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The Device Network Lock, And How It Is Abused
by Conan Kudo 10:07AM Friday Mar 08 2013
If you live in the United States, you may be familiar with the common sentiment that you generally cannot take your favorite cellular enabled device (tablet, smartphone, Sony PlayStation Vita, etc.) and use it on any carrier you like. With GSM carriers, this is referred to as a SIM lock. CDMA carriers didn't have to care about this because they didn't use SIM cards. Instead, the devices were programmed (flashed) to the network directly. Until now. This issue applies to both types of networks, now that deployment of LTE by CDMA carriers has introduced SIM cards as a staple for CDMA/LTE devices (except for Sprint, boo!).

Well, I'm here to shed some light on how a network lock works and why it isn't necessary. This statement will probably surprise you, as common wisdom indicated that device network locks are needed to ensure that you stayed with the carrier throughout your contract.

Network locks aren't needed for contracted postpaid service

The truth is, the carrier doesn't care if you use the service or not, as long as you pay your bill. In fact, carriers who largely make money on long term service agreements don't need the SIM lock at all. Don't believe me? There's evidence to support it. In the United States, Verizon Wireless is not allowed to implement network locks on devices that support its LTE band (700MHz Upper C block). And you know what? They've not seen a huge exodus of customers leaving the network. In fact, just this last year, Verizon Wireless gained the most subscribers it had ever gotten in the years it has operated as a joint venture with Vodafone.

The very legal agreement binding you (as a customer) to it is enough. If you terminate your service early, you have to pay an ETF, right? Well, that ETF is intended to cover the cost of the device itself (and a bit more). So they recoup the investment anyway! And if you don't pay the ETF? Well, the carrier can always send a collection agency after you. There's no escaping the fact that the carrier always gets its money. Whether the phone is locked to the carrier or not, you still have to pay your bills for the term you agreed to.

So, if SIM locks aren't really an effective hold for contracted service, what are they intended for? The answer is, of course, prepaid (aka contract-free service). Now, I expect this to truly confuse people. Why? Because most expect you to be able to pick whatever phone you want and use it with whatever prepaid carrier you want, right? Well, that's exactly why SIM locks were created. You see, carriers that use prepaid as the dominant business model know that they have to earn your business. But, if the carrier manages to offer a truly unique device as a way to draw in customers, then perhaps the network lock will allow them to hold onto those customers and make a bit of money on them. The idea is to hold onto the customer long enough to make back the minimal subsidy the carrier applies to the device price.

For example, Cricket offers the iPhone 5 for $500 (prior to $50 mail-in rebate) currently. That means that for each sale of the iPhone 5 to a customer, Cricket takes a hit of roughly $150 ($200 if the mail-in rebate goes through). The hope is that Cricket can retain the customer long enough that the money is made back, along with a little extra to make it profitable. While this approach is rare in the United States, it is incredibly common in other parts of the world. Asia (excepting Japan) and Latin America are hugely dominated by prepaid, so this approach to attracting customers is common in those areas. Europe is more mixed, but there are several countries where SIM locks are only used for prepaid customers because it makes little sense to use them for postpaid, contracted ones. Notably, German postpaid mobile network operators do not use SIM locks for most phones, but prepaid ones do for nearly all of them.

However, the prepaid space in the USA is dominated almost entirely by BYOD (Bring your own device) offers. Because most prepaid carriers are MVNOs (mobile virtual network operators, carriers that use another carrier's network to provide service) of T-Mobile or Sprint (with a few being of AT&T and Verizon Wireless) that have very few subscribers (relative to prepaid carriers like Cricket and MetroPCS, who own their own networks), this type of business model is extremely difficult to pull off. Thus, they are SIM-only and often request you get an unlocked device to use with the service. Well, in the case of Sprint MVNOs, Sprint does not yet allow any compatible CDMA/LTE or CDMA-only device to operate on its network, only Sprint-branded ones. Verizon MVNOs generally do not allow bringing your own device either, but there are a few that do. Until recently, that was true for Sprint MVNOs as well.

