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Unlocked iPhones Could Herald True Mobility

By Michael Geist

Apple began selling the latest version of its iPhone this week in the United States and while the device will not be sold in Canada until mid-July, Canadians will be among the few that will have the opportunity to purchase it "unlocked" so that it is not tied to any specific wireless carrier.  The unlocked versions will come at a premium price, but in return consumers will be able to avoid the long-term contracts that have typified the Canadian wireless marketplace for many years.

My weekly technology law column (Toronto Star version, homepage version) notes the issue of locked cellphones has long been a source of consumer fear and frustration since some wondered whether unlocking phones that were rendered unusable when switching wireless providers was legal. In certain respects, this was an odd question to even have to ask. No one would ever question whether consumers have the right to tinker with their car or to use the same television if they switch providers from cable to satellite, yet the wireless industry somehow convinced the public that unlocking their phones - consumers' own property - was wrong.

That perception is rapidly changing with several developments paving the way for an unlocked iPhone. 

First, the new joint Bell-Telus network now means that Rogers is no longer the only provider capable of running the device. With each of the big three offering the device, an unlocked version makes consumer and business sense.

Second, Canadian wireless carriers have attempted to lock consumers into contracts for far longer than virtually any other developed country, with three-year contracts considered the norm.  Several years ago Canada instituted wireless number portability that allows consumers to keep their numbers when switching providers, yet long-term contracts have proven a major barrier to full portability. Given consumer frustration with long-term lock-in, offering a full priced device without the contractual burden may resonate with consumers willing to pay more upfront for immediate contractual freedom.

Third, there has been a dramatic shift in power in recent years within the wireless marketplace.  Until recently, wireless carriers occupied the power position since handset makers depended on them for distribution of their devices.  Carriers were able to extract favourable terms and demand carrier-specific restrictions on devices that ran on their networks.  The popularity of smartphones from Apple, Research in Motion, and Google have reversed this dynamic, however, with the device makers now positioned to dictate terms to carriers anxious to offer hot devices that often run in short supply.

Fourth, the government sent signals earlier this month that it wants to avoid erecting new barriers that could render unlocking phones more difficult. Bill C-32, the recently tabled copyright bill, expressly excludes unlocking cellphones from its ambit. The last copyright bill would have made it a violation for Canadians to unlock their cellphones and banned the distribution of software programs that could be used to do so.  This bill permits unlocking (subject to contractual restrictions), though obtaining the technical tools for those consumers with locked phones may prove difficult.

Given all of these developments - marketplace demand for unlocked phones, changing power dynamics, and government policy designed to foster consumer mobility - is there anything more to be done?

There is at least one stumbling block left that needs to be addressed. The availability of an unlocked iPhone may foreshadow a broader shift in the marketplace, yet millions of Canadians are still stuck with phones locked to a single carrier.  Once the consumer contract expires, many believe the carrier should be obligated to unlock the phone upon request.  That obligation lies at the heart of the Cell Phone Freedom Act, a private member's bill introduced last week by NDP MP Bruce Hyer. Whether by legislation or market pressure, it appears that true mobility may ultimately be coming to the Canadian mobile market.

Full post as published by Michael Geist on June 25, 2010 (boomark / email).