When shopping online for a mobile phone, you will eventually see the term "unlocked" as an option on some devices. Often, these unlocked phones seem to be more expensive than buying the same phone at your carrier, but understanding what it means to have an unlocked phone and what the benefits are can not only save you money, but give you more options on how and where you use your device.
What is an unlocked phone?
An unlocked phone is a device that is not tied ("locked in") to a specific wireless carrier, like Verizon, AT&T, Sprint or T-Mobile. Locked phones are meant to be used only on that carrier’s network and usually include modifications or extra apps installed by the carrier, often to sell additional services.
Unlocked versus jailbroken
It's important to note that unlocked does not mean jailbroken. A jailbroken phone is a device where an operating system other than a standard version of Apple's iOS or Google's Android has been installed, or certain security features of the operating system are being bypassed. Unlocked phones are manufactured and sold by the manufacturer and there is absolutely nothing illegal or "hacked" about those devices. While a jailbroken phone is a violation of the terms of service, and may stop working the next time an iOS or Android update happens, unlocked phones are perfectly acceptable to the manufacturer and all apps and operating system updates work fine. In fact, iOS and Android may work even better, since there are no possible conflicts with modifications that may have been made by the carriers.
The carriers prefer locked devices because once you sign a contract or are otherwise tied to use their network, it makes it more likely that you'll stick around. The reason prices for locked phones tend to be lower is that the carriers subsidize part of the cost of the phone, knowing that they make up that cost during the life of the contract in your voice and data fees. The price of the unlocked phone is closer to the actual retail cost of the device as set by Apple, Samsung or the other manufacturer of the phone.
About Wireless Network Types
What many consumers don’t know that it's not necessary to buy a carrier-locked phone to use it on your wireless provider's network. All unlocked phones are compatible with one or both of the worldwide wireless network standards, called GSM and CDMA, and if your network uses that standard, the phone will work. GSM phones work on AT&T and T-Mobile, CDMA phones work on Verizon and Sprint. Phones that work on both network types are often referred to as universal. For readers outside of the U.S., ask your local wireless provider which network standard they use, although GSM is more widely-used worldwide.
The primary advantages of having an unlocked phone is that you're not locked into using a specific carrier or committed to a long-term contract. You can more easily shop around for the best service or pricing. Since these devices don't have carrier modifications or apps, they tend to have more available storage space, and sometimes offer a better experience, as users generally don’t like these modifications.
Why SIM cards are important
Every phone comes with a SIM (Subscriber Identity Module) card. These tiny cards, usually installed behind the battery or in a slot under the back cover or on the side of the phone, contain the information needed for your phone to communicate with the carrier's network. The information on this SIM card also lets the network know that your phone is a valid device to use on the network. The SIM card is how your carrier knows who you are, what services you are paying for, and that the phone is yours.
These SIM cards are easy to remove and replace. If you purchase an unlocked phone, and you tell your carrier you want to use that phone with your plan, the carrier will simply provide you with a SIM card. Insert that SIM into the phone, give the phone and network a few seconds to communicate with each other, and you're good to go! Want to switch networks? Get a SIM from the new provider, swap it in your phone, and you're done.
This is especially valuable to anyone who travels internationally. Instead of worrying about how your U.S. plan works overseas (which can be incredibly expensive, or not work at all), you can purchase a SIM from the local provider, and your phone will work, all while you're paying the same prices as the locals. People who travel frequently abroad often maintain SIMs from the providers they use in each country and swap them out as they travel.
When it's time to buy a new phone, consider purchasing an unlocked device to give you a better user experience, more choice of carriers, and more control over how and where you can use your phone. Once you are comfortable with the freedom and flexibility of an unlocked phone, you may never sign another long-term carrier contact again.