Open & Unlocked. So What?

The intense interest around the Google (Nasdaq: GOOG) Nexus One suggests how much some U.S. cellphone users want more choice on devices and service plans. This is unlikely to happen, however, until next-generation network upgrades are widespread across the country, in 2013 and beyond.

Whatever happens with the Google phone, American phone users still face major limitations in their network choices in the U.S. and often the wider world because of the varied network technologies and patchwork of radio frequencies supported for cell services.

Most U.S. users buy phones that are locked to a specific carrier's network; the phones are subsidized, with the cost paid back over the course of a two-year contract. With unlocked phones, in theory, users would pay more for the device up front but could then pick and choose their network and service plans. Supporters of such an approach suggest that having unlocked devices widely available in the U.S. -- rather than having to buy them used off eBay or Craigslist -- will promote more competition on service plans and pricing.

Buying an unlocked cellphone and shopping around for a competitive price plan is certainly commonplace in Europe and many other parts of the world. In Europe, however, there is a great leveler for carriers: They have to use GSM technology, which uses a SIM card to store user information. Thus, the European market developed with users replacing the handset but keeping the SIM card as they upgraded phones.

The Nexus One is a GSM-based phone that will support megabit-per-second 3G data download speeds. All we know so far is that it is most likely to run on the GSM-based network of fourth-largest carrier, T-Mobile US Inc. . (See Rumor: Google Unveiling Phone Next Week.)

This instantly prevents users from choosing to run the unlocked phone on two of the largest networks in the U.S., those of Verizon Wireless and Sprint Corp. (NYSE: S). Both use CDMA, a different radio technology from GSM that doesn't support SIM-based authentication. The only way to get a phone that works across both networks is to buy a more expensive dual-mode device that supports both technologies.

So, a user wanting a single-mode, unlocked GSM device and access to a major U.S. carrier has his or her choices cut in half -- down to either AT&T Inc. (NYSE: T) or T-Mobile. Early reviewers of the Nexus One suggest that the phone will run on T-Mobile's 3G network or AT&T's earlier, slower EDGE network with an AT&T SIM card.

Unstrung has specifically asked AT&T if it will allow the Nexus One on its network or block it as best it can. (Likely by tracking and blocking a mobile phone's electronic serial number, known as the International Mobile Equipment Identity number) The carrier hasn't responded to our question yet.

The playing field for unlocked phones in the U.S. will only start to get leveled in the next few years as Verizon Wireless, AT&T, and T-Mobile move to next-generation Long-Term Evolution (LTE). Even then, different carriers are using different frequencies -- 700MHz and AWS -- to deploy the technology, which means LTE phones will require multiple radios to allow roaming in the U.S and beyond.

Verizon is expecting to start commercial LTE-based services this year and finish its deployment in 2013. AT&T plans to start commercial services in 2011, with T-Mobile following that.

Sprint will use a different next-gen technology, mobile WiMax, which will make it difficult to use unlocked devices across all networks but is still an improvement over the status quo.

— Dan Jones, Site Editor, Unstrung

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