The Unlocked Phone Movement Gets A Big Boost

Mobile phones here in the US are sold by carriers and often locked down so that the device and the network are hard wired to each other. The iPhone is the best known example of this technique. I've written a lot about this bundling of device and network and why I think it is bad for consumers and software developers.

Yesterday the news starting leaking out that Google is going to break with this tradition shortly and sell its own Google branded phone unlocked and without a carrier partner.

Google is not the first device manufacturer to do this in the US. Nokia has been doing it for a while without much success. Unlocked phones are more expensive to the consumer because they have no carrier subsidy. So it is not obvious that consumers will take to this way of buying phones.

But there certainly is a minority of users who prefer to buy unlocked phones. I am one of them. I buy a fair amount of phones for myself and my family and I never take the subsidy if I can help it. I want to be able to run my phones on whatever networks I choose.

I believe the carriers should focus on making their networks as fast and reliable as possible. Device manufacturers should focus on building the best and most innovative hardware configurations they can deliver. And software developers should focus on building the best operating systems and mobile applications and services.

This is the PC architecture and I've been hoping we will see it emerge in mobile. I think the Google phone is a big step toward getting there.

I'll end this post with a reblog of part of a Fake Steve Jobs rant on A&T. This is the point:

So let’s talk traffic. We’ve got people who love this goddamn phone so
much that they’re living on it. Yes, that’s crushing your network. Yes,
3% of your users are taking up 40% of your bandwidth. You see this as a
bad thing. It’s not. It’s a good thing. It’s a blessing. It’s an
indication that people love what we’re doing, which means you now have
a reason to go out and double or triple or quadruple your damn network
capacity. Jesus! I can’t believe I’m explaining this to you. You’re in
the business of selling bandwidth. That pipe is what you sell. Right
now what the market is telling you is that you can sell even more! Lots
more! Good Lord. The world is changing, and you’re right in the sweet


Comments (Archived):

  1. Elia Freedman

    In theory I agree with you but this product is barely a step above vapor ware. If Google releases the phone – or whatever Android device their employees are working on – then it could be a big boost. But right now all we know is Google is using some tech device internally, which may not have a cellular connection at all. (If I missed something please correct me.)By the way, Fred, you may want to pass on to the good folks at Disqus that leaving a comment from an iPhone is nearly impossible and a horrible experience. Please forgive any typos. I can’t re-read my work!

    1. fredwilson

      the disqus team knows this and its on the roadmap along with several othermobile browsers

  2. hallson

    I think you are a little too hopeful. There are some fundamental problems in the US mobile market that make this a long way off. I like you love unlocked phones, having been weened on cell phones while living in Europe. But the US market is not like Europe, where every carrier is on GSM and using the same spectrums. In the US, almost every carrier is unique, making it practically impossible to switch carriers even if you had an unlocked phone.Let’s take the iphone for example unlocked it can only work on ATT & T-mobile. The T-mobile 3G network is a different frequency, so really you can only use it on t-mobile if you are fine living with Edge. The new google phone, is the exact reverse, works on t-mobile, but not fully on ATT (insert you att network joke here). Neither phones work on Verizon or Sprint.So what benefit would an unlocked phone have, if you cannot fully take advantage of it on any other network (if you are a frequent international traveller ignore my argument).

    1. fredwilson

      i believe if this were to become more normal, we’d see more interoperabilitybuilt into the phones

      1. GraemeHein

        Putting a few more radios in is rather trivial. Various “world phones” from the non-GSM carriers is good evidence of this. It’s a business model thing, just as the crippled phones carriers sell are.The biggest problem with no carrier subsidy is that mass market phones are being targeted at a price that is rather unaffordable without subsidy. $600-800 for a fragile, tiny device that you need to replace rather frequently is substantial if you can’t expense it or you’re on less than $200k salary. Getting handsets targeted to $200 retail is going to be disappointing for consumers in the first few generations who expect feature level of a subsidized $200 phone.

    2. anand

      I agree. I like this phone but they should have built in a dual GSM/CDMA chip, like Apple is rumored to be doing on its next phone, so it can work with Verizon too. Not that I’m a Verizon fan, but if you’re going to build an unlocked mobile phone, why not make it work with all carriers?

