New iPhone may thwart hackers
NEW YORK - The new iPhone and the way it will be sold could shut down a small industry that arose to make the first version of the iconic phone available around the world.
The original iPhone, launched last June, was initially available only in the United States and only for use on AT&T's network. Soon, however, hackers found a way to "unlock" the phone to make it usable on other networks, including abroad.
Apple showcased a new iPhone Monday for use on 3G, or third-generation, data networks. It will stem the flow of unlocked phones in two ways.
First, the phone will be sold in more countries. Apple added five countries beyond the United States for the first phone, but the second one will go on sale in 22 countries on July 11. Apple has said it will add more countries rapidly and reach 70 by year-end.
Second, Apple is abandoning the unusual arrangement under which the iPhone was being sold. Customers could buy the phones from a carrier or from Apple without activating them on a service plan, and that meant customers could go home and unlock the phones - and never sign up with AT&T.
The new phone will be subsidized by carriers, which accounts for its lower price: $199 for the 8-gigabyte model, down from $399. This brings the phone's marketing in line with standard industry practices.
The carriers plan to make back what they spend on the subsidy through service fees, which means they very likely will require two-year service contracts from everyone who buys the phone. AT&T said buyers will have to activate service before leaving the store with an iPhone.
"It's looking pretty bleak for unlockers," said John McLaughlin, founder of Uniquephones.com, a New York company that sells unlock codes for cellphones. After being warned away by AT&T's lawyers, it doesn't help to unlock iPhones. Unlocking software is available free online, though.
Freeit4less, a company in Syracuse, Utah, has posted prices on its website for unlocked 3G phones at $100 above store prices, but chief executive Kyle Jourdan said the company is not accepting any pre-orders, given uncertainty surrounding the activation requirement.
"We're just crossing our fingers and hoping for the best," Jourdan wrote in an e-mail. He speculated that Apple or AT&T may sell unsubsidized phones, which would leave an opening for his company.
Federal law allows consumers to unlock their own phones. But selling someone the means to unlock a phone may be illegal. At least one US carrier has won civil cases, not involving iPhones, against unlocking businesses.
One major incentive for unlocking remains, especially for Europeans. Those who travel to other countries with unlocked phones can use local prepaid service plans, rather than paying exorbitant international roaming fees to their home carriers.