As you may know, if you buy a cell phone today, you have to sign up for a 1 or 2 year contract, and you get a serious discount on the phone, often as much as $200. The stores that sell the phones get paid this subsidy when they sell to you, if you buy from a carrier you just get a discount. The subsidy phones are locked so you can’t go and take them to another carrier, though typically you can get them unlocked for a modest fee either by the carrier or unlock shops.
The phones are locked in a different way, in that this subsidy pretty much makes everybody buy their phone through a carrier. Since you are going to sign up with a carrier for a year or two anyway, you would be stupid not to. And except for prepaid, signing up even without a subsidy phone still requires a contract, you just don’t get anything for it.
Because of this, it is carriers that shop for phones, not consumers. The carriers tell the handset makers what to provide, and quite often, what not to provide. Subsidy phones tend to come with features disabled, such as bluetooth access for your laptop to sync the address book or connect to the internet. A number of PDA phones are sold with 802.11 access in them in Europe, but this feature is removed for the U.S. market. The carriers don’t want you using 802.11 to bypass their per minute fees, or they want to regulate your data use.
This method of selling phones is the biggest crippler of the cell phone industry. If consumers bought phones directly, there would be more competition and more features. But less control by the carriers.
That’s the only reason I can think of why they don’t do what seems obvious to me. If you walk up to a carrier and say you will sign the 2 year contract, but want to bring your own phone, they should be very happy to hear that and give you the subsidy. They can give it to you as a $10 discount for 20 months instead of $200 all at once and it would actually be cheaper for them. This would allow a much better resale market in used phones, and allow new and innovative phones — even open source homebuilt phones. Competition and free markets means innovation.
They could even exercise some control if they truly needed to. They need not let you just bring in any phone, they could still specify which ones are approved. I think that would be stupid, but they could do it. However, this would still not let them so easily control what applications you could get on the phone. For example, one reason they disabled bluetooth features (other than headset) on many phones is they wanted you to pay their fees to download your apps and photos over the network, not just sync them up to your computer for free. An open phone market would deprive them of that revenue.
So frankly, if they are so worried about just these revenue issues, then give me less subsidy. Figure out what you’re losing by letting me have my choice of phone, and take it out of the subsidy. I can still put in my choice of phone today if I am willing to pay the extra $200, but of course few want to do that, so there’s no market for such phones. This would improve that.
There must be some number which makes this work, and the innovation generated would benefit the carriers in the long run. In Asia, subsidies have largely gone away, and there is word this trend may be moving to Europe, where at least carriers are happy to have 802.11 in their phones. Let’s hope.