Wireless carriers in the U.S. have tried everything to reduce “churn” - the loss of customers to competing providers.
Until the FCC mandated number portability, one of the best ways cell phone providers kept unhappy customers locked in was by forcing them to give up their phone numbers if they switched carriers.
Now that we are legally guaranteed the right to take our number with us, providers keep us from switching carriers willy-nilly by “locking” the handsets they sell us - preventing the handsets we bought from being easily used on another carrier’s service.
But the practice of locking handsets may also be waning. We’ve reported that rumor that Apple’s new iPhone will be sold unlocked, capable of being used on a range of carriers. CompUSA already sells Motorola, Nokia and Sony Ericsson handsets, unlocked. Palm is selling its new Treo 680 on its own website, unlocked - so it is usable on any GSM cell phone carrier (such as Cingular or T-Mobile in the U.S.).
You can also buy the Treo 680, locked, from Cingular, for much less - with a two year commitment. Cingular and nearly all other U.S. carriers subsidize handset prices, knowing that they’ll make the money back over the long haul, off the air time they sell you. Until now, America’s addiction to cheaper handsets has allowed carriers to get away with locking handsets.
The U.S. Copyright Office contributed to the unlocking trend by ruling last month that copyright law was not violated by schemes to unlock phones. Seems there’s little that handset makers and providers can do about it. Although they don’t like to talk about it, T-Mobile will usually give out the unlock codes for its phones to customers, after they’ve had service for a while (6 months is the norm, we hear). It’s led to a booming handset resale business on auction sites like Ebay. Unlocking phones makes them easier to sell because they’re usable on a variety of carriers, not just one.
We can safely assume that, if Apple aggressively direct markets its new iPhone, unlocked, that the other major handset manufacturers will have no choice but to do the same. It could, and should, lead to additional price incentives and more choice - maybe even lower overall prices for handsets and wireless service.
unlock cell phones, Nokia, Motorola, Sony Ericsson, Palm, Cingular, T-Mobile
[via Business Week]