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Summary:

Apple, it is rumored has signed a deal that will allow the Cupertino-based computer company to source 12 million iPod-based phones from a Taiwanese electronics manufacturer. In itself, the news is hardly a surprise for the iPhone has been subject of rampant speculation. What is surprising […]

Apple, it is rumored has signed a deal that will allow the Cupertino-based computer company to source 12 million iPod-based phones from a Taiwanese electronics manufacturer. In itself, the news is hardly a surprise for the iPhone has been subject of rampant speculation.

What is surprising the speculation that Apple will sell these phones unlocked, allowing consumers to pop in their SIM cards and use it as a phone. In the US, that would mean getting a SIM card from either the Cingular or T-Mobile. If this is indeed true, and it is not clear if it is so, then Apple will be lending a helping hand to the mobile phone makers.


You can buy unlocked phones in Europe, Asia and on the Internet. But in the US, the carriers in exchange of a long-term contract subsidize most of the handsets, typically between one to two years.

Since they are the big buyers of handsets, the US mobile phone providers have an unnatural control over the market, and thus giving them the ability to dictate what features or models come to market. Many of the major handset makers roll over and play The Pooch, as a result.

Nokia for example doesn’t sell the E61 smart phone in the US, and instead sells a striped down E62 (no WiFi) via Cingular. LG Chocolate (GSM) version is nowhere to be found, but you can get it from Verizon. It is a source of frustration for many handset makers, since they would like to sell their latest phones at premium prices.

The introduction of the unlocked iPhone will do two things – it would basically get US buyers savvy to the idea of buying full priced unlocked phones. Secondly, it is going to cause a behavior change – of buying phones instead of freebies.

It won’t be a mass-market phenomenon in the early stages, but eventually (as shown by iPod Nano and iPod Shuffle), Apple will bring the iPhone prices down to a mass-market price point.

If iPhone causes this behavior change, then, it is good news for rest of the handset industry. Nokia is currently selling three million N Series phones a month, a number that could easily go up if the company could sell its entire range of products at full price. So if you are Nokia or Samsung, it is time to secretly root for the success of iPhone.

  1. I see an added benefit – for criminals. One mugging and not only do you get an unlocked phone, you also get somebody’s entire network’s phone numbers and all their music. What a bounty that would be.. Of course I make this remark purely with the knowledge that mobile phones remain the most common reason for muggings here in the UK, now closely followed by iPods..

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  2. Looks like the first link in this post is broken, Om.

    Luke

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  3. By this time next year goog will be giving iphone’s or something with the same functionality, away like AOL used to give away disks. One year may be too soon but two years is a lock. Schmidt and Urs have both said something to the effect that utiilties(specifically power and telco) may be better positioned as businesses if they gave away computers(power companies) and phones(telco/wireless) because the revenue they can achieve by providing services to computers and phones is greater than the customer acquisition costs. Something btwn the lines there perhaps?

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  4. I’m reading that they’re trying to release it in early 2007. So maybe the timeline would start with an announcement in Q1, FCC approval shortly thereafter, and then a Q2 launch.

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  5. Hardly! If at all the US Handset market opens up with iPhone, it would be a side-effect. Nobody will buy the Apple phone because its unlocked. They will buy it because its a better product than the current generation of mobiles out there. With Apple’s brand appeal and marketing prowess, they can definitely beat the crap out the incumbent players. Big trouble for the handset majors lies ahead IMHO.

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  6. I don’t agree fully on this. It’s true that majority of devices sold in the U.S. goes via carriers. However, Nokia already started to sell its phones unlocked in its Flagship store. Plus, there are many stores online selling unlocked devices and it seems that they do well.

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  7. I have had a number of phones from a number of makers over the years and I have YET to experience a well designed product. (Blackberry excluded) I believe it will be some type of crossover functionality from the ipod world that will drive sales initially. Perhaps rendezvous for discovery and short range free messaging to get the kids excited.

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  8. Unlocked mobile phones are so normal here! You get them from 50 dollars on. They are a great way to save money since we have those new mobile virtual network operators (MVNO) like Easy Mobile, Simyo, Blau and others. I just bought a SIM card from one of them and now I only pay one third of my former minute price. No setup fee, no monthly minimal use, no basic monthly fee. I just put their SIM card into my unlocked GSM phone and made my first call. When there is another MVNO that is even cheaper I will get a SIM card from them.

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  9. Opening Bell: 11.16.06…

    Sponsored by Bloomberg.com Dell knocks back Q3 results as SEC probe turns formal (The Register) That’s the problem with informal SEC investigations, they have a knack for becoming formal ones. Sure, the first time they show up in their jeans…

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  10. The Telco’s will not be too enthusiastic about the unlocked phones going mainstream.
    All major Telco’s have some sort of serial number tracking system in place.
    If unlocked phones are sold it would create more problems for them; i.e. Customers want to install T-zones on their unlocked phones.

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