Unlocked Phones Reality Check: More Pain Than Panacea

More than 100,000 people signed a petition to support it. The FCC and White House are behind it. And now there's a push to introduce legislation to reverse the ban on mobile phone unlocking that went into effect in January via the Library of Congress. So it's a foregone conclusion that the carriers will capitulate, right? Not so fast, says one prominent wireless analyst who has been following this controversy closely. And even then, most consumers don't stand to benefit much. At least not yet.

Assuming consumers do get what they want, they likely won't be thrilled with the end result. "Even if you agree with the White House on this issue and even if phone unlocking was implemented in as fully transparent a manner as you could hope for, it still won't do what consumers will think it will do," said Avi Greengart, research director for mobile devices at Current Analysis. 

The issue, Greengart argued, is that different carriers use different bands and technologies for their networks, which makes taking your unlocked phone from one provider to another a lot less seamless than you might think. In some cases it's just impossible. "You won't be able to take your Samsung Galaxy S III that you bought on Sprint to AT&T," warned Greengart. "It won't work."

Incompatibility Mess

The analyst is referring to the fact that AT&T uses a GSM network, while Sprint relies on a CDMA backbone. In other cases, however, you can easily use an unlocked phone on more than one carrier. For instance, you could take an unlocked T-Mobile phone to AT&T using a SIM Card. Unfortunately, you wouldn't be able to enjoy AT&T's 4G LTE speeds.

It gets worse. Even though AT&T and Verizon Wireless use the same 700-MHz spectrum, they use different portions of it, making their networks incompatible. You could argue that the carriers don't want interoperability because it would make it easier for consumers to switch carriers while keeping the same phone.

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Meanwhile, Sprint is using the 1900-MHz and 800-MHz spectrums. T-Mobile is trying to free up room in the 1700-MHz band for its LTE network while it "re-farms" its 1900-MHz spectrum for HSPA+. Add up all of these caveats and it's easy to see why phone unlocking may not be the holy grail some are making it out to be.

"Many consumers would need to consult an eye chart to figure out which phone they have, which carrier they're on, which technologies are supported on their phone or their carrier and which technologies will work on the carrier they're thinking of going to," said Greengart.

According to Phil Goldstein, editor of FierceWireless, AT&T and T-Mobile subscribers have the most to benefit from making phone unlocking easier. "When you think of the unlocked phone market, it's basically GSM phones," he said. Both AT&T and T-Mobile are using 1900-MHz for HSPA+ going forward, but a T-Mobile customer won't be able to tap into AT&T's 4G LTE network. 

Why the Resistance?

Given all of these caveats, why is the CTIA-The Wireless Association opposing the reversal of the phone unlocking ban? The industry group, which represents the major carriers, argues that they need to be able to recoup the cost of the subsidy that reduces the initial purchase price of the handset. 

In a statement, CTIA Vice President Michael Altschul said that "the Librarian of Congress concluded that an exemption [on phone unlocking] was not necessary because the largest nationwide carriers have liberal, publicly available unlocking policies, and because unlocked phones are freely available in the marketplace -- many at low prices." Altschul added that carriers will unlock a phone at the customer's request once a the contract terms are satisfied.

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What such senators as Amy Klobuchar (D-Minnesota) want is legislation that will get rid of the ban on unlocking cellphones altogether. That could be a scary proposition for the major carriers, who need to hold on to as many subscribers as they can as the number of new subscribers dries up and the market becomes more oversaturated.

"The carriers don't want to publicize the idea that consumers can have more control over switching between networks," argued Goldstein. "A blanket exception to phone unlocking rubs carriers the wrong way because they see it as one less touch point that they get to control." 

Part of that control includes the ability to charge exorbitant rates of overseas usage. For instance, AT&T charges $120 for 800MB of data in Spain, versus the $21 Vodafone charges for 1GB of data when you buy a local SIM. Getting your phone unlocked can be a real pain, too. One colleague who wanted to plug another SIM into his AT&T iPhone while abroad had to threaten to leave the carrier before he got the green light.

Mid-2014 Could Be Turning Point

In the short term, carriers have plenty of reasons to be nervous about phone unlocking, but perhaps it's not as big of a threat as they're making it out to be. "Verizon is leaving a lot of its phones unlocked to start with, and last time I checked they haven't seen a rise in subscriber defections," said Greengart. The analyst said that making phone unlocking easier for consumers will likely have as little impact as number portability did, which allowed subscribers to take their existing numbers to other carriers.

The impact on consumers will also be minor for the foreseeable future, unless you're someone who travels overseas. Ultimately, in order for unlocked phones in the 4G era to really matter, carriers will need to strike LTE roaming agreements. And that won't happen until the networks are significantly built out, which Goldstein said won't occur until 2014 at the earliest. "Until that happens I don't anticipate the carriers having a fondness for software-defined radios or anything that's going to let you switch seamlessly between the networks."

Mark Spoonauer
Responsible for the editorial vision for Laptopmag.com, Mark Spoonauer has been Editor in Chief of LAPTOP since 2003 and has covered technology for nearly 15 years. Mark speaks at key tech industry events and makes regular media appearances on CNBC, Fox and CNN. Mark was previously reviews editor at Mobile Computing, and his work has appeared in Wired, Popular Science and Inc.