Cracking the Code: ‘Unlocked’ Cellphone Use Grows in U.S.
By Allan Pulga
Many U.S cellular subscribers are anxious to see if the carriers’ iron grip over the airwaves will loosen anytime soon, as the world’s biggest handset makers attempt to bypass the carriers and sell “unlocked” phones directly to consumers.
Marguerite Reardon of News.com reported last week that unlocked phones – which can be used on multiple carrier networks – are being sold by Motorola, Nokia and Sony Ericsson on their websites and through certain retail channels. Until recently, phones such as these were only available in “grey” markets, where U.S. users had bought phones from overseas.
Grey market is right. Simply Google-searching the words “unlocked cell phones” brings up hundreds of links peddling these phones over the Internet. So why do these cellphones command so much attention?
People want options; people want freedom. The consumers looking to buy unlocked phones feel limited by the options available to them – or should I say, the handful of options that the handful of carriers make available to the public.
Consumers are also limited by the networks they can use. In her article, Reardon explains that subscribers are limited to the network provided by their carriers. For example, Verizon Wireless subscribers can only use phones that support the Verizon network. When subscribers switch from one carrier to another, they can’t take their phones with them – even if both carriers use the same make and model!
But the carriers run the show in the U.S: between 90 and 95 per cent of cellphones are sold through a carrier, to be used on that carrier’s network. Compared with the global market – where only 50 per cent of cellphones are sold through carriers – the disparity is appalling. In Europe alone, about 70 per cent of cellphones are unlocked; in Asia, a whopping 80 per cent.
The major difference between foreign cellphone markets and that of the U.S. is that U.S. carriers subsidize the cost of handsets. The good news is that subsidies make buying new phones more affordable for consumers. The bad news? Carriers have complete control over the relationship with consumers: which brands to carry, which models to sell and which services/options to offer. And all this results in fewer handset options to consumers.
Reardon used Nokia as a poignant example of carrier control: the Finnish cellphone maker released about 50 new products last year and only a handful were offered by U.S. carriers. I, like those buying unlocked phones, have long been jealous of all the cool phones available to consumers in overseas markets.
Generally, handset manufacturers like Motorola make more money in markets where handsets can be bought independently of carriers. And it’s good for consumers because there is more competition and a wider range of prices and features.
Nevertheless, the big cellphone makers aren’t rolling out big campaigns in the U.S., to avoid biting the hand that feeds them. Again, carriers control 90-95 per cent of the market.
“We would welcome a path that provides more direct sales access to consumers, so we can promote our brand,” Bruce Brda, a vice-president at Motorola, to Reardon. “But today the carrier subsidizes the phones, and that’s great because it makes our phones more affordable to more people. Until that goes away, I see unlocked phones being a very small piece of our business in North America.”
Very diplomatic, Mr. Brda. It will be interesting to see whether sales of unlocked phones grow substantially in the near future and if so, will it be enough for handset makers to stake their own territory (i.e. grow some cojones) and offer more choices/freedom to the customer?
There is clearly no “free market” for cellphones in the U.S. The market is controlled by a handful of monolithic corporations telling the public what’s best for them. That’s the world we live in, I guess.