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Today on Radio New Zealand National I talked about Vodafone’s announcement that it will be locking the mobile phones it sells from now on. This is a bad move for consumers in the short run – but it may in the long run break Vodafone’s and Telecom’s hold on the retail phone market. Read on for my speaking notes or down load the podcast.

Q: Now to locking mobile phones – what is that – do you mean using a PIN number so other people can’t use your phone?

A: Not really, although that’s not a bad idea. I’m talking about the practice of phone shops doctoring telephones before they sell them to you so that they can only be used on one phone network. Now, before we go on, most of this is going to be a brickbat for Vodafone and Telecom, so let’s just first acknowledge that Vodafone currently looks like the cat that ate the canary with its announcement that it wil bring the iPhone to New Zealand this year.

Q: There are iPhones here already – you brought one in last week!

A: Yes, and Voda were fond of saying privately that it was one of their fastest selling phones even though they didn’t sell it themselves. It illustrates one of the points I want to make today – you don’t have to buy your phone from the network company – any unlocked GSM phone will work on any GSM network.

Q: So what is locking? Is that using a PIN number to lock your phone someone who picks it up in the street can’t use it?

A: Not really – using a PIN is sensible thing to do if you can be bothered – but I want to talk about the way phones can be locked by their seller so that they will only work with one GSM network.

Q: Surely Telecom phones only work on the Telecom network, and Vodafone phones only work on the Vodafone network?

A: That’s always been the case because Telecom uses a different technology from Vodafone and most of the rest of the civilized world. The technology that most networks use is called GSM. With GSM you get a SIM card – people with Vodafone phones will know what I mean, it’s a thing about the size of a little fingernail that you insert into your phone and that gives the phone its allegiance to a specific network and it gives the phone its phone number. Telecom’s old technology, the 027 phones and the 025s before them, used different technology that didn’t need a SIM. So there was never a possibility of a phone bought for one network in New Zealand working on the other – the two networks were totally incompatible.

But now Telecom has been forced by market forces to move to GSM as well, and there’s a new network waiting in the wings called New Zealand Communications. So soon we will have GSM networks.

Q: So we’ll have some choice!

A: Yes, I really hope it will bring down our appallingly high mobile costs. But this is where locking phones comes in. The phone companies are far from rapt about selling you a phone to work on their network and having you take it across the road, so to speak, and running it on their competition’s network.

Q: I can see why they wouldn’t want you to do that if they have subsidized your phone from your contract.

A: But they get you to sign a commitment anyway! You try getting an on account plan for a mobile phone without committing for 12 months. They are going to get their subsidy back alright. That’s no justification for locking phones so you can’t change the phone to another network.

Q: But they are locking phones anyway?

A: They didn’t used to. But Vodafone has just started. It’s going to start locking all the phones it sells to its own SIM cards. You can physically change the SIM card to one for another company but the phone won’t work.

That’s really very irritating for the consumer. It’s likely to delay the effect of competition in the New Zealand market by preventing people form moving phones from one network to another. It will also prevent people who go overseas from buying a SIM in their local market wherever they are going and force them to pay the ruinous roaming charges that the mobile companies charge. This is almost a rort – it’s designed to keep consumers from taking advantage of competition.

Q: Why do Vodafone say they are doing this?

A: Ah yes. They say it’s to preserve the customer experience of the quality provided by the Vodafone network. Vodafone plasters its logo no the outside of the phones it sells but it guarantee other networks.

Q: Do they guarantee their own?

A: Not that I’d noticed! And, they say, Vodafone phones have the special Vodafone Live button, which gives people access to extra services and a uniquely Vodafone experience.

Q: I take it you don’t buy their explanation?

A: Hardly. I really can’t say on the radio what I think about this explanation – complaints would be made – but let’s just consider the excrement of the male bovine. “We are going to limit your options and suppress competition but we will tell you it’s for your own good”.

Q: Can’t you unlock these phones?

A: That’s possible for most types of phone and Vodafone have said they will unlock phones for you – on payment of $50. This is what gives the lie to their precious little arguments about preserving their customers’ experience. Vodafone says: we are anxious to preserve your experience and deliver you our quality services, unless you pay us some more money. Yeah, right.

Q: And what are Telecom doing about this?

A: Until recently they haven’t even supplied phones that would work on GSM. But over the last few months they have supplied their so-called world phones which are locked GSM phones that will go on any network except Vodafone New Zealand. That’s pretty bad as well –we’ve kind of got used to seeing Telecom as the bad guys and Vodafone as a breath of fresh air – but, really, this kind of feral corporate behaviour makes you think they are both as bad as each other. Oh – one other thing about the Telecom world mode phones – some of them at least don’t work across the whole world, they don’t do all the GSM bands and wouldn’t work in Canada. Before you take any phone overseas get a positive assurance that its going work where you are going.

Q: So what should people do about locked phones?

A: New Zealand is not the only country with this problem. In some other countries mobile networks lock phones to try to suppress competition. In France, locking phones is illegal, and it may be in other countries – I’d love it if the Commerce Commission looked at doing that here. Anyway, there are instructions on unlocking some models of phone out there on the Internet. It doesn’t work for all models, though. Best to check. But what this is really going to do is greatly increase the flow of grey market phones into New Zealand.

Q: You mentioned the grey market last week – what do you mean?

A: People who import unlocked GSM phones and sell them locally. There are people doing that on Trademe. Or, if you are brave, you can buy yourself from an overseas website. You might wind up needing a power adaptor to plug the charger into the wall, but they are pretty cheap.

I’m wondering whether this whole business will spell the end of the mobile networks running the distribution channels for mobile phones in this country. Perhaps we will someone like the Carphone Warehouse come here. That’s another wonderfully named British company, like Radio Rentals, which no longer supplies the thing it’s named after – but that’s another story. Carphone Warehouse is the biggest independent mobile phone supplier in the world, but there are lots of others.

Q: So, advice to people who want to buy a mobile phone?

A: Get one that is not locked. It will pay you in the long run. For the next few months you will probably be able to get one form the Vodafone shops – ask for an unlocked one – but just say no to buying a locked one and paying $50. Let’s see some consumer resistance here! Don’t let them get away with it! And if you can’t fond the phone of your dreams, unlocked, on the High street of your town, have a good look on Trademe. And use Google to check whether the phone will work in any country you might want to go to. That’s what the arrival of the iPhone has shown so many New Zealanders – there are thousands of them here, totally outside the control of the networks, which are now being forced by market pressure to support them. Unlocking phones promotes competition by separating the phone supplier form the network.

Links

Vodafone’s announcement about the iPhone.

There’s no link to Vodafone’s announcement about locking their phones because they haven’t published one. But here’s journalist Peter Griffin on the matter.