Why this is important to understand

So why bring this up? Recently, the White House responded to a petition to legalize SIM locks without requiring carrier consent after the Library of Congress chose to allow the exemption permitting them to expire. The response indicated that the White House was all for it. But, the White House continued to follow the flawed premise that SIM locks are required for enforcing contracted service. This is not the case at all. There are more than enough legal protections built into the two-year agreement that you sign when you sign up for contracted service that SIM locks are worse than useless.

Eliminating the network lock allows natural economics to work in the prepaid sector. If a device is in low demand and there's a huge supply of them, the carrier is obligated to slash the prices to get those units sold. On the other hand, if the device is in high demand and supply is kept up or low, then the price could remain close to MSRP or rise in order to control demand to more manageable levels. But with carrier locks, there isn't as much of an incentive to allow those dynamics to play out. Frankly, we need price competition in cellular-enabled devices. The prices are already too high and do not appear to be falling as new devices come out or when demand falls.

In conclusion, network locks are not needed for long term service agreements. The legal protections in place currently do more than enough to protect both the carrier and the subscriber. It is potentially justifiable in the prepaid space, but it still remains mostly unnecessary in the United States. After all, the vast majority of prepaid providers selling phones are not offering any discount at all. To date, only Cricket offers substantial discounts (that wouldn't be made back within a month or two of service) on its devices. The rest would prefer unlocked devices because the economics actually work in their favor (unlocked models could be made available that are compatible with a multitude of carriers to widen the target audience).

However, if selling phones is part of the business proposition with prepaid service from a carrier (which it is for most prepaid carriers that have their own networks), then it makes complete sense to use network locks. In fact, I completely agree that network locks are a necessary evil for that business. In that scenario, I believe network locks that last for up to 180 days of continuous prepaid service is enough to make back the subsidy and earn some money. It can be less (T-Mobile will unlock a prepaid phone after 90 days of continuous service), but definitely not more than 180 days. But for postpaid service that involves long-term contracts, I do not believe that network locks are needed at all.

This article is part of an effort to solicit paid content from the Broadband Reports community. If you'd like to participate, please contact us.

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elefante72

join:2010-12-03
East Amherst, NY

Nexus 4

Well,

Network locks can be damned. The Nexus 4 is a beginning of the "universal" phone, where you can have the relationship directly w/ the phone vendor, and choose the network of your choice, NOT the ass backward way we have it today.

I bet you a billion dollars if Verizon or T had to compete on postpaid w/ universal phones you would see android updates come at a staggering pace, and prices go DOWN.

Within a year the major radios will be able to do many of the LTE bands, GSM/CDMA, etc so if an MVNO offers LTE (like Sprint is beginning) then the phone is tuned to the correct network.

As for postpaid, the ONLY reason they put locks on them are three fold:

1. To prevent you from going out of country and using a prepaid SIM, to gouge you for talk/data.
2. To prevent or slow the migration of said equipment to prepaid.
3. You have to manually go through a process to unlock (many don't), and this turns the phone into junk or remains locked. This is where the law will really bite. Resellers are punished big time on this. This is of course to slow (2).

These are both anti-consumer, and the stooges in the government are the enablers. As a libertarian I support SIM locking (you don't have to buy it) if the carrier wishes, but after you buy the phone you should be able to do anything you want w/ it, otherwise it's not your phone but simply a service fee...
Kearnstd
Space Elf
Premium
join:2002-01-22
Mullica Hill, NJ
kudos:1

Re: Nexus 4

SIM locking should not be a carrier wish though. Or well more specifically, When the contract expires the system should automatically send out an unlock code as the user has completed their end of the bargain by staying in for the 2yrs.