  3. Eduardo Yeh

    “Hardware wants to be free… too!” We need the “Dell” of Smartphone Manufacturing.

  4. im2b_dl

    and the company that gets ahead of those bandwidth issues will be at the new compete line. My guess is though, (you hit a nerve today because this has to do with another issue …so I’m stealing your soapbox ..forgive or ignore the rant) will see those companies even (especially) Google… falling into grooves of those partnerships that won’t be good. Google will only stay open and free from those partnerships as long as their advertising is leading. In the next few years they will lose that edge( just inherently because the “first to the paradigm shift” edge will slow and if they will base their future plans (like Polaroid and Kodak before them) on diversifying because their adsense is to big and weighted by scale (and corporate entrenchment) to turn corners well …that same weight will screw up their ability to be innovative and risk taking with their pressure… …they almost have to and they will become like all scaled corporate boards of that size and power who do nothing comparatively extraordinary with R&D…thus they will be at the whim of corporate dollars and will need a cable phone provider service in house or by their side. Corporate giants who lose their “do know evil mantra” need to buy up, eat up and control. (Just the nature of the beast right?) In the long tail…even in the new world of the internet and mobile delivery. and why (most importantly) with the sadly, coyly, sheepishly…government turning it’s (corporate lobbied) head from deals like NBC/Uni/Comcast (Microsoft which no one talks about all the contractual strings NBC has with Microsoft that play into that deal)) …are probably the bior tri-opoly future. and yes totally agree that the fact is…it is horrendously bad for the consumer, the econ. and the public good. here’s your soapbox back.

  5. Mark Essel

    Agree to the infinity power on the architecture splitting. I believe in super business specialization whenever possible, our society needs to stop reinventing working solutions and focus on building layered applications of richer functionality and user value. Big business is not necessary in the information and hyper network age. Millions of micro businesses will better respond to shifting needs.The strong restrictions which are single options in BIG business are precisely the same type of inhibitors to progress as you describe in mobile Internet. Not exactly what a venture capitalist wants to hear. But, I also think small businesses can also be amazingly profitable. Hah, I enjoyed the fake Steve Jobs rant. What sort of fellow has an admitted fake that gains such popularity ;)?

    1. Mark Essel

      Ps I edited the above to change Haha, to Hah. Anal retentive commenting.

    2. kidmercury

      droppin’ it like it’s hot, mark. no doubt about it, increased specialization and microbusinesses are a big part of the coming new world order. i agree VCs will need to adjust to this. but, no one likes to be disrupted, and every incumbent goes on living in denial, even if the incumbents are VCs who study disruption for a living. 🙂 i do think however that the microfinance stuff (ycombinator, techstars, etc) is evidence of what’s to come and a step in the right for fake steve jobs…..well mark, you know how it is….the lie is always easier to sell than the truth. although fake steve is a lie that tells the truth, which is always the sweet spot.

      1. Mark Essel

        Thanks Kid, I was just feeling ornery since my blog was reflecting 85% of it’s visitors like an invisible forcefield. New news to me, it turns out people don’t read on the web (in general). So all the visit stats were meaningless, bah to social media, bah humbag ;). Gotta get my xmas moods set.

        1. ShanaC

          You know, you could be like me, and just go bah humbug whenever you want.

  6. ErikSchwartz

    I think we’re all taking a way too US centric take on this. CDMA is largely (but not entirely) irrelevant anywhere but the US. Unlocked phones are standard everywhere else in the world.As for the FSJ quote that’s been going around. He’s right, and it’s the end of flat rate data. Their job is selling bandwidth. The more data consumed the more money they make, ONLY of they’re charging by the bit. If they’re not charging by the bit the more data that gets consumed the LESS money they make.

  7. rdeichert

    Fred – this might be a easy question, but I’ll ask it.When you do go and signup for a wireless plan do you get a different rate plan since they don’t give you a phone?

    1. fredwilson

      i’ve used the same carrier (t-mobile) for over ten yearsi have a bunch of lines on t-mobile that i manage as a single accounti’ve renegotiated the rates on that account a bunch of times but i neversign a contract with them

      1. rdeichert

        Thanks FredJust to be clear you’ve been able to get lower monthly rates on the minutespackages?Also how great is t-mobile coverage out east?

