Should US based service providers be required to sell SIM unlocked phones?
The question was always valid with AT&T and T-Mobile offering a compatible network, but now with the move to LTE 4th generation wireless networks, most of the new phones sold are now SIM card dependent for operation on both CDMA and GSM networks making the question more relevant than ever.
A little background on why the phones are SIM locked in the first place is in order. In the US, cell phones sold by the service providers are subsidized. The consumer is pays significantly less for the phone than the service provider’s actual cost. The carrier will generally recover its losses on the handset over the length of the 2 year contract signed to get that discount price. As a result of this subsidized price, if the phones were SIM unlocked, it would create an environment where the consumer could purchase a deeply discounted handset and after paying any early termination fees would still spend less than full retail for the phone resulting in large losses for the service provider.
A second factor playing into the SIM lock decision is ‘Exclusivity’. This is a key tool used by service providers as part of their marketing strategy. The service provider can leverage having exclusive rights to sell certain phone models to retain, attract and acquire customers.
The iPhone is a perfect example of both of these scenarios. Thanks to exclusive rights to sell the iPhone at its launch, T-Mobile, Verizon and Sprint each lost customers to AT&T. While the iPhone would only have worked on T-Mobile’s network, had the phone been sold carrier unlocked, consumers could have easily purchased the device, paid the earlier termination fee on AT&T (saving more than $200 off the full retail purchase price) and been able to use T-Mobile negating the exclusivity and costing AT&T untold sums in losses on both the phone AND service.
Requiring the service providers to offer their phones free from SIM locks, while offering greater flexibility for the consumer, it does have some drawbacks. First, the carrier’s will ultimately need to change their business model of offering subsidized or exclusive handsets. The most likely shift will be the end of subsidies, or at least in the amount of the subsidy, driving the cost of the phones higher. At present, you can buy an SIM unlocked iPhone 4s directly from Apple starting at $649 for the 16GB model. AT&T is selling the same iPhone SIM locked for $199.99 with an early termination fee (ETF) of $325. If AT&T was required to sell the phone SIM unlocked, the subsidized price would need to rise to $324 just to keep the phone + ETF fee equal to the full retail price charged by Apple now. Without the price jump, it would be cheaper to buy the phone from AT&T, pay the ETF and use it with the service of your choice.
The second drawback – in the case of any current GSM handset used on T-Mobile or AT&T, consumers need to be aware that the phone, even when SIM unlocked, is not capable of 3G or 4G data speeds when used on the other’s network. T-Mobile and AT&T use different frequencies for their data. Using an unlocked phone on a network was not designed for will put limitations in place and create a negative user experience.
Finally, in the case of SIM unlocked LTE handsets, there will still be a compatibility issue on the CDMA networks. Verizon Wireless and Sprint have strict policies on adding handsets to their systems that were originally sold on each other’s network.
While there will be some benefit from carriers being required to sell SIM unlocked cell phones, the negatives may far outweigh the positives. For now, the better approach may be to require the carriers to provide the SIM unlock codes after a set period of time. That will provide some consumer value – especially for those that travel overseas – without some of the major drawbacks.
There is however another option, a few retailers sell unlocked iPhones we do recommend you purchase only from reputed vendors such as Thriftycomputer.com with a 9.2 out of 10 rating and 60 day warranty.
Robert Nissenbaum is the owner of Blue Ridge Wireless and has more than 16 years in the wireless industry.
He can be reached at 520-329-7570 or via Facebook
