Archive for November 29th, 2007

You wanted an unlocked iPhone, you got it…for $1,500

Apple’s iPhone was undoubtedly a hot commodity from the first day of its launch. The phone sold one million units in less than three months. While most consumers had to get their hands on one, it didn’t stop them from grumbling about the exclusive agreement (amongst other things). In the United States, the response from Apple was largely, “Get over it,” but this attitude hasn’t flown overseas in Germany and France where locking phones to a specific carrier is against the law.

After agreeing to comply with a preliminary injunction from competitor, Vodafone, T-Mobile announced it will charge the equivalent of $1,478 for an unlocked iPhone in Germany. (The company is, however, appealing the injunction and will withdraw the unlocked version if successful.) In France, Orange is letting unlocked versions of the handsets go for $965.32, a bargain over Germany’s price tag. The cost of having a handset independently unlocked is only about $150 and if you can wait six months, it should be free in Europe.

Hearing about Orange and T-Mobile’s exorbitant prices, I can picture Apple CEO Steve Jobs’ smirk. The message behind the price tag seems to be “you can have your precious unlocked iPhone, but it’ll cost you.” German and French law might require T-Mobile and Orange to offer unlocked iPhones, but they never said how much it had to sell for. Jobs’ “so there” move reconfirms Apple’s power and shows that when you take away the carrier subsidies, the picture isn’t so rosy anymore.

One might argue that the announced unlocked prices goes to show that despite Apple making it really hard to acquire the phone, customers still really want the unlocked phone. My question is, are they really willing to pay Apple’s inflated prices? Or, will this move have the side effect of encouraging the already active hacking community to crack the phone on their own? I think the answer will be both.

Customers who do shell out the cash for the unlocked phone run the risk of not being able to use all of the phone’s features through another company’s SIM card. According to T-Mobile, the coveted visual voicemail will be one such missing feature. The company also noted that the their EDGE network is more extensive than most of its rivals. Through T-Mobile, the locked phone ends up costing consumers $2,330 after the two-year contract expires – $590 for the phone and $1,740 in monthly fees. While this is pricey, an unlocked iPhone would still require some kind of contract through another carrier, so the price gap is going to be even more significant.

T-Mobile competitor Debitel, for one, announced that it will give customers the equivalent to an $800 rebate of sorts if they sign up their leased phone with them instead. The bonus brings the phone down to around the same price that T-Mobile is charging with a contract, however, that doesn’t factor in Debitel’s own inevitable contract requirement. It’s a trade off, but one that is not necessarily financially advisable.

I think it’s worth remembering that the European mobile handset market is very different from the U.S. market. Customers are accustomed to paying a premium for a multimedia phone in Europe and, to many, it may be more of a matter of principal – it’s their phone and they reserve the right to choose a provider. In the US, while complaints about AT&T’s EDGE network and requirement of a data plan abounded, gripes about having a two-year contract weren’t as prevalent. Consumers are used to contract constraints in the U.S.

On a Webinar hosted yesterday by iSuppli vice president of multimedia content and services David Carnevale, he noted that despite the record-breaking level of hype that the launch of the iPhone generated this year, its market share remains almost insignificant. ISuppli estimated that the iPhone would ship 4.5 million devices in 2007, just a drop in the bucket when you consider that overall handset sales will surpass 1 billon. Carnevale’s point was that despite its minuscule market share, the iPhone’s impact has and will be revolutionary for the mobile and entertainment industry. Offering an unlocked iPhone seems to be a step in the right direction, however, before I become a full-fledged believer, something’s got to be done about the price tag…and that damn EDGE network, but that’s another story.

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