Though really the users can just unlock their phones, it is only against the DMCA and that is worth less than the speed limit on the Turnpike.
--
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Skippy25

join:2000-09-13
Hazelwood, MO

Re: Nexus 4

Locks have nothing to do with contracts as was extensively explained in the above text your apparently did not read.

So why should they be unlocked automatically after the contract expires when they have nothing to do with recouping the cost anyway?

Sarick
It's Only Logical
Premium
join:2003-06-03
USA
Reviews:
·Frontier Communi..

Re: Nexus 4

So they can force you are forced to use them as a provider if you want to continue using that phone forcing the customer has to buy a new phone if they want to go elsewhere.

It's really simple to figure out how bean counters think they only care about making money and milking people for everything.
--
Sarick's Dungeon Clipart

delusion ftl

@comcast.net
Sim locks are from carriers who see themselves as champions for bringing X phone to market. And they think they are entitled to the fruits of that phone in the market. Meaning when ATT brings the Blackberry torch to market that because ATT worked so hard and was so diligent in allowing their customers to purchase the torch, that the torch should be stuck on their network, and theirs alone. Forever. If anyone uses a BBery torch ATT should bet getting some money somewhere from it.

This is the bulk mindset behind sim locks. It has little to do with contractual obligations. You may agree with the carriers, you may disagree. I just feel that people ought to know why before they make their decisions.

When you bring up devices like the nexus 4. It throws carriers for a loop as it's not "The nexus 4 brought to you by AT&T", or "The iphone 5 brought to you by AT&T". Instead it's a 299 dollar high end smartphone directly from the producer. Now when an ATT subscriber buys a nexus 4, they look at their 96 dollar a month plan and wonder why they are paying so much when they buy their device outright. I've been told that even the subsidized nexus 4 sold through T-mobile on contract is unlocked. That should blow away anyone's notion that sim locks are required for contracts to function properly.

JasonOD

@comcast.net
YOu are missing the point.... Maybe not you, but most American's like having carriers eat 2/3 of the cost of a phone up-front and amoritizing the discount over a contract period. If the subsidy model is going to work, there has to be a way for carriers to secure the 'loan'.

One can argue whether ETF's are enough, but there is nothing wrong with 'locking' the phone to one carrier if that's what the carrier chooses. They're giving out the subsidy (loan), they get to set the terms. The customer can choose whether it's worth it for them.
Skippy25

join:2000-09-13
Hazelwood, MO

Re: Nexus 4

Did you even read the above text? Subsidizing the phone has nothing to do with it and locking the phone has nothing to do with securing a loan or making sure they get their money back. And if it was, they have plenty of legal avenues to already take.

Example: I go to ATT and get their locked iPhone . After 3 months I decide I dont like ATT and so I decide to go to Verizon and get their locked iPhone. After 5 months I decide they suck as well and decide to go to Sprint and get their iPhone. How did "securing that loan" stop me from taking my business elsewhere?

Sure I just paid a crap load of ETF's, but ultimately I still have 3 phones (2 of which I will sell) but nothing secured me from doing the above. Locking only caused me to get another phone with the other carriers. It did not stop me from discontinuing service with anyone and making sure they were fully reimbursed. If I was an idiot with poor credit already, I would not have paid the ETF's either and then where would that have left them?

ropeguru
Premium
join:2001-01-25
Mechanicsville, VA

Re: Nexus 4

And to further your comments, this is also good for the phone manufacturer.
ake your example of 3 iPhones. Apple has just sold three units and not just one that was moved from carrier to carrier. So there COULD be a push for the locking from the manufacturers also.

mulp

@Level3.net

Re: Nexus 4

Then we should lock cars to the driver's license, or the State.

That will be good for automakers because you will be required to scrap your car and buy a new one if you need a different one, or move to a new State.

ATTPerson

@sbc.com
WOW! Somebody actually gets it! If you bail on AT&T, ETF and all, and go to Verizon, you get the same phone discount that, by the math, zeros your perceived "loss" on an ETF, and it's a brand-new device every single time.

