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Slow but steady: How the iPhone is changing the phone industry

Dan Moren | March 11, 2013
Every time Apple enters—or seems to even think about entering—another market, we’re barraged with noise about how the company should, or must, or can’t reinvent this industry. Why all the attention? Because Apple has a remarkable track record of having reinvented industries before, and the reward for a job well done is—surprise—another job.

But in the last six years, the smartphone market has become more and more established; unlike in 2007, when the iPhone was an unknown quantity, people are now familiar enough with these devices that theyre willing to invest more money upfront, instead of paying it out over the course of a 24-month term.

Take the iPad, for example. At $459, even the 16GB version of the cellular-enabled iPad mini costs a pretty penny. But it brings with it the option to sign up for a monthly cellular data plan without any long-term commitment, allowing you to cancel at any time. (Of course, you cant really switch your iPad to a different cellular network, but more on that in a bit.) The cheapest of those plans is just $15 per monthfar less than what youd pay for a monthly cell phone plan.

Thats not the only indication of change, either. Late last year, T-Mobile announced its plan to drop both subsidies and contracts. Though that will result in higher upfront costs for handsets, it also stands to lower monthly service costs, since the company wont have to recoup the handset subsidy over the lifetime of a customers two-year contract. Given T-Mobiles spot as the smallest of the major U.S. carriers, its no surprise that its the first to forego this time-honored practiceof its competitors, it has the least to lose and the most to potentially gain.

Of course, theres no guarantee that this trend will sweep across the board: Its a much riskier proposition for the likes of Verizon, AT&T, and Sprint. But this does open up a hole in the traditionally locked-in cell phone field. Now, if T-Mobile doesnt have you under contract, you can leave without having to pay an early termination feeif, of course, you have an unlocked phone that can switch networks. Which brings us to another point &

Unlock and load

Its not only legal documents like contracts that keep us tethered to a particular carrier. Technology is likewise used to make sure that we customers dont stray from our one true carrier. In the past, the use of different network protocols and radio frequencies made it impractical to jump from carrier to carrier. These days, the increasing prominence of world phones and convergence on standards like LTE have reduced some of the friction of changing carriers, but in the U.S. most phones remain, by and large, still locked to individual carriers.

Even worse, though its not hard to find a way to unlock phones, the process of circumventing that restriction is currently illegal for any phones purchased since the beginning of the year. Which is a bit like selling a TV that only works with a single cable provider.

 

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