There was an article in Business Week recently talking about the rising notion of being able to buy unlocked cell phones. It was timely, as I just returned from Europe, where cell phone purchasing patterns vastly differ from those in the United States.

Here, the market for cell phones is driven by the wireless network operators (i.e., Verizon Wireless, Cingular, et al.). When you want a new cell phone, most of the time you go to a dedicated kiosk or store for your cell carrier. True, there are other outlets for mobile phones, but this represents the method of purchase for the majority.

Well, a curious thing happened over the summer. Both Motorola and Nokia opened stores in Chicago where customers can test out cell phones and buy unlocked versions if they wish. An unlocked phone is one that has not been restricted to one mobile network. For example, a cell phone purchased from Cingular will not automatically work on T-Mobile's network simply by switching SIM cards, even though both utilize the GSM radio standard. If you want to switch carriers, you generally have to have your phone unlocked, which can cost $20 or more.

While many cell phones are available for purchase over the Internet, these two stores represent the first major push by handset makers to sell directly to consumers rather than through the carriers, who supplement the often steep price tag of cellphones. The carriers make their real buck not be selling you a phone, but but tying you into a two-year contract.

The model in the rest of the world is different. The carriers and handset makers play on more even footing when it comes to who's in the driver's seat. As I spoke to European-based journalists, it was evident that most people buy new phones every 6 to 12 months, rather than every 12 to 24 months as they do here. And they pony up for the full retail price, which is often $200 to $500. Over here, most people balk if they don't get a phone for free with their contract.

The losers in this equation on the U.S. side of the pond are the handset manufacturers. Obviously, if most U.S. subscribers purchased new phones more often, Motorola, Nokia and others would sell more handsets and make more money in this market.

Why they aren't making a stronger push for this model is beyond me at the moment, especially given Nokia's poor penetration in the U.S. market when they top over one-third of cell phone sales the rest of the world over.

Though the carriers haven't responded to this notion of unlocked cell phones negatively yet, there's obvious reason for them to do so. As more and more people choose to shun carrier-centric phones and buy the handsets that they are excited about, whether or not they are supported by their carrier, the result can be a bitter pill for the U.S.-based network operators.

Myself, I am all for consumer choice. If unlocked phones represent that freedom, I applaud Motorola and Nokia's efforts to make them more available, even if its for selfish reasons.

 

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