Unlocked $649 Apple iPhone Has Limited Value

Apple announced on June 14 that an unlocked version of the iPhone 4 is available starting at $649, allowing you to use any SIM card from any GSM carrier. This can be handy for those who routinely travel abroad.

The unlocked phone would allow you to get a prepaid SIM card from a local carrier and pay the same rates the people in that country pay. The problem is most phones sold in the United States are locked to the carrier you purchased it from. An Orange, T-Mobile, or O2 SIM card won't work in a phone locked to AT&T's network.

The carrier does this because you are often buying the phone at a steep discount on contract. They need to make their money up on the services. AT&T would lose a ton of money if you purchased a phone from them that was discounted a few hundred dollars and then plugged in another company's SIM card. Yes, early termination fees (ETFs) are a disincentive as well--they work hand-in-hand with SIM locking to keep you on the carrier's network that sold the phone.

Now you can buy an unlocked GSM phone, eliminating ETF fees and SIM locking, but you have to decide whether or not it is worth the extra cost. The 16-GB model is $649 and the 32-GB model will set you back $749. Those same models from AT&T with a two-year contract will cost $199 and $299, respectively.

No matter what you buy, you need to purchase a voice and data plan, otherwise, you just have a really expensive iPod Touch. The rates the carriers charge are the same whether you buy the phone from them or not. The main reason for considering the unlocked version is to use the phone on a different network if you travel internationally.

Buying one of these to use on T-Mobile won't be the best experience since it uses different frequencies for its 3G services. Any savings you might realize by using T-Mobile's data plans will be wiped out by the disappointment you'll feel as you cruise along at 2G speeds.

For international travel though you could come out ahead if you are a frequent traveler. For example, AT&T charges $0.99 per minute to roam in Germany if you are on their World Traveler plan and $1.39 if you aren't. Rates for a prepaid SIM card for German networks can be as low as $0.39 per minute. Talk for 100 minutes a month when traveling and you can easily pay for the unlocked price differential in a matter of months. Then there is texting and data. You get the point.

Unless you spend a lot of time in foreign countries roaming, skip the unlocked version and buy one on contract from AT&T.