iPhone unlocking explodes despite Apple's countermeasures
There's no doubt that Apple has taken iPhone unlocking very seriously in the first six months of its life on the planet. Even so, it appears despite significant roadblocks, the unlockers are winning.
Each of the three times Apple and AT&T have reported their iPhone numbers since July, there has been a gap between the number of iPhones sold by Apple and the number of iPhones activated for AT&T's network. During the first weekend of iPhone sales, the gap was 124,000 units. At the end of the third quarter of the calendar year, it had grown to 300,000 iPhones. And last week, Apple and AT&T revealed that gap had increased five times over in the fourth quarter, to 1.7 million units.
There's one easy explanation this time around for part of the gap: The fourth quarter marked the first time the iPhone was available through other carriers, namely Europe's O2, Orange, and T-Mobile. Still, that accounts for only 350,000 iPhones, according to various estimates, leaving 1.35 million missing iPhones to explain.
Some analysts think around 1 million of those iPhones have been purchased with the intention of unlocking them to run on other cell networks. If those numbers are true, that means iPhone unlocking exploded in the fourth quarter despite two steps taken by Apple to reduce the number of iPhones bought with unlocking in mind.
Last week Toni Sacconaghi of Sanford C. Bernstein thought a demand issue was to blame, believing that unlocking couldn't be much more widespread than Apple Chief Operating Officer Tim Cook had estimated back in October, somewhere around 20 percent of all iPhones sold. That would mean AT&T stores were starting to pile up an inventory of unsold iPhones.
The pace of iPhone unlocking exploded in the fourth quarter, if recent estimates are to be believed.
(Credit: CNET Networks)But his fellow analysts jumped all over that presumption on Friday and Monday, declaring that unlocking is a much more prevalent practice than it seems, which would mean iPhone inventory is within normal levels. Mike Abramsky of RBC Capital Markets estimated that unlocked iPhones account for as many as 30 percent of all iPhones sold in the world last year, and Sacconaghi later upped his estimate to 27 percent, or sales of 1 million unlocked iPhones in 2007.
So how has Apple tried to curb unlocking? First of all, it imposed limits on the number of iPhones that could be sold per person to two units in late October, and required that buyers use a credit card. This was done to discourage unauthorized resale of the iPhone, especially among resellers who purchased iPhones for resale in countries that use GSM networks but where Apple has yet to launch.
More important, as Apple got ready for the launch of the iPhone in the U.K. and Germany in early November, the company changed the way the iPhone loads software from flash memory to only permit only certain kinds of software from loading into the main memory. This is called the bootloader, and moving to a new version of the bootloader automatically caused problems for the iPhone unlocking community.
Up until that point, it had been relatively easy to unlock the iPhone by just downloading software and buying new SIM cards from any number of different outlets. But the release of those new iPhones created a roadblock for the hacking community that it still hasn't managed to solve through software. iPhones purchased prior to November 9 with older bootloaders can still be unlocked, even after they have upgraded to the 1.1.2 firmware that was released on the same day as the iPhones with the new version of the bootloader.
This was an extremely frustrating development for the unlockers, although work continues on finding a software fix. Post-November 9 iPhones can be unlocked using a couple of hardware methods that involve disassembling and tweaking the iPhone itself, or cutting away a little piece of your SIM card and taping it to another SIM card. As you might have guessed, those aren't exactly foolproof, and anyone who tries runs a serious risk of inflicting permanent damage.
But despite these hurdles, somehow many more iPhones were unlocked during the fourth quarter as were unlocked during the third, if the estimates are accurate. Analysts accepted Apple and AT&T's explanation for the gap during the initial weekend that a significant amount of iPhones were in transit as the weekend (and the quarter) came to a close on Saturday night, and the widespread activation problems experienced that weekend certainly could account for some of that gap.
But if only 250,000 to 300,000 iPhones were bought with the intention of unlocking during the third quarter, that means 700,000 to 750,000 were bought during the fourth quarter if the estimate of 1 million unlocked iPhones is correct, despite Apple's attempts to make life harder for the unlocking community. Put another way, overall iPhone sales doubled from the third quarter to the fourth, and iPhones destined for resale and/or unlocking almost tripled.
It's pretty easy to find an unlocked iPhone on eBay, and they are selling for between $450 and $700, well above the locked iPhone price of $399. And given these numbers, it's not hard to imagine finding plenty of unlocked iPhones in above-board and underground shops around the world.