I will also point out that, in a situation where the FCC is clearly trying to convert the ENTIRE NATIONAL TELECOMM INFRASTRUCTURE TO WIRELESS (that goes for your home internet service, too), the only way relevant data about usage loads can be collected is for users to stay with one carrier for a long enough duration to collect information about data transfer loads on the wireless network.

The fact that the ENTIRE wireless spectrum has to have its bands re-defined by the FCC, to accomodate a hundred million people using wireless data that all need unique broadcasting frequencies - well, your mobile data plans are capped and throttled not because carriers are trying to rip you off, but because LTE is so fast (and in rural areas, even HSPA+ is fast compared to landline broadband options) that unrestricted use would presently have negative implications on everything from interference of wireless communications (to the point they'd simply stop working) to the business interests of everybody that transmits video or voice media wirelessly to your phone, vehicle, or television.

It's capped and throttled now. I can also tell you that it's so comparitively cheap, in terms of cost of doing business, compared to wired service, that it will not have caps forever (at least, not at the level of the individual user - entities like Netflix and YouTube may, in theory, have caps associated with the amount of broadband they use via local carriers taking those video services to individual users).

I'm an AT&T employee, and this isn't me being an AT&T fanboy. Free-for-all use of mobile data isn't supported by any carrier's network (yet). Allowing it wouldn't cause speed problems like you experience if you try to stream 8x 1080p Netflix movies simultaneously to your home on your 12mbps internet service or whatever.

Instead, the actual "problem" is that every single person using mobile data has to have a unique frequency made available to them, similar to the way local broadcast television and FM radio need the same thing. How many local broadcast television and radio stations cover your metropolitan area?

Well, I can tell you that while maybe there are a total of 20 local FM radio/TV stations in a metro area, there are about a million potential wireless data users in my metro (Kansas City) alone. In my immediate neighborhood, based on population density, you're talking several thousand around one LTE tower, easily.

It's not a corporate screw-job, it's an FCC-guided redesign of telecom, and not limiting initial access to it would make it so terrible from the perspective of data speed and dropped calls that nobody would want it anyway.

"Fiber backhaul" to an LTE tower is the same "fiber to a wireless router" concept that you'd imagine if you had a true fiber connetion running straight into the outside wall of your home. It's also completely stupid to build it out in that manner, because you can just put up micro-cells (think short little cell towers that just cover an individual subdivision or city block or whatever) on existing fiber that presently terminates to VRADS or IPDSLAMs, and give fast service to a bunch of people.

If you want the proof in the pudding, read a recent statement from AT&T about their "VIP" initiative and the deployment of "macro" and "micro" cell towers.

What's actually befuddling to me is the join dates of the members of this site's staff (around 1999 or 2000), which should have implicated that they'd be able to see this trend. Instead, you read paranoid garbage about "stalled U-verse build outs" and "no fair ETFs" and "no fair data caps, throttling, and overage fees".

This site use to be a hub of intelligent discussion about broadband. Now, it has degraded to uninformed and short-sighted paranoia...

AVD
Respice, Adspice, Prospice
Premium
join:2003-02-06
Onion, NJ
kudos:1

Re: Nexus 4

fail ^^^^
nice try tho.
NOVA_UAV_Guy
Premium
join:2012-12-14
Purcellville, VA
Reviews:
·Comcast
said by JasonOD :

If the subsidy model is going to work, there has to be a way for carriers to secure the 'loan'.

