AT&T to Sell Unlocked, Contractless iPhones. Why?

By Tara Seals

Leaked documents reveal that AT&T Inc. will start selling unlocked, no-contract, no-activation-fee iPhones starting in late March– a move it said last summer that it would make, eventually. But if you’re scratching your head, you’re not alone.

The Boy Genius Report has gotten its hands on a presentation from AT&T that says these iPhone “pricing enhancements” will start March 26. The 8GB will go for $599, the 16GB for $699. And the offer is only open to existing customers.

So sure, buyers can simply swap out the SIM card and be off to the races on the T-Mobile USA network—the only other major GSM carrier in the United States and therefore the only other one that can support the iPhone. There’s also Rogers in Canada, which has a GSM network. But it’s unlikely AT&T will lose too much ground to its smaller, less 3G-ified rival nor its cousin to the North.

While the presentation says AT&T will only allow one unit “per line,” it also says tracking this is pretty much a non-starter, though it’s clear that bulk purchases won’t be allowed. And if AT&T can’t keep a handle on who’s buying the poised-to-go-rogue iPhones and how many are sold per line, does this mean that legions of unlocked iPhones are poised to hit the global market? Will people in Europe on any number of networks be ordering the devices for themselves via clever black marketeers, considering the exchange rate makes this look like a pretty good deal? Will this upset AT&T’s roaming partners that are enjoying iPhone exclusivity in other countries?

Who knows. But for AT&T, we’re wondering where the upside lies. The upcoming iPhone 3.0 is a software update and will be free to existing users—negating the need to clear inventory ahead of its launch. And, who is the target customer, exactly? Is it the person that will shell out the $599 to go sign up with T-Mobile? If that’s the case, what sort of margin is AT&T making? And who would do that, anyway? Or is the target customer the person that travels and wants to avoid roaming fees by using travel SIM cards? Or is AT&T hoping to capitalize on that segment that wants the freedom of being unlocked but will still sign up for AT&T’s two-year voice and data plans—thereby eeking an extra $400 out of the sale for the promise of flexibility?

We wish we knew the answers to all of these tantalizing questions. AT&T didn’t respond to our request for comment.