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To Lock Or Not To Lock

2/29/2012 03:53:00 PM

Consumers have grown used to carrier-subsidized cellphones, and they understand the deal.

In return for a deeply discounted device, you commit to a two-year service contract and buy a locked phone, which protects a carrier’s investment in the subsidy because you can’t activate the phone on a competing carrier’s network.

Best Buy CEO Brian Dunn isn’t so sure the tradeoff is all it’s cracked up to be. During a keynote address at the Mobile World Congress in Barcelona, he contended that locked phones actually drive up costs for manufacturers and retailers and thus for consumers. Manufacturers’ costs go up because different versions of the same phone have to be built with different components. Retailers’ costs also go up because they have to stock different versions of a phone that is otherwise exactly the same.

Locking phones and other connected devices, such as cellular modems in cars and consumer electronics, is creating a barrier to a connected world in which many devices connect to the network, he said.

Or is it? As I was told last year by one large cellular retailer, on a typical post-paid smartphone with an average dealer cost of $375 and a retail price of around $199, a dealer nets about $25 after factoring in an activation commission of $200. That’s excluding residuals of around 2 percent of the activated phone’s monthly bill for two years.

Would eliminating locks bring down the prices of smartphones as much as a $200 subsidy would?

What say you?

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