I'd hardly call the subsidy model a "loan". Loan payments eventually go away after the loan is paid off. I've never seen a wireless bill go down after completing a 2 year contract and sticking with the same phone. If it was a loan, the part of the bill reflecting the installment payment would be eliminated.
--
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VentShop

join:2009-08-21
Oklahoma City, OK

Re: Nexus 4

I agree 100% to this and to expand what if you buy a phone outright? If I choose to not be locked into a contract and just pay the cash price for the phone why is it that I don't see a reduced monthly service cost?
steevo22

join:2002-10-17
Fullerton, CA
Reviews:
·Time Warner Cable
·AT&T DSL Service

1 edit
Carriers eat 2/3 of the cost of a phone? Only because that's how their distorted business model is set up.

How much do you really think it costs to build an Iphone in red China?

Look on Dealextreme, there are lots of Iphone clones, obviously built with most of the same parts for $65. A real Iphone cannot cost more than $85 to make.

Why do they price it at $600? To make the contracts seem attractive, that's why.

As it is the carriers keep a stranglehold on the equipment and use that power to keep their customers signed up on long contracts to prevent competition.

They do it intentionally. That's what should be stopped.

The cellphone carriers should be barred from selling equipment at all as a condition of their radio spectrum licenses.

If the cellphone carriers were only carriers you would be able to buy unlocked multi network phones from retail stores much cheaper than now. The manufacturers only sell to carriers now, if they could sell their products at retail there would be much more competition.

Don't you think Motorola, Apple, LG, Samsung and all the rest wouldn't be eager to sell to you? Of course they would. They would have to compete to do it but if they had to do it or go out of business, they'd do it. They are largely hampered by there being only 3 or 4 buyers (cellular carriers) for their products. 100 million buyers would be much better for them. Even if they only sold through Radio Shack, Walmart and other retailers they would have to compete.

Prices for both phones and service would decline and quality would improve. There would be real competition.

No carriers whining about unlocking phones. No carriers advertising phones, they would only advertise their service and how great it is, and without contracts they would have to provide good service or you would take your multi network phone elsewhere.

Conan Kudo

join:2013-03-04
Clinton, MS
Well, like all Verizon LTE phones, T-Mobile's subsidized Nexus 4 is SIM-unlocked. So there is that, at least.
elefante72

join:2010-12-03
East Amherst, NY

Re: Nexus 4

Verizon devices can move the SIM because as part of the spectrum deal they HAD to allow it, not because they are good guys... Their phones are still carrier locked. You also can't go to another carrier because LTE is incompatible between carriers today.

The TMO N4, is truly unlocked, you can pop any SIM in there, from any carrier that supports the pentaband, and that means internationally also.

I have a Verizon 4g myfi. Never used it. $50 a month wasted (or at least my employer). I wanted to buy a new ipad and throw that SIM in there. Verizon wouldn't let me buy an ipad WITHOUT activating a plan, so I told them to screw. I went to the Apple store and bought a "Verizon" ipad, spent 3 minutes cutting the SIM, and voila I was now using data.

My point is that Verizon is still in their bad habits, because they shouldn't care if I use my 5GB data plan on a myfi or ipad, just that I am paying them every month. They want you to pay per device EVEN if it is unsubsidized (ipad)... I'm not going to pay for both, when the ipad can act as a hotspot if I need it.

AVD
Respice, Adspice, Prospice
Premium
join:2003-02-06
Onion, NJ
kudos:1
the nexus 4 don;t work on sprint, and there is no LTE interoperability between the major US carriers.
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--Standard disclaimers apply.--

Iridium
Premium
join:2003-04-02
Los Angeles, CA
said by elefante72:

Well,

Network locks can be damned. The Nexus 4 is a beginning of the "universal" phone, where you can have the relationship directly w/ the phone vendor, and choose the network of your choice, NOT the ass backward way we have it today.

No the Nexus 4 is not the beginning. Unlocked phones have been available for years, direct from phone manufacturers. The problem was that most people didn't know about them. I've been buying unlocked Nokia phones directly from Nokia for about 10 years now. Google was the first US company to successfully sell unlocked phones. They stumbled a bit with the original nexus, but killed it with the Samsung Galaxy Nexus and the LG Nexus 4. I really hope the trend continues.
--
My next laptop will be an Apple, I am fed up with PC's and Windows.

