France and Germany sell unlocked iPhones. What price freedom?

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Dec 4, 20073 mins

Apple assumed that it could extend the reach of its U.S. sales model for iPhone, which requires the purchase of a two-year service contract with AT&T, across the Atlantic. But in France and Germany, consumers are able to purchase unlocked iPhones over store counters, without shame and in broad daylight. It seems that “over there,” governments take a dimmer view of companies telling consumers that this cake must be purchased with that icing. At least in two European countries, consumer freedom is a cost of doing business.

Does Apple face a danger that iPhone carrier choice may catch a favorable ocean breeze and drift to the States? Not likely. There are Americans who still assert that they have the right to use iPhone with any GSM carrier, but these protesters commiserate via iPhones on AT&T’s network. The number of Americans torqued off at the exclusive AT&T deal roughly matches the number who march on Cupertino over Apple’s refusal to let OS X run on PCs. Translation: Nobody with a life really cares about it. If someone wants an iPhone, AT&T won’t be a show-stopper.

Perhaps it is noteworthy that Apple hasn’t packed up its marbles and walked away from Germany and France for their refusal to bow to Apple’s American model of carrier exclusivity. It potentially leaves Apple’s chosen partners at a disadvantage: A customer with an unlocked iPhone can sign with another carrier that treats iPhone like any other phone, a carrier that doesn’t pay dues to Apple and can therefore undercut Apple’s official partners.

But Apple has a clever strategy to make freedom pay. It can make any of iPhone’s canned applications work only on select networks. Imagine the letdown of bringing your unlocked iPhone home, sliding in the SIM card from your old phone, and getting a “this feature is not supported on your network” message when you tried to access Visual VoiceMail or YouTube. Sure, an unlocked iPhone will work on any network, but if that network doesn’t have Apple’s partner services, will an unlocked iPhone really be an iPhone, or an iPod Touch that makes phone calls?

I expect that it’s difficult to light up the bars on an iPhone in a way that satisfies consumers’ expectations without somehow giving Apple something off the top. Some consumers may find carrier freedom that comes at the cost of iPhone services unfulfilling.