Six reasons why Apple is selling unlocked iPhones in the US

Posted by Andru Edwards Categories: Apple, Smartphones, Editorial, Handhelds

Yesterday we told you that Apple started selling unlocked iPhone 4s here in the U.S. We do have to admit that the move leaves us scratching our heads a bit. The iPhone 4 is a year-old device at this point. That leaves the question: why?

The GSM iPhone 4 only works well on AT&T. Sure, you can run it on 2G EDGE with T-Mobile, but that's a lousy user experience, and Apple is all about providing smooth user experiences. I just can't accept that T-Mobile users want the iPhone so desperately that they're willing to give up 3G for it, although I may be wrong about that, too.

Boy Genius Report's Jon Geller is right when he says that Apple sells unlocked iPhones in 85 other countries. But those countries all have more than one GSM iPhone-compatible 3G carrier. Canada has three. Dave Zatz points out this morning that for Americans, the "unlocked" iPhone will cost $450 more over two years than the locked model, because AT&T doesn't give any discounts for bringing your own phone. That's "an extra $450 mostly for the privilege of feeling more liberated and fancy free," he concludes.

Apple does nothing without a reason, so the company has to have a reason here, although it's not saying what it is. Fortunately, some of the folks I know on Twitter provided some pretty good ones.

Keeping the iPhone 4 alive: Geller suggests "there's nothing to lose by apple selling them unlocked 3 months before a new iphone." Apple traditionally releases iPhones in June, and there's no new iPhone this summer. That could create a trough in sales and mindshare. So Apple found a way to bump up an aging product. Even though the unlocked iPhone doesn't provide any advantages to most Americans, this gets the hardware into the news.

Sell an iPhone 4 now, iPhone 5 later: Zach Epstein theorizes this lets people buy an iPhone 4 now without re-upping their AT&T contracts, so they can buy September's new iPhone at a subsidized price. It's a kludge, though: consumers are either essentially paying more than $200 a month to use a phone for three months, when they'll then have to cope with reselling their phones on eBay this fall. Still, it's an idea.

Currying favor with the FCC: AT&T is trying to merge with T-Mobile right now, so the company wants to do things to make it not look like a rapacious, wannabe monopoly. As Jon Fingas suggests, what would be better than to wave around a bunch of unlocked iPhones? No monopoly here, Senator. Anyone can have a GSM iPhone! See, we're all consumer-friendly-like. In this theory, Apple takes a neutral stance, and it's been AT&T stopping the sales all along.

International travelers are a real market: Jan Dawson, an analyst with Ovum, Tweeted that AT&T and Verizon consider international travelers to be a real, if not a huge market. One of the big advantages of having an unlocked phone is that you can avoid your home carrier's high roaming fees by buying a local SIM card. The problem with this is, unless you're familiar with the language and culture of your destination, this can be very difficult. (I've tried.)

The export market: Because of exchange rates and taxes, Apple products are less expensive in the U.S. than in some other countries. An unlocked, 16GB iPhone 4 is £512 in the U.K.—that's $839 in U.S. dollars. Compared to that, $649 is a bargain. Apple could be welcoming massive gray-market exports of these phones to more costly countries. When the iPad 2 came out, Apple limited the number people could buy to prevent them from being snapped up by resellers. But if Apple has a surplus of iPhone 4s it wants to get rid of before the iPhone 5 comes out, the company may be willing to open the floodgates.

Apple has nothing to lose: I'm uncomfortable with this theory because Apple doesn't just sell hardware. It sells end-to-end experiences, and there's something very incomplete about the end-to-end experience of an "unlocked" iPhone in the U.S. I can see average consumers thinking an "unlocked" phone works on Sprint, Verizon, or T-Mobile 3G—after all, that would make sense, in a sane world—and Apple's entire customer strategy is designed to prevent confusion and frustration like that. But Apple may just feel that U.S. consumers are smart enough to understand that their unlocked iPhones aren't truly free at all. In that case, the company could feel it has nothing to lose by putting those phones out there.

This article, written by Sascha Segan, originally appeared on PCMag.com and is republished on Gear Live with the permission of Ziff Davis, Inc.