Is it a crime (or at least wrong) to sell lock-picks?: iPhone unlocked
It seems that the team of someones at iPhoneSimFree.com are the first to successfully pull off this feat. The group says it has unlocked the phone, and will be releasing its software for sale starting next week.
Unlocking the iPhone dramatically widens the phone's appeal. . . . .
Unlocking the iPhone is on net bad for consumers. Those who already have an iPhone or who are going to get one are possibly better off. The question though is whether this theft will alter AT&T's investments in future capabilities for its network and service. If it does, the consumers will not have quality of service that they would have had and that will work to reduce the iPhone's appeal. One presumes that since Apple wants to maximize iPhone's attractiveness relative to its costs, this cheating will move them away from the right mix of quality. The bigger problem is that this type of cheating reduces the incentives to invent and invest in devices such as iPhone to begin with.
UPDATE: This is about what I expected. This seems like pretty strong evidence that Apple for one doesn't think that it is better off by the unlocking of the iPhone.
UPDATE2: AT&T is now in the act.
Labels: Economics, Freedomnomics
posted by John Lott at 12:57 AM
6 Comments:
I can't agree with the lock-pick analogy or with calling this "theft". When you purchase an iPhone, the device is yours. You own it. This is simply allowing you to take an item that you physically own and modify it to better fit your needs. I believe this is even protected to some extent by federal law.
I also don't understand how this could possibly be on net bad for consumers. It simply decouples the physical device from the network that the device is used on. In theory, this introduces competition where competition previously did not exist and thus AT&T should only be encouraged to improve their network in order to avoid losing customers.
I say "in theory" because, in practice, you can only purchase an iPhone along with a two year service contract with AT&T. This means this hack should have no real effect on AT&T's iPhone related revenue, other than slightly increasing the desirability of the iPhone to consumers who have need to swap SIM cards (for example, someone who does a lot of foreign travel).
There is no "theft" of any sort here. The cost of the iPhone is not subsidized by AT&T. Most purchasers of iPhones have no business transaction of any kind with AT&T until they actually sign up for their service--smart customers buy the iPhone from Apple directly.
The only reason Apple went exclusive with AT&T is that AT&T made huge revenue generating concessions as a result. Apple did not create the iPhone for AT&T or due to inspiration from AT&T. Now that AT&T is locked into a multi-year revenue sharing deal with Apple as payment for this exclusivity, Apple will be all to happy to sell iPhones for a substantial profit to customers of any other carrier. And AT&T can't do anything about it except keep forking over the post-purchase revenues.
This is a huge win for everyone involved, except AT&T. And AT&T has done nothing to merit any windfall to begin with.
I am willing to bet that when you buy the product from Apple that there is an agreement that you make saying that you will not alter the product or its software in certain ways. If there is such an agreement, would that make a difference to you?
Dear Anonymous:
I don't agree that it is a huge win for Apple, nor its customers. Is AT&T going to keep on investing as much in its networks in the future and if not, will that lower the quality of the service that their customers get. What about in other markets where the new iPhone is just coming out? Will the demand for the new iPhone be hurt relative to what it otherwise would have been. I presume that the reason that Apple agreed to this type of exclusive dealing arrangement with AT&T is because AT&T had to make some large fixed investments. Apple could have easily let multiple carriers provide the service but they didn't. Why?
What also does this do to Apple's reputation for being able to prevent such hacking in the future? What impact does that have Apple's ability to market new products that depend on other companies making investments that will help make the product work well?
It doesn't matter if Apple put such a clause in the agreement because current federal regulations grant me the right to unlock it:
http://www.copyright.gov/1201/
Why would any of this hurt demand for the iPhone? In the short term, this simply allows a consumer who has need to use the iPhone on a different network to do so. In the long term (assuming a fix isn't released), it requires AT&T to compete based on pricing and network quality rather than device exclusivity. Why would more competition be a bad thing?
Thanks very much for the long and very detailed comments.
Dear Anonymous:
1) I don't see how Apple could possibly be made better off by this hacking. Apple could have set up its telephone to be used on multiple networks if it wanted to begin with, but I presume that Apple could not have gotten the networks set up the way it wanted if it had tried to do this. Apple surely wouldn't have been able to share the review with AT&T and other networks, thus lowering the return that the company would get from putting the iPhone together. Not all the international sales operations have been set up yet.
2) I don't think that Apple's DRM for iTunes has been effectively hacked. True it has been hacked a couple of times, but Apple was able to quickly undo it each time.
3) "They monopolize a highly desirable new product to acquire new customers, by leaving customers with only one choice if they must have the new phone."
We give patens for the same reason, to encourage innovation. The point though is that this monopoly power is unambigously making consumers better off because Apple is only getting sales from existing cell phones by offering a better product despite an possible monopoly profits that it might be obtaining.
Dear David:
The fact that the government allows this hacking doesn't imply that it makes either customers or Apple or AT&T better off.
Thanks.
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