Apple’s introduction of an unlocked and contract free iPhone 5 may be a big thing in the United States, but for the rest of the world it’s business as usual. But it might herald a change in the US market that will benefit consumer choice.
Having consumers buy a subsidised phone on a two year contract has a lot of advantages for the network carrier, but having options in the pay as you go market, as well as SIM only deals and buying the hardware outright is something that is an accepted practice outside of the US.
In the run up to the launch of the iPhone 5 in the UK, SIM only networks such as GiffGaff saw their user base request the new nano-sim in preparation for the unlocked smartphone from Apple; pay as you go data plans in many countries are heavily tailored to data usage for smartphones; and there is very little to stop someone with a two year contract switching the SIM into another phone to see out the contract period. In America the carrier relationship is much more powerful. Handset costs are subsidised to a huge extent. Smartphones on sale for $50 are clearly not being sold at the true cost of production, but it’s the expected price. And if you want to end or switch a contract out, there is a high cost to pay.
By opening up the smartphone market in America with more options for pay as you go users, Apple could have a positive effect on the whole ecosystem. Arguably the press from the American media drives the stories that promote the ‘winning’ smartphones, and that concentrates the story on the carrier, rather than the Lumias, Galaxies, and iPhones of the world.
Just as manufacturers are looking to have people locked into ecosystems, there is a secondary battle to own the customer. With a reliance on subsidised hardware, the relationship remains with the carrier.
This is where Apple could help the rest of hardware manufactures. Tim Cook’s company does its best to grab user details, both through the iTunes setup and the billing relationship required for app and media purchases. Microsoft are making similar moves with Windows Phone to direct people to register via a Windows ID and set up payment for the Windows Store, and Google has the requirement for a Google account and payment details to fully engage with Android.
All of these relationship require nothing more from the carriers. In essence they become little more than data pipes while the fun stuff happens between users and ecosystems.
Carriers would likely prefer this not to happen, and the two year contracts and subsidies ensure people will return to buy their handsets from them because for many in the US there is no other valid choice. The rest of the world knows differently and the carrier model sits alongside the contract-free option quite nicely.
Opting out of a restrictive carrier grip is a choice the hardware manufacturers would love for the consumers to have. Every little step helps, which is why Apple’s move to supply unlocked handsets should be applauded.
