Unlocked iPhones: Why Apple Won't Do It

Editor's Note: Sometimes we get it wrong. Obviously, by now you know that Apple is selling unlocked phones. PCMag will examine the why in future stories. Two other clarifications of note: The Twitter account @ChronicWire is actually a sub-account of a significantly more popular and active account: @Chronic. @Chronic has no direct relation to Boy Genius Report, which was simply reporting on Chronic's scoop. My characterization of how Boy Genius acquires its tips/stories, though based on information from industry sources, is still only an opinion, and should not have been characterized as fact.

For all those who believe Apple will unveil four unlocked to the U.S. market on Wednesday, I have news for you: Apple won't do it.

This news, touted by Boy Genius Report, is based on a so-called insider's Tweet. Chronic Wire wrote on Sunday:

"Unlocked iPhones headed to Apple Stores for Wednesday: MC603 (16GB, Black) MC604 (16GB, White) MC605 (32GB, Black) MC606 (32GB, White)"

134 characters was enough to send Apple fans—especially iPhone fans—into a tizzy. They are ready to buy. Too bad there won't be anything for them to buy, and here's why: Apple is not stupid. Apple knows the utter uselessness of this concept and the history of unlocked phones in the U.S. Yes, fanboys, early adopters, and geeks with time on their hands will snap them up. Even if the phones cost almost $600, they will buy. Why? Because they probably have jailbroken every iPhone since the product launched in 2007. They want Apple's lovely slab phone, but they want it their own way—even though toying around with the device to make it do things Apple doesn't want it to does not include getting it to run on another carrier.

The excitement around an unlocked iPhone would also make more sense if the radios inside the phones could be easily used on similar networks: they can't. As our mobile expert Sascha Segan explained to me, not every carrier uses the same frequency, even when they are using the same network technology. Segan also reminded me that an unlocked iPhone could run on AT&T's prepaid GoPhone plan and T-Mobile's 2G Edge offering. Plus there are, obviously, places where an unlocked iPhone could run outside the U.S. In China, the iPhone is considerably more expensive. I guess someone could buy a $600 unlocked iPhone here and sell it there for a hefty profit. Clearly Apple wouldn't want to enable that kind of transaction. Apple simply has nothing to gain from an unlocked U.S. iPhone. No matter how awesome it might sound, Apple won't do it. Why? As I said before, Apple isn't stupid.

Here's what Apple and its on-medical-leave CEO Steve Jobs know: In order to win in the consumer electronics space, you have to offer a cohesive environment that asks as little as possible of the consumer. Phones tied to particular cellular networks are easy. Activation can happen in the store, from your computer or over the phone. This strategy has allowed Apple to activate 175 million iPhones around the world and, according to the International Data Corporation (IDC), sell 14 million iPhones in the U.S. last year.

Consumers do not like the rigmarole of finding a carrier and working through what will likely be a more complicated activation process. Apple does not create niche products, devices that will sell to an excited few who can, perhaps, generate further interest in broader product offerings. Apple goes big or it goes home. Its products are designed for adoption by the largest set of consumers. Phone hackers and DIYers are not a part of this group. In fact, most iPhone jailbreakers know that hacked iPhones can turn into useless "bricks" when reconnected to iTunes for an update.

Google has sold unlocked phones. The Nexus One was unlocked. It helped launch Google's own online phone store. Now where is that today? Google's Samsung Nexus S is available on the T-Mobile network, but also unlocked for $529. They even let you unlock the regular Nexus S after 45 days so you can hook up with a different carrier (even a foreign one). Please, how many consumers in the U.S. are actually doing this?

How has Google become the number one mobile phone platform in the U.S.? (IDC puts it at 39% worldwide) It's done so by offering a steady stream of carrier-locked Android devices. Verizon, T-Mobile, Sprint, and AT&T: They all have them. While rooting Android devices to access an Android OS build your carrier has yet to supply does happen, I haven't noticed Android consumers expressing much interest in unlocked Android devices.

Unlocked phones get a lot of media attention, but they just aren't that interesting to consumers. Ramon Llamas, IDC's Senior Research Analyst, Mobile Devices Technology and Trends, estimates that "less than 1% of all mobile phones were sold unlocked in the United States". Ooh, that sure does sound like a scintillating market for Apple.

And who is this Chronic Wire, anyway? He's a guy who's posted a grand total of 12 tweets since June 6 (of this year). He may be working the stock room at the local Best Buy (this is how Boy Genius Report gets most of its "scoops"—from well-placed blabbers at your garden-variety brick and mortar consumer electronic store). It is not clear to me if this is one of BGR's usual sources or simply someone who, judging by his tweets, has access to the iOS 5 developer build and is looking to build a bit of buzz for himself.

If Chronic Wire is right, he will have succeeded. He won't be, though. As I said before: Apple isn't stupid.