AT&T MOBILITY WILL TELL YOU that writers expounding on the issue of unlocked phones far outnumber consumers actually interested in buying them.
Preliminary data shows that, while not literally true, that statement does reflect that a relatively small number of American consumers are researching unlocked phones and fewer are buying them.
In practical terms, analysts said, the most likely parties to be impacted are GSM carriers such as AT&T Mobility and T-Mobile USA Inc., but many differ on whether impacts may be positive or negative. (A subscriber with his own phone doesn’t need a subsidized handset. But any loss of control for carriers-the predominant channel for phone sales-is a wild card.)
Losing control
At least one question is likely to be sliced and diced by parties on both sides of the issue: is the relatively small segment of consumers currently interested in unlocked devices going to grow into a groundswell that could chip away at carriers’ pre-eminent position in the wireless food chain?
The issue arose, of course, when a vocal element among the early adopter/Apple Inc. fanboys who snatched up the iPhone this past summer expressed their horror
that Apple and AT&T Mobility had “locked” the device, meaning it was configured to run only on the latter’s network.
Prying open the lock
The swirl of interest in the subject reflected several, disparate dynamics. First and most obvious, hackers and, by extension, bloggers with similar interests, have leveraged the Web’s democratization of news and information to acquire an outsized voice in many issues. Those outsized voices, however, have begun to raise awareness among U.S. consumers about an issue that could gain legs and loosen carriers’ top-dog status.
Analysts say CDMA phone subscribers and their carriers see very little action in this area; most of the interest in bringing an unlocked phone to a new carrier occurs with GSM phones, whose SIM (subscriber identity module) cards are easily swapped out, allowing the use of multiple devices with one subscriber account.
Apple has taken steps to protect itself and its client, AT&T Mobility, from the consequences of unlocking the iPhone. Late last month, Apple declared it would no longer accept cash for iPhones, apparently due to a significant number of purchases of the device that didn’t translate into account activations at AT&T Mobility. Presumably, the difference between the number of iPhones sold (between 1.4 million and 1.5 million) and the number of corresponding AT&T Mobility activations-about 250,000 fewer, according to Bill Morelli, analyst at IMS Research-were bought for profitable resale overseas. (The iPhone launches there this week.)
Yet American consumers’ online research regarding unlocked phones reflected only a “passionate subset” of interest in the topic, according to Miro Kazakoff, analyst at Compete Inc.
In September, 110,000 Americans researched unlocked phones on eBay, which sees about 77 million queries per month for all topics, Kazakoff said. The top-tier carriers’ Web sites each average about 3.5 million visitors per month (after current subscribers managing their accounts are factored out), while a leading purveyor of unlocked devices, Cellular-Blowout.com, averages about 120,000 visitors per month, far more than make a purchase, according to Kazakoff. That interest appeared not to be growing, the analyst said.
“It’s a passionate subset interested in this issue,” Kazakoff said, “but the issue has not yet touched the average consumer-they don’t really know what it means for them.”
The limited data from Compete appears to vindicate AT&T Mobility’s position on the level of interest in the subject. Yet the sale of a significant number of iPhones that failed to land on AT&T Mobility’s network-many presumed to have been unlocked and spirited overseas for private profit-apparently led to Apple’s change in retail policy. (iPhones will be sold unlocked in France, due to a French law that prohibits tying a handset to a carrier.)
Walk the line
And Nokia, among device vendors, is walking a fine line in attempting to address the needs of its carrier partners in the U.S. while spending significant amounts of money on advertising and retailing its unlocked devices in direct competition with its clients. Nokia said last week that it merely serves a niche market for its advanced devices in this country in order to build its brand, a position not entirely consistent with the expense of operating flagship stores and running full-page newspaper ads touting unlocked devices.
Motorola Inc., too, has been touting its unlocked devices. But because the leading American device vendor has not yet launched its own content play, as Nokia has with “Ovi”-coming to America soon in increments, a spokesperson said-widespread interest remains focused on Nokia’s apparent tightrope walk. Though AT&T Mobility, the nation’s largest wireless carrier, is likely to receive the most requests to activate an account for a subscriber who purchased an unlocked Nokia phone, the carrier declined to say how it would treat such a case.
At Nokia, spokesman Keith Nowak downplayed any potential conflict between his company’s push on unlocked phones and the concerns of its carrier customers.
“At the end of the day, it’s about choice,” Nowak said. “Sure we want to promote our brand. But we’re happy when the masses go to the carriers and the tech-savvy buys an N95 (Nokia’s premiere smartphone). We’re going to support consumers and their choices.”
Morelli at IMS Research said that carriers want to maintain their dominance of the retail handset channel and control over the devices’ homepage and its revenue-generating service offerings. Placing an AT&T Mobility SIM card into an unlocked device not approved for AT&T Mobility’s network likely will not reproduce the carrier’s on-deck offerings and, thus, represents a lost opportunity.
In practical terms, however, many device users in the “passionate subset” don’t need or want carrier-approved applications, said Rob Enderle, principal at Enderle Group. Unlocked phones and their features work just fine, he said.
“The unique features tied to a specific phone may not work, but that’s pretty rare,” Enderle said. “There’s some truth to the carriers’ claim that they can’t guarantee quality of service if the phone is not in their portfolio, but that’s rare too. I’m using the most advanced phones on the planet everyday and I’ve never run into a problem.”
Many of these issues may have been on the mind of AT&T Mobility spokesman Mark Siegel when he was pressed last week on how the carrier handles requests from consumers for service plans for devices outside its portfolio.
Siegel said the carrier handles such requests on a case-by-case basis, while reiterating that AT&T offers a broad portfolio of devices rigorously tested to ensure quality of service.
Indeed, analyst Iain Gillott said that far more clamor for “open access” than actually want it, because under that scenario the consumer has no single entity to go to with problems. The carrier sends the consumer to the retailer, the retailer sends him on to the OEM, and so forth.
“It’s very few people-the techies-who want (service for an unapproved device),” Gillott said. “If you walk into an AT&T store and can’t find a phone you like, you’re really picky.”
