Unlocking the Phone

[slitchfield]

Krisse explores the myths and deceptions involved with selling phones 'locked'. When is a free phone not really free? What about the so-called advantages of buying through a network operator? And how can you and I change the situation? Read on in another thought-provoking Krisse rant!

Read on in the full article.

[Hardeep1singh]

Grass is always greener on the other side

Thats what I would say because the networks give you the option of buying the phone when its really NEW. Here in India, all phones are SIM free, even the GSM networks that sell phones don't lock them because they feel safe. Number portability hasn't arrived here so this makes users think twice before switching networks as if they switch, the number would change for sure.

Now the downside, New Smartphones are launched at an exceptionally high price (Rs 38,000 to Rs. 40,000, one can buy a high end PC or a motorbike instead) which makes them unaffordable for the common man. There are no networks that give you an affordable price plan to help you buy the phone when its new. True, credit cards and loan companies are always there but by the time you pay half your installments, you find that the phone's price has already came down by 50%. With phone companies, atleast one gets freebies like Free Text messages or Call minutes, nothing like that when you buy via credit card.

[svdwal]

People don't only buy cars to go from A to B and back, they also buy cars to show off their status. That's why there are cars like Mercedes and BMW, even though a Lada offers the same transport facilities against a much lower price.

In the car business it is possible to buy a car even if you don't have enough money to pay for it at that time. You borrow the money, and you pay rent. In the car business you don't borrow the money from the petrol supplier, but from independent borrowing companies, or from the dealer selling the car (the dealer acts as a reseller for the borrowing companies). The rent on car loans is well-known to be very high.

The advantage for the consumer is that he can have a car that has/bestows more status than he could afford if he has to pay upfront. It's the same with these locked phones.

[Jago]

Good article Krisse - woth some good points.

But I think one of the biggest barriers at the moment is that there are no incentives not to buy a locked phone.

If I buy an unlocked phone I still have to sign up for the same price plans (unless I pay as you go which I don't want to do for convenience) with the same call rates as the 'free' phone deals

I can't see the operators offering cheaper call deals for customers that don't buy phones from them.

Also Number porting (in the UK at least) takes far too long - upto 2 or 3 weeks for the old operator to release and the new operator to adopt your number. I am sure there's no good reason for this other than that they do it in their own good time (similar to bank cheque deposits taking days to hit your account ). In the meantime movers have the inconvenience of juggling 2 numbers and account/bills.

If a standard time of say 3 or 4 days could be implemented (say 2 to release and 2 to adopt) then it dould be done within a working week.

Cheers
Jago

[cooli]

Any more hindsights/comments from US readers about the possibilities/choice of SIM/contract without phone included?

Is it possible with all GSM US operators? Both for prepaid and postpaid options?
For the customers, do they sign up for same call/data rates or cheaper ones compared to contract with locked/included phones?

I personally think these questions are key whether buying unlocked phone is worth the extra price...

(In the US, using an unlocked E61 with T-Mobile)

Something the author forgot to mention about the contracts was the early termination fee that comes attached with them. If for some reason, you want to terminate your service with a network, say, 20 months into your 24-month contract you still get the privilege of paying them something between $150-$200 as a penalty.

Although the fact is little advertised, I believe it is possible to sign up for service with a GSM operator in the US without signing a contract if you bring your own phone. Yes, you'll have to pay the same rates as those on contract, but remember you're free to leave the provider whenever you choose without the termination penalty.

[rcadden]

I think the bigger fish to fry here is unbranded. Unlocked is great, but unbranded is where users truly feel the freedom.

As a US user of unbranded/unlocked Nokias for a few years, I can say it's much better.

The problem is, though, as someone else posted, pricing.

Carriers give discounts on the price of the phone, not on the price of the service, which is truly their "product."

What I see promising is the evolution towards ISP pricing. If you sign a contract, you pay a discounted MONTHLY RATE for the length of that contract. When it's up, you can pay the month-to-month rate, or sign a new contract and get another discounted monthly rate.

As was pointed out by Ollywompus on my blog a while back, they could even do this at the same time as offering equipment discounts. Just have a Bring Your Own Equipment plan with the monthly discount.

