It’s been estimated that the number of smartphone users will top 2 billion globally by the end of 2016, and that by 2020 there will be over 5 billion users worldwide. That’s a lot of smartphones, considering the global population is at about 7 billion people right now. Smartphones have become a way of life for nearly 30% of the world’s inhabitants, and when you account for the age group that is least likely to have them, the very young and very old, you get closer to 50% of the remaining inhabitants. That is an unprecedented global participation rate.
Service Provider Subsidised Smartphone Prices
Smartphones, as popular as they are, aren’t cheap. Consumers often lock themselves in a long-term contract with service providers in exchange for a subsidised price on the smartphone. This subsidised pricing has certainly had an impact on the demand for smartphones as it has made ownership much more affordable for consumers. To prevent losses to service providers, contracts are written with large early-termination fees for the user who doesn’t remain with the provider for the duration of the contract. Each service provider uses a unique network, so consumers who need a replacement phone due to loss or damage during the contract term can only select from the smartphones that their particular service provider carries.
The wireless service provider market consists of competing providers that use networks that are incompatible with each other, so many smartphones are manufactured “locked,” with features that will only allow them to function with one or two providers. Smartphones that are compatible with all of the service providers, do exist, but the cost of such phones is somewhat prohibitive. By manufacturing smartphones that need only be compatible with one or two service providers, the manufacturers are able to keep costs and prices lower at the expense of consumers’ choice of carriers. Consumers would obviously prefer to purchase a smartphone that could be used with any wireless service provider they desired.
Consumer Unlocked Smartphones
Whilst some manufacturers do produce smartphones that are compatible with any service provider, it complicates the consumer’s buying decision because the phone and the service need to be purchased simultaneously from a service provider to get a subsidised price. Consumers have thus learned techniques for “unlocking” a locked phone so that it can be used with any service provider that the user desires. The process of unlocking a smartphone also opens up the second-hand market so users can purchase used phones to use with their own service provider.
Manufacturer Unlocked Smartphones
This demand for unlocked phones, which are generally more appealing to more tech-savvy users who favour greater choice at the expense of some convenience, has opened the new smartphone market to manufacturers who are willing to value engineer their product to make it more affordable. These unlocked smartphones are compatible with multiple service providers and are not as expensive as the more popular “main brand” phones. This allows consumers to purchase a smartphone they can afford whilst still having their choice of service providers.