers would have to pay more up front, and whatever the price for a kill switch, there's likely to be a markup. But a bigger revenue driver for businesses is all those "dead" phones. If consumers have to "kill" their devices instead of potentially locating them, they'll have to buy a new phone. And the market for stolen devices could dry up, meaning people who might otherwise buy hot devices might no longer have that option.
As it turns out, increased mobile theft has become a very lucrative industry. According to the legislation, an estimated $30 billion was spent replacing lost and stolen mobile devices in 2012. In addition, insurance sold to cover mobile device loss and theft created a $7.8 billion industry in 2013.
A kill switch can financially go either way for wireless carriers, so you'll find some on either side of the legislation. Some carriers see the potential in having a way for consumers to potentially jump the gun and forgo their phone for a new one rather than seeking other methods to retrieve it. Other carriers argue that with the kill switch in place, fewer consumers would purchase insurance, which could cost carriers billions in revenue.
While for businesses this legislation's benefits may seem up in the air, for consumers, the benefits are even cloudier.
Why the kill switch is pointless
All in all, the kill switch legislation is still a pointless ordeal. Many other safeguards are already in place for something that has more unintended consequences than have yet been realized. For example, according to the CTIA, a trade group for the wireless industry, hackers could potentially forge kill switch commands and effectively shut down mobile communication services for authorities, emergency responders, or other officials.
In spite of potential dangers, legislators claim that these kill switches will ultimately deter burglaries. But several mobile carriers already provide services that help to deter mobile device theft by providing the location of the phone—without any additional cost to the consumer. With Android Device Manager, you can connect your device to your Google (NASDAQ: GOOGL ) account and track your phone remotely using Google Maps. On Apple (NASDAQ: AAPL ) devices, Find my iPhone also uses a GPS system to track the location of your lost or stolen phone, and it has been around for several years. Windows devices use a similar tool.
Other anti-mobile-theft tools include programs like Apple's Activation Lock on devices with iOS7, which requires a user's Apple ID and password before the device can be used or reactivated, as long as the feature is enabled after the device's purchase.
But the other problem is, if burglars are smart enough, they could potentially figure out how to access data storage to reverse the kill switch and bring the mobile device back to life anyway. With hackers as intelligent as they are today, it likely wouldn't be long before a code was developed to get around these kill switches, rendering the entire debacle a waste of time and money.
And while robberies are rampant, still the vast majority of consumers will never need a kill switch, yet they will be forced to pay for one. This just puts more money into the mobile device and wireless industries.
In short, while legislators may mean well, there are other factors at play that may render this legislation as useless as the phone a kill switch has shut down. We'll have to wait and see if this bill makes it through the California state legislature before 2015 and whether other states would follow suit.
The next step for you
Want to profit on business analysis like this? The key for your future is to turn business insights into portfolio gold through smart and steady investing … starting right now. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. The Motley Fool is offering a new special report, an essential guide to investing, which includes access to top stocks to buy now. Click here to get your copy today -- it's absolutely free.