When rumors surfaced yesterday about Apple beginning to sell unlocked iPhones in the U.S. this week, I said I was intrigued by the idea of an unlocked iPhone 5. But I didn’t elaborate. And the scuttlebutt persists.
So here’s a little more detail: my interest is more emotional than rational. I can pull together enough money to pay for a phone in one large chunk. I don’t particularly want to be sign a contract with a wireless carrier if I don’t have to do so. I sometimes travel overseas. So the notion of owning a phone outright, avoiding obligation, and being able to use it outside the U.S. with a local carrier rather than via pricey AT&T roaming is appealing. It’s what I’ve done several times in the past. (I’ve also bought locked-but-unsubsidized phones that weren’t iPhones from AT&T, which has cheerfully unlocked them for me a few months after purchase.)
As commenter Mike Cern pointed out, it’s nearly impossible to justify the unlocked iPhone 4 on economic grounds when you do the math. For one thing, an unlocked GSM iPhone 4 is really only designed to run on AT&T in the U.S.–it can’t do 3G on T-Mobile and won’t operate on Verizon or Sprint at all. And AT&T doesn’t give you a price break on the service for turning down the subsidy you get on the phone by signing a two-year contract; your monthly cost is the same whether you go locked or unlocked.
Here’s how the total cost breaks down, assuming you choose the cheapest voice and data options and stick with AT&T for two years:
Locked AT&T iPhone 4 minimum cost: $1758.76 ($199 for a 16GB phone, plus two years of voice and data at $64.99 a month)
Unlocked iPhone 4 minimum cost: $2208.76 ($649 for a 16GB phone, plus two years of voice and data at $64.99 a month)
That’s a $450 savings if you opt for the locked phone with the two year contract–a hefty 69 percent discount. I’m not quite well-heeled enough to pay an extra $450 mostly for the privilege of feeling more liberated and fancy free.
The numbers might look different if you were a frequent international traveler who bought an unlocked iPhone 4 and then swapped out your AT&T SIM for a cheap local one every time you left the states. That could save you more than $450 over two years. But I don’t leave the country that often.
What if you bought a locked iPhone 4 with a two-year contract, then canceled the contract at the first opportunity, so you were no longer under any obligation to AT&T? You’d pay a $325 early termination fee. Assuming you then stayed on AT&T with the cheapest voice and data options, you’d pay $2083.76 total over two years–still $125 less than the total cost for an unlocked iPhone and two years of service. (Of course, if you bought a locked iPhone and canceled the contract, you wouldn’t have an unlocked iPhone, unless you jailbroke and unlocked it.)
My instinct is to be unhappy with all of this. Shouldn’t people who are willing to pay for a product upfront get a better deal than those who aren’t? But maybe I’m just being difficult. Maybe I should be impressed with the subsidized deal rather than disappointed in the unsubsidized one.
On the other hand, when I look at what iPhones cost in other countries, I go back to unhappy camperhood (campership?). If I lived in England, where the iPhone is available on five carriers, I could sign a two-year contract with Vodafone and pay the equivalent of $50 a month. Compared to AT&T’s $64.99 plan, I’d get 33% more minutes, 250% more data, and unlimited text messages rather than no bundled ones–and the iPhone would be free rather than $199.
For now, I’m somewhat grudgingly signing up for contracts when I buy new phones. And chances are that I’ll buy an iPhone 5 and re-up my AT&T contract, especially if the company continues its practice of letting many iPhone owners get new iPhones before they’ve fulfilled their old contracts.