Lone Wolf
Retired
Premium
join:2001-12-30
USA
kudos:1

Re: Nexus 4

Agreed!

As soon as I learned about unlocked phones I began buying them. I bought my phones from places like Pemix and WElectronics for over 10 years. Some were unavailable in the US and came from Singapore or the Philippines and all were unlocked.

Here's an earlier unlocked phone of mine that I have never seen another person have: »/showpic/cellp···0863&1=1
rradina

join:2000-08-08
Chesterfield, MO

Did we miss something?

I agree with the article. However, did it miss the potential downside of an unlocked phone for the traditionally post paid carriers (Sprint, Verizon, T-Mobile, ATT)? Yes, they are not necessary for them to enforce the agreement but a locked phone is useless after the contract is complete unless you stay with the carrier or get them to unlock it so you can go somewhere else. If they don't have to unlock the phone, why wouldn't they want to make it more painful to leave by locking it to their network and refusing to unlock it? Sure it's not fair and it's totally anti-consumer but if it's legal, shareholder interests are not being served if they don't exploit it.
TBBroadband

join:2012-10-26
Fremont, OH
Reviews:
·AT&T U-Verse
·MegaPath

Agreement/Contract

Just because you have an agreement to keep the service for 2 years, doesn't mean anyone will stay. The customer can still void their contract and leave- even if they don't pay. You're assuming the customer will pay and the carrier will still be paid in full. But if the carrier sells the debt to another outside company for collection, the carrier still won't get paid the full amount and it's up to that collection agency to get repaid. There is a LOT of IFs in that one and really doesn't prove anything on getting paid.
TBBroadband

join:2012-10-26
Fremont, OH

Proof

You claimed there is proof about VZ and what they're not able to do, but yet you failed to provide the proof. You only stated something. Any links or creditable sources. Blogs and random news articles don't show proof either.

Conan Kudo

join:2013-03-04
Clinton, MS

1 edit

Re: Proof

Here's the source: »ecfr.gpoaccess.gov/cgi/t/text/te···&idno=47

n2jtx

join:2001-01-13
Glen Head, NY

Sprint

Unless their policy has changed recently, Sprint will still not fully unlock an iPhone at contract completion or when terminated early. I have an iPhone 4S from Sprint and it is unlocked for foreign SIM usage (I use it in Canada occasionally). However, the ability to put in an AT&T or T-Mobile SIM will never be allowed unless Sprint changes its policy on its own or is forced to by legislation. As such, I have no plans to ever acquire another iPhone from Sprint. I might as well buy a brick since once it is no longer being used for Sprint service, it is basically just as useful as a brick in the United States.
--
I support the right to keep and arm bears.

JonH

@verizon.net

Re: Sprint

Sprint devices, like the iphone you mention, will not work with the other carriers because they are CDMA vs the other carriers GSM, it has nothing to do with sprint being selfish... you are free to convert your sprint phone to another cdma carrier, if you want to do the work...
desarollo

join:2011-10-01
Monroe, MI

Re: Sprint

iPhone 5 sold on Sprint:

CDMA model A1429: CDMA EV-DO Rev. A and Rev. B (800, 1900, 2100 MHz); UMTS/HSPA+/DC-HSDPA (850, 900, 1900, 2100 MHz); GSM/EDGE (850, 900, 1800, 1900 MHz); LTE (Bands 1, 3, 5, 13, 25)

Pay particular attention to the second line.

ropeguru
Premium
join:2001-01-25
Mechanicsville, VA
said by JonH :

Sprint devices, like the iphone you mention, will not work with the other carriers because they are CDMA vs the other carriers GSM, it has nothing to do with sprint being selfish... you are free to convert your sprint phone to another cdma carrier, if you want to do the work...