Thus, I would walk into a Cingular store, and I'd have 2 options:

1. Pay $30 for a new $180 cellphone, and pay $39.99/month w/ a 2-year contract (basically what you get now)

OR

2. Pay $180 for the same phone (full retail, or bring my own phone) and pay 32.99/month with a 2-year contract.

End of story, at the end of 2 years, my out of pocket expenses are

1. $30 + (39.99*24) = $989.76
2. $180 + (32.99*24)= $971.76

Roughly the same, but it conditions people off the "free phone" syndrome. The carrier still makes money, and they still have a reason for people to sign contracts.

The only problem is that ARPU will go down, but I think investors will be happy if there's also a reduction in physical inventory costs.

Great article, but the perfect world just doesn't exist, so how about another solution....
In Asian and European countries, their networks are advance enough to have customers signing contracts with really good phones and service. But in the US, our networks are laughably bad, and therefore all the US phones are crappy as hell.
Also, we are paying WAY TOO MUCH for monthly rates and data rates AND overcharges here in the US. My friends that came from other countries were shocked to find out how expansive with little features/minutes the phones and networks we have in the US, they're especially upset with the ridiculous charges that came with using too many minutes and the instant SMS texting fees.
On top of all, US still has no presence of 3G because of unavailability and overpricing.
I think if the carriers can provide good service and technology, a locked phone isn't too much of a problem, but obviously they're not.
Seriously, Americans still think "pink" MotoRAZR is novel technology....
huh...brainwashed by carriers.

I quite agree to your comments/observations, however it seems that there is no solution around. In India there is no solution provider that guarantees quality coverage/data. Infact if you are out of city there is none at all.

During my last trip to US, I felt compelled to compare US operator's quality visa a vis India operator's quality and find little or no difference. Dataspeeds were comparable in those places where they will be acutally used (homes/office).

However the call rates are so cheap in India! Just about 10-20 cents per minute. Ofcourse India has very high no of cell users, one cant ignore that fact. But apart from that there is nothing. Those operators would try to sell stupid ideas giving them name as another brilliant "idea!".

I ended up buying a T Mobile DASH, unlocked it and use it with an Indian ISP. Kind of having goods of both the world. I have free WIFI at home and office and hence dont miss those high speed net access much. But thats about it.

[epo.fm]

It is possible to take your sim free phone & join a network without being locked into a 1 - 2 year contract. Generally at a LOT less than the usual £20 - £30p/m contract tariffs.

T-Mobile offer a £7.50p/m 'no contract' tariff offering 50 free mins a month.

But possibly some of the best 'no contract' deals are to be had by signing up as PAYG but also setting up a monthly direct debit. Spares you all the inconvenience of PAYG but can get you some decent free txt/data bundles for a very low monthly fee.

Orange - Top up £10p/m & get 300 free txts & 4mb data
T-mobile - Top up £10p/m & get free evening & weekend txts.

Obviously depends on your usage needs but I've managed to half my monthly bill with the PAYG set up.

[Webbunny]

Hi Krisse

- The iPhone is locked to a network provider because Apple wanted to offer a new feature called Visual Voicemail... but to provide it the network that the iPhone is used on needs to build a proprietary backend server system to enable this. You must be able to understand that Cingular would want to lock any iPhone customers in to get some guaranteed revenue to cover development of this system.

If you #could# get an iPhone SIM free and you used it on your GSM network of choice, you wouldn't get Visual Voicemail (which Apple seem to think is a big deal and an essential part of the whole 'experience' - personally I couldn't care less!).

- In the UK, I have 2 choices - take out a restrictive, 12-18 lock in monthly contract, or get a Pay as you Go SIM. There is no option, from any provider, to get a 'SIM only' Monthly contract which doesn't provide a phone as well and therefore doesn't lock you in for a year or more to make sure you pay the subsidies that are funding the phone.

So, go for the PAYG option you say. The problem here is if you have a smartphone, you will use a lot of the data features on the phone as well as just making calls. And on PAYG in the UK no provider offers a 'data bundle' that gives you reduced data prices, you have to pay the full price, 'ad hoc' prices, which are just daylight robbery! How does £3 per MB sound to you?

You can ONLY get reduced rates on Data tarrifs if you buy a 'data bundle' on... your restrictive lock in monthly contract!

And finally, I have an N73. I can buy this phone SIM free in the UK for £290. If I did this I would then have to pay for my calls on top.

