Cell Phones: Locked vs. Unlocked
For most people, shopping for a cell phone is a cumbersome process. Promotional deals often mean selecting a specific carrier to even have access to a desired phone, and switching from one company to another can be a time-consuming and very expensive process. However, in some cases, there are ways around the usual contracts that encumber cell phone purchase and usage.
Cell Phone Economics
In America, the most common type of cell phone offer is one in which the phone itself is either free or heavily discounted; the user is required to sign a service contract, usually guaranteeing that they will stay with a provider for two years. Companies offer this discount on the actual hardware to make it seem like a good deal while ensuring the buyer will be locked in as a customer for the longest period of time possible. Leaving the contract early--whether to upgrade to another phone or a cheaper monthly bill--generally incurs a steep fee.
As a rule, phones sold under these promotional contracts are locked. That is, they are programmed to only work with the carrier that sold the phone in the first place. This is to ensure that the company earns back the subsidy on the device through the monthly bill. Some carriers in the United States use the CDMA standard, which ensures that phones cannot be transferred from one provider to another, but a competing standard called GSM has recently become more popular in this country. In a GSM phone, the account is tied to an easily-removable chip inside the phone, and the technology allows for more portability.
An unlocked cell phone is one that isn't tied to a specific carrier, and it can be moved from one carrier to another simply by installing a new SIM (Subscriber Identity Module) card. These phones can be used on any compatible network, offering subscribers more choices when it comes to service. Some "locked" phones can be unlocked after purchase. However, in most cases, this is a violation of the contract and can even void any warranty on the phone. The safest option is to purchase already-unlocked phones; they are becoming more widely available in this country.
The chief benefit of purchasing an unlocked phone is that it allows the consumer to pay for cell phone service on a monthly basis without having to sign a contract. This allows complete portability; if another provider offers a better price or better service, switching is just a matter of a few phone calls. There are no punitive fees involved.
The chief drawback to purchasing an unlocked cell phone is the price. Without the price subsidy of a long service contract, unlocked phones are usually sold at full retail price, and they can be extremely expensive. Often times, a phone that would be given away free with a new contract would cost several hundred dollars out of pocket, and the latest hand-held devices can rival laptop computers in price. Still, the freedom this option allows might be worth the inflated price tag to those who dislike being tied down to an extended contract.