The Device Network Lock, And How It Is Abused
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.
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...
| || 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...
·Time Warner Cable
·AT&T DSL Service
| 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.
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.
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.
| 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!
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.
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.
This post is made with meat biproducts.
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.