Unlocked iPhones don't hurt Apple in the short term, as the company still gets the hardware revenue and the walking advertisement for Apple that is an iPhone user. It's the opportunity cost of the unlocked iPhone that really hurts Apple; the sweetheart deal it signed with AT&T entitles the company to a portion of the revenue taken in by AT&T for data use over its network.And it will also make it harder for Apple to roll out the iPhone with exclusive carrier partners around the world. Apple is said to have a five-year exclusive deal with AT&T for iPhone distribution in the U.S., and if unlocking is rampant, AT&T's going to start wondering why they are giving Apple so much money on the revenue earned from locked phones when so many are going unlocked.
Tom Krazit writes about the ever-expanding world of Internet search, including Google, Yahoo, online advertising, and portals, as well as the evolution of mobile computing. He has written about traditional PC companies, chip manufacturers, and mobile computers, spending the last three years covering Apple. E-mail Tom. 
Right now I feel like Appple is making me play the waiting game.
I am a gamer at heart. If Appple holds out for 6 more months not releasing any good quality games that can be downloaded and run localy on the phone then yes I wil unlock it and play all the coolest emulators.
The hubris of apple not listening to the gamers out there is a sad case indeed! Look at the other cell phones that have games!
iPhone.
As for "almost every"; well the numbers are not THAT high! I suppose you think that these iphones are being purchased rather as ipods (in practical usage/sans cell subscription)?
least they don't car about selling phones in their store that will
be used outside of the wholy grale of apple authorized
networks. I know in my smaller circle here in Luxembourg at
least 10 people how have iPhones (some unlocked, some with
this new f..g 8-) boot loader). Some of them even resell them.
One of them signe an article in a national newspaper about his
(very positive) view on the iPhone and how he unlocked it.
Actually a friend of mine who travels frequently to the States
brought mine with him. And trust me it wasn't the only phone
which he brought over ... through the customs ... and most of
all, all of them from the Apple Store ... and they knew about the
intention :-).
PS: Look at me previous posts ... i am a Macboy 8-) ... but Steve
is definetly on the wrong trip here.
at least give the appearance that they are concerned, they have an
agreement with AT&T.
There are those who want to run the iPhone on other networks...
and thus unlock the SIM. Bad for AT&T / Apple.
And there are those who want to enhance their iPhone with
additional applications and aesthetic customization (like me.)
Not bad for AT&T / Apple. In fact, probably good. More software
equals better value in buying the phone.
My phone was unlocked for the purpose of adding software and
customization until Apple released its recent update for the
iPhone. I used to have a full-featured text editor, a real AIM chat
client, SSH, disk storage, and games. By comparison, my phone
now seems far less useful. A good phone, but not a full-fledged.
computer.
And I agree, it only shows off what the iPhone is capable of handling, which is why Apple hasn't taken nearly as harsh a tone with jailbreakers as it has with unlockers.
brand loyalty, the more "halo effect" that leads to Safari browser
adoption, Mac sales, Apple peripheral sales and Apple software
sales.
Millions of otherwise non-Mac users are carrying mini MacOSX
computers in their pocket. The SDK is about to released and the
functionality (and profitability) of these machines is about to rise
considerably. Certainly it would be great if all users were with
AT&T in order for Apple to get its unprecedented cut of the
service pie.
But given that AT&T is a deal breaker for some, I'm sure Apple
would rather have the rogue user (who still has to pay for the
phone) than no user at all. Windows/Office spread by becoming
the most pirated software in history - they didn't see a dime, but
secured corporate mindshare as a result. Apple makes hundreds
of dollars in hardware, AppleCare and Apple Store sales. And as
a result, iPhones in the enterprise (along with Macs) are
becoming much more likely. It's all about pecking away at that
90% tower of competitive cash that MS, Dell, HP and others
currently enjoy. It's a mistake to look at the iPhone in a vacuum.
When the 5-year countdown ends (if legislation doesn't hasten
the demise of mobile service-hardware tying) Apple will be free
of AT&T and users won't have to go underground. I personally
use a BB (company issued) but would happily switch.
All things being equal...that is a LOSS of income. Glad you are not a CEO,CFO of any corporation. I would certainly dump stock if you were. This is crystal clear economics.
p.s. is at&t paying apple more for each new account with the iphone than apple makes from selling one?
than apple makes from selling one?"
I guess it would depend on how long the iPhone is on the AT&T
network.
There's an argument that unlocked iPhones are going to people who wouldn't buy a locked iPhone, so at least Apple is getting the $100 hardware profit that would have gone to Nokia or Samsung. But that's even harder to quantify.
