at almost all carriers you can buy already today an unlocked device. You can use that service or any other carrier’s service as long as the use the same bands and technology. The problem is that consumers don’t seem to want this. They are voting with their wallets and pick the subsidized handset with a contract. Why are you trying to force people into a theoretical model that doesn’t appeal to people in the real world?

The effect that would you are proposing is a dramatic slowdown in the handset replacement cycle. Today Americans replace their handset on average every 21.7 months, giving Americans new devices that can take advantage of new services. In Finland, where handset subsidies are illegal by law, the handset replacement cycle is about 72 months – that is six years. Can you imagine the app world if the average device is six years old? What kind of drag on innovation will this great idea create? It’s these unintended consequences that are just not considered here.

I disagree. Here are some of the options an unlocked phone gives you.

1. You can sell it much easier, especially if it is a GSM phone.
2. You can bring it to a MVNO. Most MVNOs now have BYOD. My guess is all will have the
option eventually and pay much less for cell service.
3. You can hand it down to a child. My son received my unlocked iphone4, now running on
a $30 T-Mo plan.
4. You can use it as a plaything, this is mainly for tech geeks. Android for Ubuntu, or
jailbreak your iphone.

Subsidised phone + 2yr contract = locked during contract (2yrs), should be unlocked at end of contract automatically but is currently not.

Unsubsidised phone + 0yr contract = locked during contract (0yrs), is unlocked at end of contract automatically (i.e. at the end of 0yrs)

We see the problem now; it is Not that the phone is subsidised, it is that it is not unlocked automatically at the end of the contract.

Yes, in the long it may (iPhones have great resale value) be cheaper to buy an unsubsidised phone, but people buy many things on financial schemes of the type; deposit and then monthly payments, there must thousands of such schemes i.e. it is common practice.

Given this and what seems to me deliberate confusion of subsidy and lack of automatic unlocking at end of contract, I question your motives; you don’t tackle the chief injustice. Why did you write this piece?

Actually the subsidy works against the model you describe. Carriers revenues won’t really change if they eliminate the subsidy, the collection timeline is just shifted. You could argue that subsidies actually work against innovation, since carriers have to take a massive margins hit when ever a hot new device comes out. When a new iPhone rolls out carriers have to pay three-quarters the cost of millions of new devices, money they could be using to upgrade their networks against the flood of traffic those new devices will produce.

As for affordability, there’s always financing. It may sound like the same thing as the subsidy-contract model, but you’re separating the phone transaction from the contract. Once you eliminate the false pricing model in the market, handset makers have much more room to innovate and compete on price. The difference between a $350 Android device and a $650 iPhone really comes in to light.