Apple' new iPhone 4Justin Sullivan/Getty Images
It took only one week in Zambia for Iain Grant, an iPhone-using telecom consultant from Montreal, to rack up around $2,000 in roaming charges.
If his iPhone had been unlocked, he could have popped in a small card from a local wireless carrier and instantly become a local customer - avoiding the huge fees incurred when roaming internationally while using a wireless provider back in Canada. That option wasn't available to him because iPhones sold in Canada are "locked" into Canadian carriers, such as Rogers Communications Inc. or Telus Corp.
But that's about to change. Apple Inc., the Cupertino, Calif.-based manufacturer of the popular iPhone, says on its website that it will sell the current model of the iPhone "commitment-free" through its online store for $549 beginning June 24. It will eventually offer the same option with the iPhone 4, which has yet to be released in Canada.
The plan shifts the balance of power between providers and consumers ever so slightly toward the consumer, allowing buyers to choose whether to lock themselves into an agreement with a single wireless provider or pay more for their phone in order to enjoy the freedom of being able to use SIM cards in other countries. SIM cards allow a user to connect to a local wireless provider's network.
In Canada, carriers usually subsidize the purchase price of expensive smart phones in exchange for customers agreeing to sign up for a long-term service contract that locks them into using the carrier's network exclusively. Apple is giving them the opportunity to buy an unlocked phone at full cost, then select whichever carrier they want.
"This is simply saying that the carrier subsidy model appeals to some people but not to all people," said Mr. Grant of the SeaBoard Group consultancy. "I think Apple has learned that it makes more sales having a diversity of carriers than it does being locked into one."
Google Inc. attempted to go around the carriers in the United States by selling its Nexus One smart phone, designed by HTC Corp., exclusively through its own online store. But after disappointing sales, the technology giant backed down and said it would eventually stop selling handsets through its online store.
Analysts say the Google strategy didn't work, because consumers generally prefer to hold and play around with a phone before making a purchase.
Raj Doshi, Rogers' vice-president of mobile product management, said some unlocked devices operating on domestic networks may not be optimized for top performance on Rogers' network, though the company will try to accommodate unlocked devices. In the case of subsidized handsets, carriers often work with handset makers to fine tune the device to ensure the best performance possible, Mr. Doshi said.