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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.

There are already signs, though, that a shift is underway. Some handset makers are selling unlocked phones, though the lack of carrier subsidies means that the prices are much higher. For example, an unlocked 16GB iPhone 5which only works on certain networks in the U.S.costs $649, making the subsidized $199 figure seem like pocket change; even the original, unsubsidized iPhone was less expensive.

At those prices, the device itself becomes a significant investment. And its an investment that many consumers will want to hold onto, even if they decide they want to switch carriers. Like the iPad mini, they dont want to be bound into an expensive contract when theyre already paying so much upfront for a device.

Surprisingly enough, there are actually indications that the carriers have slowly begun to loosen some of these strictures. AT&T will now generally unlock iPhones if theyre no longer under contract. The Verizon iPhone 5, meanwhile, has a SIM slot that is unlocked by default, though the phone itself isnt compatible with AT&T or T-Mobiles LTE networks in the U.S. Even more recently, Sprint announced that out-of-contract devices could be ported to MVNOs that use the carriers network, like Virgin Mobile and Boost Mobile.

And even though the Library of Congress did not renew the DMCA exemption allowing customers to unlock phones, the White House this week responded positively to a public petition, calling the ability to unlock phones common sense, crucial for protecting consumer choice, important for ensuring we continue to have the vibrant, competitive wireless market that delivers innovative products and solid service to meet consumers needs.

In and of itself, the administration cant change the existing law, but movement is already afoot from several corners to introduce new legislation allowing for phone unlocking. Of course, the wheels of government often grind exceedingly slow, but this is one of those drops in the bucket that presages the bucket running over.

This is page two of two. Read page one.

Micro message machine

For those who argue that the carriers are too deeply rooted for real change to ever happen, the microcosm of text messaging provides a useful object lesson.

Text messaging has long been a staple service of carriers, because they can charge through the nose for it despite the fact that it costs them next to nothing for you to send a single text message, or even a thousand text messages. Regardless of whether you pay per-message or for a monthly allowance of messages, you can rest assured that the carriers are raking in a healthy profit.

But with the advent of smartphones, there are suddenly a number of other options. You can send an email. Or download an instant messaging app. Or, perhaps most damningly, use the built-in private messaging features of social networking services like Twitter and Facebook.


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