Obviously you overlooed Vierizon wich is CDMA also. So what WORK would there be to move from a CDMA Sprint to a CDMA Verizon? Only to give Verizon the ESN to put into their system to allow it to operate on their CDMA network.
clone

join:2000-12-11
Portage, IN
Reviews:
·T-Mobile US
Not to mention iPhone 4S, Model A1387:

UMTS/HSDPA/HSUPA (850, 900, 1900, 2100 MHz);
GSM/EDGE (850, 900, 1800, 1900 MHz)
CDMA EV-DO Rev. A (800, 1900 MHz)

Please refrain from posting if you haven't the slightest clue what you're talking about.

Every time someone talks about VZW/Sprint unlocking an iPhone for GSM/WCDMA networks, someone has to go and post this! Stop it!

Conan Kudo

join:2013-03-04
Clinton, MS

Re: Sprint

Actually, for the iPhone 4S, Sprint originally didn't lock it, but later did lock it to prevent it from working on US GSM networks. There's an MCC block on the Verizon model as well for GSM networks.

Just because the bands are supported doesn't mean the carrier will let you use it as they should be. Remember Apple won't let you use any LTE network you want, only ones it has tested and approved.

Snowy
Premium
join:2003-04-05
Kailua, HI
kudos:6

Nice!

Nice front page article
TheKrell

join:2003-12-07
Fairfax, VA

Re: Nice!

Fully agree.
pkorx8

join:2003-06-19
San Francisco, CA

Hardware Layer First?

Am I missing the point here?
This whole unlocking issue only applies if all phones are physically capable to connect to all carriers. And we know this is not the case.
Not too long ago this used to just be a CDMA vs GSM issue, but now with the prolifiration of LTE, there are now a lot more variables in terms of radio band hardware, before this subsidy unlocking issue really applies.
Keep in mind that voice and data radio bands are considered separately.

As much as I don't like apple, I give them cred for stuffing the multitude of radios in their 3(?) iphone5 configurations. But even that falls short, because of the abundance of radio bands. I don't know any other phone that matches apple's radio bundles.

I'm going out on a limb here and correct me if I'm wrong, but this article does not seem to address the fact that carriers may have to invest in development with phone manufacturers for each phone sold. This is especially true for CDMA phones like sprint and verizon.

Donkeys_Rule

@sprintlink.net

Re: Hardware Layer First?

You are correct Sir. Carrier work with phone vendors to develop devices that operate within their network parameters. There is also differences in how the devices authenticate to the network between the carriers. Note the Sprint iPhone does not support Verizon's 700MHz LTE band.
en103

join:2011-05-02
Reviews:
·Time Warner Cable

The best rationale for subsidized/lock is...

a) To effectively have devices appear 'less' expensive, and promote high turnover of devices
b) Not allow consumers to 'buy'/'resell' new devices that were subsidized. Eg. I have a +4 year old iPhone 3GS, I can obtain a new or refurbed iPhone 4/4s/5 that is highly subsidized, and sell it for ~$300/400/500 and make a little profit. Carriers would like to keep those devices on 'their' network regardless, as they 'subsidized' the device.
c) Aftermarket vendors love the US subsidy style (vs. BYOD) because many users have been 'trained' that devices are to be replaced after 2 years
SanJoseNerd
Premium
join:2002-07-24
San Jose, CA

Carriers not entitled to guaranteed profit

Where did we get the idea that carriers are entitled to a guaranteed profit, even if you hate the service and want to cancel after two months? Other industries don't work that way. In other industries, companies have to earn profits by delivering a good product at a good price so you'll voluntarily keep coming back.

The phone subsidy is part of the customer acquisition cost -- what it costs a carrier to attract a new customer. Customer acquisition costs also include advertising, promotions, sales commissions, and some percentage of the cost of operating retail stores. These are all normal business expenses.

