Contracts even with unlocked phones: Or, why I bought an iPhone

Having moved back to the U.S., I found it so hard to get a reasonable deal for service with my unlocked GSM smartphone that I decided there was little reason not to get an iPhone.

Graham Webster
Formerly a journalist and consultant in Beijing, Graham Webster is a graduate student studying East Asia at Harvard University. At Sinobyte, he follows the effects of technology on Chinese politics, the environment, and global affairs. He is a member of the CNET Blog Network, and is not an employee of CNET. Disclosure.
Graham Webster
3 min read

Passing of the torch: here are my iPhone 3G and me in the eyes of my retired HTC Touch, now reduced to life as a Chinese dictionary. Graham Webster

All year, I've been using an HTC Touch as my telephone. But now, having just moved back to the United States, I found it so hard to get a reasonable deal for service with this unlocked GSM smartphone that I decided there was little reason not to get an iPhone.

This was not an easy decision. I'm about to begin life as a graduate student, so money will be tight. I already had a pretty decent smartphone, which I'd bought in China because it was Windows Mobile and could run Pleco, the undisputed master of mobile Chinese-English dictionaries.

And I was nervous about the iPhone 3G, despite its superior aesthetics and preferable interface, having heard so much about performance problems. For a few reasons, I decided to go with iPhone anyway.

The primary reason is that AT&T and T-Mobile, the main GSM carriers in the United States, did not seem to want to give me a no-contract plan with a good data option. Both wanted a two-year contract just for opening the accounts, according to their Web sites. I had assumed one could just bring in a phone and go month to month.

The U.S. carriers seem to be using a tactic that Beijing-based tech industry consultant Mark Natkin said is the favored strategy of Chinese carriers to retain customers. Rather than lock the phones, which would be easily unlocked in Chinese electronics markets, providers are requiring contracts for decent services. Responding to my speculation on whether China Mobile iPhones will be unlocked, Natkin, who is managing director of Marbridge Consulting, explained:

Rather than locking phones, China's operators have been moving increasingly towards locking customers into a long-term contract that comes with a phone sourced by the operator. In San Francisco, a quick walk down Market Street from the AT&T Wireless store, you can get your mobile phone unlocked for $20 in about 10 minutes. So in China, where the labor is much cheaper, not many phones would stay locked unless the SIM card was fully embedded.

The fact that this tactic seemed to be in action in the U.S. made it only slightly more expensive for me to get an iPhone, so I went for it.

This could foretell a model for Apple to end its devotion to single carriers. If Apple were willing to let multiple mobile companies sell the iPhone and provide service for it in the United States, each company could sell them at a price like the $200 to $300 we see for the 3G and nail us with high-priced data plans. Especially if users wanted to use services like MobileMe's push e-mail feature (supposing it were to work), there could be specific, iPhone-only plans. Why can't this be done with multiple carriers?

This model wouldn't be new. The same phones have been available at multiple carriers for many years. They are sold at below-cost prices and the carriers make up for that with service contracts. What I want to know is:

• Why do we need to lock phones if we can lock users into contracts?

• If my phone is locked to your expensive service, why do you need to nail me with a contract?

Couldn't the industry get along with one or the other coercive tactic?