November 02, 2010, 5:14 PM —
Unlocked cell phones and smartphones are pretty commonplace in most parts of the world. In many ways, the U.S. market is an exception with phones that are locked to a given carrier (regardless of whether they were purchased at a subsidized price with a contract or not). This generally results in customers needing to purchase a new phone when they switch carriers and, combined with early termination fees (which have significant increases by some carriers – AT&T I'm looking at you and the fact that you practically doubled smartphone termination fees while cutting out unlimited data plans), also leads consumers to switch carriers much less frequently.
In Europe, unlocked phones are more common for a couple of reasons. First, some EU nations mandate that unlocked phones be offered to consumers (albeit at full, unsubsidized pricing). France is a great example and its because of such laws that the first unlocked iPhones were sold.
More practically, users tend to move between multiple countries and switch between carriers on a regular basis. With an unlocked phone, some who lives in the UK can swap out the O2 SIM card when they visit France and put in a card from Orange (O2 being a major British carrier and Orange a major French carrier). Coming home, he or she can swap back and later make a business trip to Germany, inserting a T-Mobile SIM. With each switch, the user avoids paying any roaming charges. Most European carriers offer contractless pre-paid/pay-as-you-go plans that can be applied to just a SIM card (not a phone). In fact some phones in the European market can accept two SIM cards at a time so you don't have repeatedly physically swap them.
There are also several pre-paid "world" SIM cards that can offer the ability to avoid roaming charge in any country, but with a generally higher rate than country or region specific carriers.
Whether it’s a lack of government regulation or simply a lack of market demand for unlocked devices here in the U.S. could be argued. After all, most Americans don't cross borders anywhere near as much as Europeans and when we do it's to Canada and Mexico where voice roaming rates aren't particularly bad – data rates, however, can still land you with a nasty bill even when visiting our neighbors.
It generally looks pretty dismal for Americans when it comes to unlocked phones, particularly smartphones (unless you want to buy one elsewhere or root/jailbreak an Android phone or iPhone). However, there might be signs of improvement.
HP has announced that it will offer the Palm Pre 2 in an unlocked GSM model here at home. Ironically, the original Palm Pre was the least successful smartphone launch in recent memory. Perhaps HP is hoping to entice frequent travelers or those simply wanting to avoid a contract. That could actually give the Pre 2 a pretty unique competitive advantage.
Apple may also move to this model with the iPhone in the U.S. once its exclusivity agreement with AT&T is up. Apple offers the iPhone 4 unlocked in almost every other market (including Canada and Mexico). The company is also reported to be testing special SIM cards that would allow easy carrier-free activation (though that could quite possibly for other markets entirely). There's also the issue of the iPhone 4 and its lack of support T-Mobile's 3G network spectrum (an issue unique to the iPhone 4 that further cements AT&T's iPhone lock but also one that is speculated to be artificially created).
It's too soon to see if other manufacturers (or mobile OS platform creators) will follow suit here since the issue remains with carriers (most manufacturers sell the same or similar phones abroad) and their leverage over what devices they opt to sell. Manufacturers will need to see customer willingness to buy devices at full price and success stories of one or two devices before they're likely to defy U.S. carriers and offer phones direct to customers. Hopefully, the Palm Pre 2 (and possibly the iPhone) could offer that success story.
Have you say in the comments. Would you buy an unlocked smartphone (be it a webOS, Android, Windows Phone 7, or iPhone) if given the opportunity?