Smartphone theft reaches pandemic proportions (and you are a target)

The spread of smartphone theft is off the charts. Some US senators have a plan to solve it, but the carriers don't agree. Is the Senate plan a bad idea, or are carriers just trying to bilk their customers out of insurance fees? It's an ugly story no matter how you look at it.
Written by David Gewirtz, Senior Contributing Editor

What's smaller than a slice of bread, worth hundreds of dollars, and carried by almost anyone? If you guessed "smartphone," you'd be right on the money. In fact, it's the relationship between money and smartphones that is causing the problem.

"Carriers are rejecting a technological solution so they can continue to shake down their customers for billions of dollars in (theft) insurance premiums." 
— San Francisco's District Attorney

As we all know, smartphones are small, portable, jewel-like, and quite expensive. They are extremely portable and easily resold. These characteristics make them ideal targets for criminals, and those who carry smartphones ideal targets for robbers.

iPhones, for example, have become a form of hard currency. As BusinessWeek reports, an iPhone bought here in the US for $815 (with tax) is worth about $1,130 in Italy. That's a $315 profit on a legitimate purchase. Using numbers from the BusinessWeek story, unlocked iPhone 5S devices cost about $700 on average in the US and can be resold for $971 (in France) to $1,196 (in Brazil).

Going back as far as 2009, smartphones have even contributed to the funding of terrorist organizations. In this four-year-old Department of Justice announcement, terrorist suspects were caught in an FBI sting trying to buy stolen smartphones that would eventually be laundered into purchases of "anti-aircraft missiles (FIM-92 Stingers) and conspiring to possess machine guns (approximately 10,000 Colt M4 Carbines)."

In another variant of criminal activity, the State of California Department of Justice Office of the Attorney General announced last March that they had filed criminal charges against a criminal ring trafficking in $4 million worth of smartphones. Their scheme was to send homeless and indigent people into carriers to buy smartphones at the subsidized rate (with no intent of paying the monthly fees), and then resell the devices for as much as ten times the cost in places like Hong Kong.

Our own David Morgenstern points out that Apple Stores are also a major target for smartphone theft. Last December, he documented a string of Apple Store robberies.

Consumer Reports estimates that 1.6 million smartphones were stolen in the United States in 2012. Given the incredible growth rate in smartphone sales from 2012 to 2013, we can expect that number to have been significantly higher in the last year.

While that statistic alone is disturbing, where things really begin to stand out is in the percentage of criminal activity overall that is related to smartphones and smartphone theft. According to the FCC, as reported by CNET, nearly one-in-three robberies involve smartphone theft. Half of all robberies in New York and San Francisco involve smartphone theft, and in Oakland, California, that number reaches 75 percent.

Reaching pandemic proportions

The difference between an epidemic and a pandemic is the spread of the disease. While an epidemic can impact a widespread section of a population, that population is generally contained within a regional area. If smartphone thefts were confined in the main to, say, New York City, it would be an epidemic. But since smartphone theft is now a national problem (and a worldwide problem), that pushes the problem into pandemic proportions.

Murder he wrote

And it's not just robbery. As the Huffington Post reports, smartphone thefts can lead to murder. The author, Gerry Smith, points to the case of Hwangbum Yang, a Korean-born immigrant who was shot in the Bronx by a for his iPhone. The alleged killer (the case is awaiting trial), one Dominick Davis, left Yang's wallet on the body, but later listed the phone for sale on Craigslist for $400.

The kill-switch plan

Law enforcement and government officials have taken notice of the problem and have a plan for a solution. Their solution is a smartphone kill-switch that they want to force the carriers to implement. The way it would work is that if your phone was stolen, you could immediately log into your carrier's service and permanently brick your phone, thereby eliminating its value on the resale market.

In June, this effort started as a "Secure Our Smartphones" initiative put forth by New York Attorney General Eric Schneiderman and San Francisco District Attorney George Gascón. The carriers, however, don't like this idea and in December nixed the plan, asserting that a central database of stolen smartphones might be a better approach.

The kill-switch solution escalated again on Thursday, when four Democratic US senators — Amy Klobuchar, Barbara Mikulski, Richard Blumenthal, and Mazie Hirono — proposed the Smartphone Theft Prevention Act. Here's the press release from Senator Klobuchar (who apparently is also very much in love with bold and italic formatting styles — this release wins the "Most Like Early PageMaker" award for press releases).

But is a kill-switch a good idea?

The carriers don't think so, claiming there's an increased potential for hacking. But San Francisco District Attorney George Gascón doesn't think that's the case. In fact, he claims, "Carriers are rejecting a technological solution so they can continue to shake down their customers for billions of dollars in (theft) insurance premiums." 

I did an analysis of the value of carrier protection programs last June, and determined that the value wasn't really there for consumers. Worse, carriers would often replace lost or stolen phones with inferior, used, and refurbished phones, substantially increasing their profits overall.

So there may be some merit in DA Gascón's claim. After all, when have the carriers really acted in the best interests of their customers over profits?

Even so, I can see two sides to the kill-switch idea. Clearly, if the ability to resell phones is stopped in some way, their theft value will plummet, effectively killing the reason for this pandemic crime. However, the idea that the hardware won't be hackable is unlikely, even if a kill-switch is implemented.

Second, I share some concern with the carriers over increased hackability if a back-door is embedded in each device. That said, we know that there are all sorts of management back doors embedded in the device, all the way down to the very weak firmware OS that runs under the smartphone OS of most phones.

I also have some concern that if smartphones can be killed remotely, which gives government a way to instantly shut off communications -- but one could counter that argument with the fact that governments can shut off communications at the hub and don't have to brick millions of smartphones to get the job done.

My one final concern is that the term "kill-switch" might prove sadly prophetic. If users are given the opportunity to brick their phones after they're stolen, then criminals will simply stop users from exercising that option using extreme prejudice. I'd hate to see more people like Hwangbum Yang lose their lives just because some scumbag wants to make some money off the resale of these pocket-sized nightmares.

What do you think? Is a kill-switch the solution against smartphone theft or is there a better idea? You are the folks who would know, so share your thoughts.

By the way, I'm doing more updates on Twitter and Facebook than ever before. Be sure to follow me on Twitter at @DavidGewirtz and on Facebook at Facebook.com/DavidGewirtz.

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