Sprint has agreed to settle a class action lawsuit that alleged it was unfairly restricting customers by locking its wireless phones to only work with Sprint's network.

As part of the settlement, Sprint will provide the code to unlock the phone to former customers upon deactivating the phone or afterwards, and will incorporate information about how to unlock phones into its terms of service.

Under the terms of the settlement, current and former Sprint customers in California who purchased phones between August 28, 1999 and July 16, 2007 are eligible to receive the unlock code, provided they do not have any outstanding bills due to Sprint.

The settlement affects only California customers, who brought the lawsuit under California's consumer law, but it could represent yet another turn of the tide in favor of wireless subscribers who want the freedom to take their phones with them when they switch carriers.

The California Supreme Court recently allowed a similar class action lawsuit against T-Mobile to go forward, and the Sprint settlement may cause T-Mobile to offer its own settlement terms to avoid the costs of litigation.

Wireless customers have challenged the carriers' practice of locking handsets for several years, claiming it forces them to stay with one carrier or spend money to buy new handsets every time they switch from one provider to another. Wireless carriers defend the practice as enabling customers to enjoy lower costs for phones, which would cost considerably more if bought "unlocked."

The U.S. Copyright Office, which administers the Digital Millenium Copyright Act (DMCA) that governs technology-related copyright law, recently amended the act to allow consumers to unlock their phones and use them with different carriers for three years, until the next series of examinations of the DMCA for potential revision.

In the meantime, consumer activists who support the industry-wide unlocking of cell phones for use with any carrier have joined the movement to support "net neutrality," the philosophy that content on the Internet should be accessible to all users equally, under the principle that cellphones should work similarly to computers--usable with any Internet service provider, rather than being locked into a single service.

The FCC recently passed rules for its upcoming auction of the wireless spectrum mandating that companies that use the spectrum make their devices available for any customer to use on any network. The rules were supported by Google, which promised to put up $4.6 billion for the auction if its conditions for "open access" were met, and opposed by the major telecom companies such as Verizon and AT&T.