By now you’ve probably read about the “teen whiz” who unlocked his Apple Inc. iPhone using software commands and a soldering iron. (George Hotz, unlocker from New Jersey, got a free car, three iPhones and a consulting contract from an admiring Terry Daidone, co-founder of CertiCell, an after-market mobile phone supplier. You gotta encourage today’s young people, right?)
Possibly you’ve read about the unlocking service in Belfast, Ireland-unlockiphone.com, an offshoot of UniquePhones.com-whose John McLaughlin claimed to have received a late night call from O’Melveny & Myers L.L.P., a Silicon Valley law firm claiming to represent AT&T Inc. that offered “friendly advice”-the phone contained copyrights owned by Apple-presumably in a tone reminiscent of Tony Soprano.
McLaughlin postponed his announced release of the iPhone unlocking code until he could determine whether in fact he had legal exposure to litigation launched from overseas.
Did we mention iPhoneSIMfree.com?
Motivations may vary. UniquePhones.com makes money offering to unlock phones, just as the carriers often do, for a fee. Hotz clearly fell into the Mt. Everest camp-that is, he hacked the iPhone “because it’s there.” (For further insight into this mindset, simply consider the name of one Web site, “Hackintosh.”)
The punch line? AT&T Mobility and Apple have “no comment” whatsoever on these cases or the unlocking issue.
For the chattering classes-that’s you and me, dear reader, the folks unafraid to have a frank conversation-“no comment” is the proverbial red meat. It spawns chatter.
The stakes
So let’s go: What is AT&T Mobility and, possibly, Apple, afraid of? What’s at stake here-money, reputation, the future of the U.S. wireless industry’s business model, control over the universe? Is this another data point in the discussion on whether AT&T Mobility has gotten repeatedly besmirched since June 29 when it was blamed for well-publicized yet minimal iPhone activation woes and subsequently tagged for the iPhone’s EDGE speeds?
AT&T Mobility spokesman Mark Siegel reiterated the carrier’s basic policy on phone unlocking and, in so doing, implied that we should follow the money.
“If our customers want their phone unlocked, we’ll do that for them,” Siegel said. “When people want their phone unlocked, it’s because they want to switch carriers and keep their phone. Few people do it because typically when you switch carriers you want access to the cool phones the other carrier offers.”
“Many people who came to us to purchase the iPhone fall in that category,” Siegel added. “And when you purchase the iPhone and activate service, you sign up for a two-year contract, or you pay a $175 early-termination fee.”
If someone comes from another carrier to AT&T Mobility with an unlocked phone, AT&T Mobility will sell them service, though it cannot guarantee that all the phone’s features or all of AT&T Mobility’s offerings will work, Siegel said.
Two analysts, while agreeing on many basic points, held opposing views on the overall importance of last week’s developments and their impact, if any, on the industry going forward.
“Fundamentally, I don’t think this is a huge story,” said John Jackson, analyst at Yankee Group. “It’s an extension of iPhone mania.”
“Will unlocking the iPhone become an epidemic?” Jackson added. “No. AT&T has legitimate concerns about the issue, but they’ll be hurt more by this lingering in the news than they will by revenue losses. But I would expect them to have anticipated this. The hacker community couldn’t wait to get their mitts on this device.”
If those who unlock their phones lose functionality on the device due to software issued by Apple to stymie such actions, Apple also could be the target of negative publicity, Jackson said.
“It’s way too early to cry for Apple,” Jackson said.
As for AT&T Mobility’s position, now that unlocking is possible and that news is screaming around the globe via the Internet?
“They’re screwed,” said Rob Enderle, principal at Enderle Group, pointing to the carrier’s potential loss of service revenue and/or an early-termination fee if iPhone purchasers don’t activate their handset but unlock it to migrate to T-Mobile USA Inc., the U.S.’s other nationwide GSM carrier.
“All this activity will force Congress to make locked phones a thing of the past,” Enderle said. “AT&T will take action slowly. It will get a black eye for suing kids. And there’s a danger that AT&T could drive unlocking, especially while they’re solving their customer handling problems.”
Enderle cited the well-publicized activation problems that beset the iPhone launch, acknowledging the slim percent of problems among all customers, but pointing to the generally negative press. And he pointed to AT&T Mobility’s well-publicized delivery of paperback book-sized, iPhone bills that reflected every action, no matter how inconsequential, between the handset and the network.
“This suggests that partnering with either company”-AT&T Mobility or Apple-“isn’t a good idea,” Enderle said.
Both companies are actively reviewing their deal with the other, the analyst said, and either or both may seek to change the terms of their agreement before it expires.
CertiCell provocatively said last week in a press release that on Sept. 14 it would “formally announce on its Web site its intentions for the Apple iPhone.”
One thing seems assured: given the way the unlocking news has spread, including the alleged middle-of-the-night phone call to the unlocker in Belfast, an Internet-based spotlight is likely to highlight the action.
