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Why buy an unlocked phone?

An unlocked phone is great for traveling abroad, but be careful if you're looking for true carrier independence in the U.S.

by Trent Loomis,

Unlocked phone

Why would you want to purchase an unlocked phone? That is a great question, and the answer is pretty simple. If you travel internationally on a regular basis and spend most of your time between countries, then an unlocked phone is right up your alley. Buying an unlocked smartphone exempts you from signing a contract and locking you in to service from a single carrier — but the costs of being a free agent can be steep, especially when picking up a shiny new powerful smartphone. But before we get into that, first let?s explain how an unlocked phone is different from a phone that's tied to a specific carrier.

GSM vs. CDMA: The two main cellular standards in the U.S.
In the U.S., we have four major carriers using two entirely different wireless standards: AT&T and T-Mobile use cell networks based on the GSM (Global System for Mobile Communications) standard used widely around the world, while Verizon and Sprint use the CDMA standard, which few other countries have adopted. In the GSM universe, phones have a slot for a subscriber identification module or SIM card that contains vital information about your cell account, including your phone number.

Putting the authentication information on a removable chip makes your phone number essentially portable: you can remove the SIM card from your unlocked phone, pop it into another unlocked phone, and place calls from your same number. Conversely, if you have an unlocked phone and are traveling overseas, you can buy a relatively inexpensive prepaid SIM card from a local carrier, pop it into your phone, and make local calls in your destination country without having to pay expensive international roaming fees to your carrier back home.

Phones on Verizon and Sprint generally do not have SIM cards and can't benefit from phone unlocking or phone number portability in the same way as GSM phones can. Some of this is being complicated by the advent of 4G data network adoption in the U.S. and around the world, such that your Verizon phone might actually have a SIM card — but the reality is, it's probably still not going to be able to benefit from being unlocked because it will most likely not operate on the same frequency bands as other carriers.

You're also going to want to be very careful if the reason you want to buy an unlocked phone is to be able to use it on whatever carrier you like here in the U.S. Right out of the gate you won't be able to use a GSM phone on either Verizon or Sprint, and you may also run into issues trying to use an AT&T phone on T-Mobile or vice versa.

Unlocking the true cost
Beyond network incompatibilities, there's another big factor to take into account when considering an unlocked phone. What generally makes buying a smartphone affordable is that the carrier subsidizes the actual cost of the phone, so you only have to fork over somewhere in the neighborhood of $99 to $299 for a new phone — sometimes the cost will be subsidized completely, and you can pick up a powerful new device at no cost in exchange for signing a two-year contract with the carrier.

Carriers have adopted this method of defraying the initial cost of a phone purchase, knowing full well they're going to make their money back (along with a healthy profit) over the lifetime of your contract. This is also the reason why the cost of ending your contract early usually results in a rather hefty early termination fee — the carrier is essentially trying to recoup its losses on the hardware they gave you at a much lower price than the actual cost of the device.

On the flip side, when buying an unlocked phone, there are no strings attached. You'll typically pay anywhere from $400 to $800 to buy a smartphone outright, but you aren't obligated to pay a monthly fee to any particular carrier. You can pick up prepaid plans as needed while you travel, or get a month-to-month contract on the carrier of your choice — just be sure to check whether the carrier you choose will fully support your specific phone model.

Overall, it's generally cheaper to buy a smartphone under contract and use it for the full two-year agreement with your carrier than it is to buy an unlocked phone outright and keep it in service for the equivalent amount of time. However, the most notable use case for making an unlocked phone net out financially is the frequent international traveler.

When you need an unlocked phone
Travel. Travel, travel, travel. The main reason buying an unlocked phone makes sense is if you actively travel overseas or if you plan to live in another country. Aside from AT&T, T-Mobile is the only other big GSM carrier in the United States, but Europe and Asia are filled with them. China, Mexico, Germany, Russia, France, Spain, and the United Kingdom are just some of the countries that support GSM carriers.

If you have ever tried using your phone in another country, you might have fallen victim to astronomical roaming charges, particularly if you need to use any data on the go. Even if you purchase an international roaming package, you end up spending a sizable chunk of change. That's why it is important to look into international carriers and calling plans before you travel.

If you have an unlocked phone, when you arrive in a destination country that uses GSM networks you can simply pick up a new SIM card from a local carrier. If you often hop around to multiple countries in your travels, it is not only possible but relatively easy to have multiple SIM cards on hand for different carriers and countries. You'll be able to place local calls without tacking on additional international roaming fees from your own carrier, and if you run out of phone minutes it's often an extremely simple process to "top up" your card with more minutes or data either right from your phone or via the web. You'll still want to be careful about your overall phone usage, particularly if you're using your smartphone's apps and other data-consuming services like GPS. Make sure to check with the carrier about how cell minutes and data might be handled differently by the plan you're picking up, including exactly how much data you're paying for and what happens if you run over your initial allotment.

If you work for a company that has offices overseas that you visit frequently, then an unlocked smartphone might indeed be the smart way to go. Maybe you are planning on moving to another GSM-friendly country for a year, and you don?t want to buy a new phone when you get there and another new phone when you come back. At the end of the day, the best way you can justify buying an unlocked phone is by thinking globally.