        1. fredwilson

          i wouldn’t say that i’ve been able to get lower rates because of myapproach, but i have negotiated for lower rates and continue to do so fromtime to timet-mobile voice coverage is horrible in NYCbut i’m ok with it. the data coverage is pretty good and getting better

          1. rdeichert

            Sorry should have been clear – meant out in the Hamptons – AT&T is spottyout there

          2. Mark Essel

            Data is getting to be all I care about. There are times when I love synchronously chatting but I can usually plan those ahead of time. Asynchronous message flow is my beloved com channel.

          3. RichardF

            I’m the same Mark, I use my iphone mainly for data, hardly ever use it as a voice communication tool !

  8. Subrahmanyam

    Carriers are still caught in the middle in terms of building models that can monetize changing mobile Internet usage behavior, while allowing ‘open’ access…..Subsidizing phones, and recouping the costs over the period of a contract, cloaks this inability by forcing users to cough up significantly more than they would, if they purchased the device upfront….While unsubsidized phones always have a market, however, it will be interesting to see if and how Google can wean away people accustomed to paying little or no upfront price…The brand has a certain pull, how much is the question?

  9. Doug Covey

    Your post reminds me of Thomas Friedman’s book The World Is Flat. It’s only a matter of time…

  10. Reykjavik

    Google doesn’t have a great history of product development outside its core two (search and monetization). Eventually, after many years, they start to get it right on other products, but Android has only recently gotten close to viable. Given that the company is heading into hardware-land (OK, it’s outsourced, but that’s beside the point), I can’t believe that they would be a serious contender for anything other than a paperweight for quite awhile.That being said, Fred’s right on regarding locked phones. I travel a lot and the American obsession of tying phones to network providers drives me batty. I just pick up GSM phones in Hong Kong or Europe when I need something. Even the unlocked prices in the US aren’t competitive with the rest of the world — kind of like pharmaceuticals.Maybe next we can tackle decoupling health insurance from employment…

  11. Alan Wilensky

    Ive been on ATT since 06 with a Samsung Blackjack. Meh. Gets my mail, makes a call, I am ready for better, I am not an iPhone guy, I cant stand tech fashion. I want something more…utilitarian. I want something Droid like, but not Verizon. I called ATT and asked if an unlocked phone would require a contract…..I was on hold for 20 minutes, they would not answer my questions. I guess my Blackjack SIM will work? No?

    1. anand

      You can use an unlocked phone as a prepaid phone if you want to. Sim card should still work fine. I’ve read a few cases where people break their smart phones and successfully transfer their sim cards into other phones (for prepaid use) to get by temporarily. Of course, the phone’s functionality is dictated by its hardware. But the info on your sim card should transfer ok.

  12. andyswan

    Is it realistic from a tech perspective for a phone to have one “network provider” for voice, and a different “network provider” for data?I’d really like to see a company spring up that says “data is all we do, and we’ll always be years ahead of the ‘minutes’ providers.”

    1. fredwilson

      yes, but it would be more costlyi’ve asked for a phone that has no voice on it (you could use VOIP over thedata plan)

    2. Mark Essel

      Damn I’d love to see this as well Andy. It’s the dream. Give us data, we’ll figure out how to talk over it!

    3. Craig Plunkett

      That would be Clearwire, the first wireless data only pure-play.

      1. andyswan


        1. Craig Plunkett

          You’ll have to wait a bit for handsets and nationwide deployment, but they’ll get there. They’re a WIMAX network.

          1. ShanaC

            Any idea of the cost or how large their spread is nationwide. Will they be able to target the people who need to keep it cheap?

