the air

Most of the mobile handsets purchased by consumers through GSM wireless service providers (e.g. Cingular Wireless, T-Mobile, etc.) are unable to work with other wireless carriers. For example, if you purchase a Motorola Razr from Cingular and switch to T-Mobile, your Razr will not function. However, if you were to “unlock” your Razr, then you can easily use it with any GSM provider across the globe. This is the price you pay for purchasing a subsidized phone from your wireless service provider. Most Americans cherish the fact that they are able to purchase newer phones at a discount by signing, usually, a 2-year service agreement. This is in contrast to Asia and Europe where over 70% of the consumers purchase their cell phones unlocked and pay steeper prices.

There is a major disadvantage to the consumer because of this model. In the past year, Nokia has introduced over 50 different models with varying price points. However, only a select few have actually made it to the list of carrier offered phones. Why? Most carriers only want to select particular types of phones from particular manufacturers. The North American market is notorious for clam-shell, otherwise known as “flip” phones, whereas the market in Asia and Europe prefer candy-bar style phones or sliders. Nokia and Sony Ericsson have release more candy-bar and slider style phones than Motorola. Yet, Motorola is the pre-dominant phone maker you will find in the US. However, that will soon change in the near future as Nokia and other manufacturers, including Motorola, will begin offering unlocked versions of their phones to consumers directly. Already, Nokia has a flagship store in Chicago that sells a multitude of unlocked media-centric models directly to consumers with warranty. Motorola has also begun testing these waters by setting up vending machines that will “vend” brand new cell phones. Unfortunately for the consumer, they have to put with limited feature sets and often many features in phones are disabled so that consumers are forced to take advantage of “value-added” services offered by their wireless carrier. For example, Verizon Wireless is notorious for disabling their phones’ Bluetooth from sending/receiving files.

what can the consumer do?

To be honest, the American consumer cannot do anything. American consumers are unwilling to do away with subsidized phone costs because they want to pay low prices for phones and will tolerate 2-year service agreements. In fact, I would not be surprised if companies started offering multi-year contract agreements (e.g. sign a 4 year agreement and get the hottest phone free). The biggest problem lies not with the industry, but with the consumers buying habits. It appears to me, from personal experience, that the American consumer is unwilling to spend upwards of $300 to purchase a phone unlocked. In addition, I also think that they are also unaware of the benefits of having your phone unlocked. The major benefit of the subsidy model is the fact that phones are much more affordable and the industry has been able to penetrate the market much more deeper. In some cases, you can prudently argue that wireless rates are cheaper than land-line rates. Till the consumer buying habits evolve, I don’t think this model is going anywhere. Hopefully in the near future, companies such as Nokia and Motorola offer their phones unlocked side-by-side to their locked counter-parts.

Source: C|Net Article

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