The problem is that Apple won't be able to negotiate those kinds of revenue sharing deals when the iPhone is available on any carrier, so it loses out on potential profits. Again, it's not losing money on unlocking, it's losing out on the potential for more money.
Analysts claims about the number/percentage of unlocked iPhones is pure speculation, with no basis in fact.
Look at that scene. Now look at Symbian community sites like
my-symbian.com .
What was wrong with opening the SDK at first place? There is
no need to re-invent the wheel, Symbian got hit by viruses and
they fixed it by forcing the signed applications and offering free
signatures to open source/freeware apps.
Also what was wrong with J2ME? If I was Apple, I would offer
the first ever REAL Java (desktop) on the device. What they did?
They claimed nobody wants java. Oh really? There are 1 billion
J2ME enabled devices on market. Ask if their owners know what
"java" is. They don't. They don't ask for it. They USE it.
If iPhone released with a XCode plugin SDK at first day along
with a J2ME or Desktop Java, it would change shape of industry.
By not shipping a multi platform (Mac first- Win later) SDK/IDE
plugin, Apple managed to make that an expensive toy.
generate more sales. Seems to me the best way for them to do this is by offering a rebate
that is conditioned on activating the phone through the authorized carrier. Tivo had some
deals like that, you only got the rebate if you activated the service. Then, people might still
unlock the phones, but they'd get the boost of a free extra $100 for each one that isn't
activated (plus, of course, the boost from those people who forget to send the rebate in; if
they want to appear friendlier, they'd offer it instead as a $100 credit to the phone bill;
doing this could even be part of the activation process.
Having dealt with Apple rebate programs, they are run very well in comparison to most. Easy
to fill out the form on-line and get pre-qualified, and they sent the check very quickly.
Whatever retarded management deadhead thought this was a good idea should be sent packing. And if it was Steve, he must have been smoking dope at the time.
Hmm, isn't AT&T one of those wonderful folks who let the govt. spy on our calls, and is now whining for legal protection against invasion of privacy suits? That sure gives me confidence in being gulled into using their service. (Not to mention they helped the Nazis during WWII.)
This particular phone should have been deployed that way... All this controversy would not exist and Apple would have sold five times the IPhones they have sold thus far.
But don't whine when Apple is trying to protect it's investment and wonder why Apple doesn't support your hacks.
Hopefully, you don't look as stupid as you write.
software. That's licensed. So you are free to use the iphone
hardware on any carrier you want. Just write your own software for
it because the iPhone OS is only licensed to use that carrier that
Apple has made an agreement with.
Like it? No. But that's fair and what's right.
Have they taken into account how many have been disassembled
makes me feel like such the individual.
I wish my dad bought me a care and helped me work it effectively.
I'm gonna go break something
that does not make me blind.
The iPhone is a fantastic device with awesome potential. I do
believe the introduction of an SDK is bowing to the weight of
desire for people to write real code for it.
Unfortunately, the AT&T deal looms large, and seems to be
universally accepted as a bad decision regarding consumers, and
the real bottom-line for Apple. But let's not forget, the deal
with Cingular was for two years of exclusivity. That deal was
changed by AT&T, when they bought out (brought back into its
fold) Cingular.
When the two year deal was announced, I believed it to be a
prudent business decision regarding the iPhone. When it was
changed to a five year deal with AT&T, I was horrified. I bought
one anyway, in hopes of an SDK being introduced.
#1: Buy an iPhone
#2: Be locked into a phone contract that you can't abandon for 5 years if you have an iPhone
#3: Have to come running back to them if you want to use your iPhone.
AT&T has the worst customer service that I have ever seen, and they know it as well...they can only keep you as a customer if you arewilling to put up with your crap because you want the latest, greatest status symbol.
Look, early adopters of VHS players could set the time correctly. Late adopters simply ignored the flashing "12:00" because it was too much to figure out how to change it.
It is that later group that buys in really large volumes--lots of folks who don't even know what cnet is, for example. And for that group, they won't give a flip about unlock-lock-jailbreak or whatever.
- Set the iPhone Free
- by iphone lover January 30, 2008 6:06 PM PST
- If only the iPhone could sing, surely it would do ?Release Me? by Engelbert Humperdinck. Yes, with all this unlocking activities going on and with millions of iPhones being unlocked, Apple should now set the iPhone free instead of jailing it at the four walls of AT&T.
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Showing 1 of 2 pages (73 Comments)Mars M.
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