          2. Craig Plunkett

            Info about their service can be found here:, and I forgot to mention that Google made a very large investment in Clearwire, along with a consortium of MSOs and Sprint. The service is also private labeled by the MSOs and being marketed in the Carolinas by Time Warner Cable as Road Runner Mobile, and by Comcast in a few other territories as High Speed 2 go.And just a little rant of my own. Everybody wants stuff for free. The capex and opex of building out and running a wireless network that provides blanket coverage is tremendous, don’t let anybody kid you. It’s a real estate and engineering game, and the carriers have to pay their landlords. For every little cell site you see on top of an apartment building in the city, a decent sized piece of your monthly fee goes to pay the rent for that roof and the cost of the wired backhaul. To provide quality coverage, you need to test, fix, repeat in an endless cycle, it’s not like a wired network that you have better control over because the endpoints move. As a counterbalance to the Fake Steve Jobs rant, you should read this article by Randall Stross:…The Disqus guys need to get their login act together. I tried a bunch of times to login with my Disqus username and the twitter connection, both failed while using Chrome to write this comment. The page is still telling me I’m commenting as a guest, but when I go to post as a guest, it’s asking me to login.

          3. fredwilson

            i bet it is a chrome issuei’ll flag it for themthanks for pointing it out

          4. Craig Plunkett

            Thanks, I thought it was operator error, because it seemed to work for me once, but maybe I was on firefox at the time.

          5. ShanaC

            Thank you so much for the pricing information. That is so very useful.

  13. Aviah Laor

    The real breakthrough should be massive WiMax networks. Good bandwidth can meet most of the users’ communication needs, on every device.Google is important here, since communication via simple web access does not cannibalize their core business, but enforces it.

  14. Aristotle

    Fred, thought you’d enjoy this article (it actually made me laugh out loud…reads just like an Onion article).AT&T to Urge Wireless Customers To Use Less Data…

    1. fredwilson

      that’s what prompted fake steve jobs’ rant

  15. Jason Devitt

    In other countries, when you bring your own phone to the network the operator will give you a cheaper monthly plan. Until recently, no US operator offered this deal. If you brought an unlocked phone to their network, you were effectively paying for two phones – the one you bought yourself and the free one they built into the cost of your plan whether you wanted it or not.In October T-Mobile became the first carrier to offer a discount for bringing your own phone. On their high-end plan, you’ll save $480 over two years if you bring your own phone – enough to buy a Google phone. I wrote about it here:…That said, you’ve built your consumer portfolio on the premise that “free” is an irresistible price point. The same applies to cell phones.

  16. Benedict Evans

    The most obvious effect of an end to the subsidy model would be a massive slowdown in the replacement cycle – which would mean far fewer people with the latest high-end device and a harder life for application providers…Meanwhile, a world in which mobile operators have no role in subsidies and service development is also, probably, one in which they have no consumer brand, target a 10% EBITDA margin instead of 40%, and there are no stores, no customer service, retention teams offering you a better price… rather like the current US airline business in terms of customer experience.That is, you can’t look at ‘unlocked phones are good’ in isolation from the industry structure it’s embedded in.

  17. scottythebody

    Seems to me that if Google really wanted to jump start the unlocked phone “movement” that they could subsidize the phones to get the price competitive with contract-subsidized phones through the providers. They could simply require certain of the apps to display Google ads in certain ways and suck down the advertising cash. I mean, they do a little bit of business in the advertising space, so they have a little track record there.

    1. fredwilson

      they may be doing just that

  18. curiouslypersistent

    Interesting. In the UK, we’ve been doing a fair bit of consumer research around consumer tariffs and perceptions of price. There are massive perceptual barriers to shelling out for handsets – due to massive subsidies people expect them to be free/dirt cheap. £500 for a locked iPhone (plus call charges) is perceived to be far worse value than a 24 month contract on £40 a month (all in), when the opposite is more likely to be truePS Is there a way that disqus can remember be so that I don’t have to log-in every single time??

    1. fredwilson

      disqus should remember your credentialsnot sure why its not working for youwhat browser/os are you using?

      1. curiouslypersistent

        Firefox 3.0.15. I only use disqus intermittently – perhaps the firefox updates log me out?

  19. andrés alegría

    i do hope this causes enough of a stir to popularize more unsubsidized phones in the states, and at least cause operators and device manufacturers to start giving more choice.part of the reason we get into situations such as edge-only when using at&t devices on t-mobile networks is due to the subsidy model, which then results in the devices being tailored to specific carriers, down to the hardware. most gsm phones are already multi-band today, with four bands or more. it’s not a stretch at all to increase the number of 3G bands in a given device.