If the cellular industry has high customer acquisition costs, its largely because of high customer churn, and high churn is caused by having lots of dissatisfied customers. Why should carriers be shielded from the consequences of failing to satisfy customers?

Other businesses with high customer acquisition costs are able to operate without long-term contracts or other sorts of lock-in. For example, magazine publishers typically don't make a profit unless you subscribe for at least two years, yet they don't use long-term contracts. (A magazine subscription is not a contract, it's a prepayment that is fully refundable if you cancel early.)

Phone locks, contracts, and ETFs are all part of a carrier entitlement mentality. We should not be buying into it.

Toadman
Hypnotoad

join:2001-11-28
Ex Ohioan
kudos:1
Reviews:
·AT&T Midwest

1 recommendation

Monthly costs is what is abused

Subsidized phones or not,the cost per minute and cost of data per mb is what is abused in this country.

Recently going with a friend in Thailand to get a sim and service for her iphone 5 (which I brought over from the US unlocked), 4 GB data month and pretty much unlimited talk for about $18 a month (500 Baht). Tablet, just around $9 a month.
I pick up a prepaid sim, free, and then re-load at 7-11, and it costs me something like 4 cents a minute to call back to the USA, using ATT, that is $1.99 a minute, and outrageous data overseas, and we all know that is going straight in the pocket.
I don't care about ETF or sim locking, just give us reasonable phone plan rates.
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This post is made with meat biproducts.
NOVA_UAV_Guy
Premium
join:2012-12-14
Purcellville, VA
Reviews:
·Comcast

Re: Monthly costs is what is abused

Forget +1. +1,000,000.

What is the competitive landscape like in Thailand for wireless? Are there tons of providers, or just a few? Who owns the wireless infrastructure - the companies themselves or the government?

I'd theorize that part of the reason we see such pricing problems in this country is because of the relatively anti-competitive state that we've let our wireless industry become. We have essentially 4 national players - 2 of which pretty much dictate the terms to all the others (AT&T and Verizon); neither of them actually listen to the market when determining pricing strategies or service plans. (Otherwise we would still have unlimited plans available.)

While I hardly argue that more government regulation and more government involvement is needed, I'd suggest that perhaps the wireless industry is one of those rare exceptions that proves the rule. It's not "free market at work", as it behaves more like an oligopoly. When looking at how some of the players in the industry behave, I'd even suggest that it's more like a cartel.
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A sane approach to our federal budget: NO tax increases / 15% cuts across-the-board / defunding of all ObamaCare-enacted programs.

Morons

@sbcglobal.net

This site has turned terrible

Do you know why network locks were ok'd by the Feds? Because for the FCC to get a grip on how the wireless spectrum bands need to be redefined to accommodate true "no wires" telecom service, they have to track who is using what carrier at a given location, and people changing their carrier as they please makes that exceedingly difficult.

I swear, this site had had some kind of total meltdown with regards to informed opinion, either by accident or intentionally.

Conan Kudo

join:2013-03-04
Clinton, MS

Re: This site has turned terrible

That makes no sense at all for digital systems. That was only valid for analog systems that used limited to no authentication schemes for network connection. The FCC doesn't require this for digital systems at all. If this was the case, then multi-band handsets supporting non-US bands would have to be prohibited.

GSM, cdmaOne/CDMA2000, UMTS, and LTE use high levels of encyption, track spectrum being used, and log in to the network to authorize access.

If you've ever read the specifications for any of these technologies (which are freely available), you'd know that there is built-in support for logging all connections and time on the network. GSM/UMTS/LTE systems record IMEI, IMSI, radio interface and frequency, and provisioned service levels. cdmaOne/CDMA2000 systems record MEID+MSI pairing, frequency, and provisioned service levels.

This is totally not valid at all.
zefie

join:2007-07-18
Hudson, NY

Cricket owns their network?

This is news to me. Maybe since I last used them in 2009, but when I did in Arkansas, it was an MNVO of Sprint.