If I look on a website like Mobilechecker, I can find are over 20 tarrif packages for an N73 that over the lock in period would cost me less than £290, AND give me more call minutes than I need! Of course, if the service is rubbish I am stuck, but if its ok (I have been on all the UK networks apart from 3 and they are all as bad as each other!) I can threaten my current network that I am going to go to a competitor, and usually they will offer me an undocumented, highly competitive rate (which is just my last rate minus the phone subsidy) to stay with them...

Yes its a stupid way of running a business... but it seems all the phone networks in the UK are working as a cartel and only offering the same contractual options.

[elp]

Originally Posted by Webbunny

- In the UK, I have 2 choices - take out a restrictive, 12-18 lock in monthly contract, or get a Pay as you Go SIM. There is no option, from any provider, to get a 'SIM only' Monthly contract which doesn't provide a phone as well and therefore doesn't lock you in for a year or more to make sure you pay the subsidies that are funding the phone.

Yes, T-Mobile has such a sim-free-no-strings contract. And other networks might have one too. Of course, they're usually hidden away deep down their web site and you really need to know where to look to find them.

Originally Posted by Webbunny

You can ONLY get reduced rates on Data tarrifs if you buy a 'data bundle' on... your restrictive lock in monthly contract!

Not anymore. The situation is (slowly) improving. T-Mobile PAYG charges £7.50/MB but caps at £1/day after which you can keep browsing for free. So in effect you get unlimited (well, unlimited provided that you don't exeed 2GB/month) data on PAYG for £1 max per day.

Also, if you get the T-Mobile SIM-free contract, you can add the Web'n Walk option for unlimited data. The last time i looked it worked out at £15/month for 50 minutes X-Net + unlimited data (again unlimited up to 2GB) cancelable at anytime.

Orange has an unlimited data bundle for PAYG that costs £1 and is valid for a day (until midnight the day you buy it). Some say that if you use it over 3G, it's actually limited to 25MB but i haven't been able to find confirmation of that on the Orange web site the last time i looked. They also have a £4 bundle for 4MB valid for a month (good for the occasional email checking).

[Webbunny]

Reply to elp

Thanks for letting me know this, I'm obviously not up to date on current deals! I just checked out the T-Mobile Pay Monthly SIM only deal, the 'Web n Walk day pass' that costs £1/day for 40MB is restricted by the same 'fair use policy'' that stops you doing anything but HTTP traffic, which Steve L found unacceptable. If you go for a 12/18 month lock in contract you can now get 'Web n Walk Plus' which relaxes these restrictions enough to make the service useful.

I'm on Orange at the mo, and I have their 10MB/month bundle added which cost me £8. If I was on PAYG and did their 'day pass' 8 days a month, it would cost the same and give me 200MB over the 8 days... Crazy!

The perfect situation for me would be T-Mobile Monthly SIM only with 'W n W Plus'... oh well, just another 12 months of my contract to go, maybe they'll be offering something like that by then!

[epo.fm]

T-Mobile seem like one of the more forward looking UK network providors when it comes to data tarrifs but there web'n walk rates are a bit dissapointing.

£7.50 per mb is not cheap & even their *kind* offer to cap the the charge at £1 per day, could potentially still mount up to a whopping £30 per month - just for data usage alone.

[langdona]

I agree with Krisse but I think the problem is the network providers want you to purchase their branded phones and there contracts are biased in that way.

I don't think that this is at all fair for the following reasons.

1. The network providers do not make it clear that their phones are branded and locked to the network. They tell you that the phone is yours but I do not recall them stating that the phone will be locked to their network or that it may not provide the full functionality of that device e.g. you may not be able to download the latest firmware updates or that their own branded software could interfere with the performance of the phone. This I think deceives the customer.

2. The network providers subsidise the cost of the phone but reclaim that money back over the term of a fixed length contract. This implies that the contract includes a charge for the phone subsidy. Hence when the contract expires why does your monthly charge not get reduced. i.e. their should be alternative advertised contracts for people who carry on using an old phone or buy their own phones and want to have a monthly contract.

3. What gives the phone companies the right to lock a phone to their network. Yes this would be fine if you were just renting the handset but you are not, they make it very clear that the device is yours. So why do you have to pay to get the phone unlocked if you want to sell it on the open market to someone who wants to use it on another network.

So being in the UK I'm strongly thinking about raising these objections with Ofcom and seeing what they say. Typically the complaints side of their website is down today.