If you're shopping for an iPhone, you have a new choice in carrier: none of the above.
For the first time since Apple (AAPL) launched its iconic smartphone, the company is offering unlocked versions of its newest model to U.S. consumers within weeks of its debut. Starting next month, consumers will be able to purchase an iPhone directly from Apple that's not attached to any carrier.
For years, many consumers have clamored for unlocked iPhones so they wouldn't have to sign a long-term contract for wireless service and could use the carrier of their choice. They also could take their phones overseas and, after plugging in a SIM card from a local carrier, pay local rates for calls and data, rather than having to pay exorbitant roaming charges.
Bin Lee is among those interested in buying an unlocked iPhone 4S. The Palo Alto resident heads an organization called the Silicon Valley China Entrepreneur Forum, which helps small U.S. businesses export their goods to China. He travels to Asia six or more times a year, mostly to China, but also to Hong Kong, Taiwan and Southeast Asia.
Lee carries two phones: an iPhone 3G that's got a Bay Area phone number and a Samsung Galaxy that's got an Asian number. An unlocked iPhone 4S would not only be a nice upgrade from his older iPhone, but would
"For me, I do lots of international travel, so I have a need for an unlocked phone," he said.
Some users have taken to "jailbreaking" their iPhones when they want to use them overseas. That's a hacking process that allows users to delink their phones from the carrier they are locked to and potentially run unauthorized programs on them. But Lee said he worries that jailbreaking is unsafe.
Paul Singh is also interested in the unlocked iPhone. Like Lee, he does a lot of overseas travel. But Singh, CEO of Santa Clara-based startup SocialNuggets, has another reason to be interested in the phone: iPhones are in big demand as gifts in Asia.
As he puts it, "If you want to a take gift of an iPhone to somebody outside the U.S., you can't take a locked version."
But the unlocked iPhones will come with some big caveats that will make them unattractive to many consumers.
First, Apple is charging a premium of $450 for the unlocked devices. The unlocked 16-gigabyte iPhone 4S costs $649; the one locked to AT&T costs just $199.
Second, the unlocked iPhones only work on GSM-compatible carriers. So even though you can buy an iPhone 4S that's tied to Sprint or Verizon, you can't use an unlocked iPhone on those networks.
Third, even though consumers will pay the full cost of the phone, they won't necessarily get a break on their phone bill.
Carriers typically charge high rates for phone service to make up for the costs of offering consumers discounted phones. The flip side of that is that some carriers offer lower-priced service to customers who bring their own phones to the service or pay in full for those phones from the carrier.
But not AT&T. Even if consumers buy an unlocked iPhone 4S, they'll pay the same fare for AT&T service they would pay if they got a subsidized phone from the company.
For customers who pay full fare for some Android and other smartphones, AT&T offers a $50-a-month no-contract plan that features unlimited calling, text messaging and data usage. But AT&T doesn't offer that plan for iPhone users.
Consumers can take their unlocked iPhone 4S to T-Mobile and get a similar $50-a-month no-contract plan. But that's not an ideal option. Although T-Mobile is a GSM carrier, it uses a different set of frequencies for its 3G data service than AT&T. Because the iPhone 4S antennas are compatible with AT&T's frequencies but not T-Mobile's, users would be forced to use T-Mobile's much slower 2G EDGE network for data access when not in range of a Wi-Fi hotspot.
If consumers are willing to put up with that inconvenience, though, they can save a lot of money.
AT&T doesn't offer an unlimited-everything plan for iPhone users. Its closest plan is one with unlimited voice minutes and text messaging and 4 gigabytes of data for which it charges $135 a month. At that rate, users who take their unlocked phone to T-Mobile could make up the extra cost in six months.
The least costly AT&T plan is $55 a month, but that AT&T plan isn't really comparable to T-Mobile's because it only includes 450 voice minutes and 200 megabytes of data and doesn't include any text messaging.
This isn't the first time that Apple has offered an unlocked iPhone. It has offered such devices in France for years. And it started offering an unlocked version of the iPhone 4 here in the United States in June. But that move came about a year after the iPhone 4 originally launched.
Staff writer John Boudreau contributed to this report. Contact Troy Wolverton at 408-840-4285. Follow him at Twitter.com/troywolv.