  20. Jevgenijs

    People could use a consumer loan to buy unlocked (and respectively more expensive) phones and choose whatever carrier they like. At least this is the way it works in my country.

  21. Nick Oliva

    I have to think most people in the US don’t have any idea which network is better… or if they do, as yesterday’s NY Times suggests, what they think may be wrong.…Why don’t the carriers reduce their costs of expansion by leasing space on each other’s towers for their own transmission equipment? Or do they? I suppose it would be a short time then until it didn’t matter which carrier you used… fine by me.

  22. Brennan Knotts

    According to this Wired post the phone won’t work on Verizon in the U.S. and it will only work on AT&T’s EDGE network. In other words, this phone is only worth having on T-Mobile.You just can’t start a “movement” on T-Mobile.Here’s the article:

    1. fredwilson

      Good thing I’m a tmobile customer

  23. Carbon Footprint

    Fred, if only you could advocate saving resources instead of championning consumption from time to time.

    1. fredwilson

      Good criticism. I’ll work on it

  24. mikeahmadi

    I was led to this posting from someone who read a similarly themed posting on my site, and I must say I love what you have said here. Carriers have used their monopolistic control not to build better products, but to figure out ways to take more money from consumers, and that has led to wealthy carriers and irate customers. It has to stop!

  25. Terry J. Leach

    Fred I thought you you immediately when I read about Google offering a unlocked phone not linked to any carrier. I knew you would cheer this development. If Google succeeds with making their phone a big seller it will benefit to consumer and wireless provider and here is why. Verizon Wireless did some financial analysis that showed that the cost of supporting existing phones at each store was out pacing the sales of new phones at each Verizon outlet. Verizon’s profit margins would decrease if had to open more stores to support existing customer’s phone versus selling new phones. What this tells me is that the current business model is not scalable.If the cell phone producer or someone handled support for existing phones wireless provider would be free to support their networks and maybe increase profitability.

  26. Christian Brucculeri

    I couldn’t agree more with this, from a consumer perspective. Product bundling is almost always bad for consumers in the long run.

  27. Arthur Charles

    This will be such a breath of fresh air for telecoms in South Africa. We have the exact same problem with the iPhone and people are having to resort to importing the phone via friends and acquaintances overseas to us eit on other networks.I trust that should the Google phone not be cost-prohibitive in our currency, it’ll make a killing across all 3 our mobile networks in terms of uptake.

  28. Duke

    Brilliantly put! Typical case of this hapenning in Australia. I mean really, how do telco’s kid themselves into believing that they know how to deliver a better O/S or firmware version than the OEM themselves?In Australia, Telstra’s Nokia N95 was a classic case. What a mess. Nokia couldn’t support the phone because it was a Telstra variant and the problems were software related so all Nokia could do was offer ‘software reloads’ which didn;t really fix anything. Teh rest of teh world was happily firmware upgrading away yet because there was no ongoing firmware support from this telco it was pretty much a dud.Telstra have chosen to roll down this parth with Sony Ericsson. SE won’t & can’t reload the OEM software into a C905 so once again branding affects the way the OEM hardware works. I guess OEM’s are willing to risk the bad name a telco’s ‘software variant’ may give an otherwise decent piece of hardware because the telco will bring the sales volume so they telco gets leverage. I believe OEM’s should always own the software and release variants for telcos that way they keep the hardware as good as it should be rather than some dumbed down piece of of junk that the telco software variant will often make it.Yay for non-branded software and yay for open source O/S.

  29. Duke

    By the way… the point which I failed to make in my last comment: The global trend is that a telco will reserve the right to ‘lock’ / brand / software variant phone hardware because they subsidise it on their ‘plan’ in the first place. Big deal! Just because you buy the hardware on the plan, does making the unit function at a disadvantage to the OEM unlocked version make it worth the rubbish branding ? For locked phone issues, the reason once again is to keep the user on-telco-net with that device. Once again big deal. The user will either sell or just not use the thing again or get it unocked by a third party and forego any risk associated with voided warranty.BY branding, locking etc the phone with your telco software, you do more worse than good for your [telco] brand name and for technology as a whole.

  30. Lauren McLeod

    You need to move down under… We can unlock phones from network providers easy peasy.