Unlocked iPhones from AT&T may benefit FreedomPop and H2O

Startup FreedomPop may be one of the major beneficiaries of AT&T Mobility's (NYSE:T) decision to begin unlocking the Apple (NASDAQ:AAPL) iPhones of its non-contract customers.

AT&T began unlocking its non-contract customers' iPhones at their request on Sunday. The operator is requiring that a customer's account be in good standing and be off contract before it will agree to the unlocking. Further, customers who upgraded under one of AT&T's discount upgrade policies or paid an early termination fee will not be allowed to unlock their iPhone.

AT&T's sudden openness to unlocking will make international roaming and switching networks much easier for iPhone owners, and it is also likely to benefit certain MVNOs, such as FreedomPop and H2O Wireless.

FreedomPop is nicely positioned because former AT&T customers will be able to sign up for cheaper voice service from any SIM-based network operator or MVNO while leveraging FreedomPop's free or low-cost mobile broadband data service. FreedomPop, the "freemium" mobile broadband data startup backed by Skype co-founder Niklas Zennstrom, confirmed last month that when it launches service over Clearwire's (NASDAQ:CLWR) WiMAX network in late summer it will also release a hotspot case that can hold an iPhone 4 or iPhone 4S. The case will enable customers to share a mobile WiMAX connection with up to eight devices, including the iPhone. The case will technically be free, though FreedomPop will require a refundable deposit of about $75. FreedomPop customers will get to use 1 GB of WiMAX data at no charge, with an overage charge of $10 per GB beyond the first free 1 GB.

GigaOM suggests that Locus Telecommunications' MVNO H2O Wireless will also benefit from AT&T's move to unlock iPhones. H20 operates as an MVNO on AT&T's network and sells handsets for use with its low-cost voice and data plans but also offers a $10 SIM Starter Kit that can be used with any handset, including an unlocked iPhone. The MVNO's $60 Month plan includes 1 GB of mobile Web access, unlimited talk, text, and picture messaging, plus $10 worth of free international calling each month. H2O's business could pick up if a flood of unlocked SIM-based iPhones suddenly becomes available.

Although AT&T-locked phones will already work on H2O's network once one cuts down the H2O miniSIM to fit the iPhone's microSIM slot, some features such as MMS will reportedly not work on the locked handset. Also, it is not clear how widely known the capability of switching to H2O is among the general populace of AT&T customers who own locked iPhones.

Like FreedomPop, H2O Wireless also has a partnership with Clearwire, having recently begun offering a $50 no-contract, unlimited data service via Clearwire's WiMAX network. Thus, H20 might be in a position to copy FreedomPop by offering a data hotspot device for use with the iPhone, only H2O would also be able to combine the data service with its own cheap voice service via the wholesale deal it has AT&T.

T-Mobile USA, which is the only major U.S. operator to not offer the iPhone, could also benefit from AT&T's shift to unlock iPhones. Because T-Mobile's HSPA+ data services are offered in the AWS 1.7/2.1 GHz band, which is not supported by the iPhone, anyone taking an iPhone to T-Mobile would be limited to 2G data service unless they opt for a data backup such as FreedomPop's planned iPhone hotspot case. But at least T-Mobile customers would be able to access its lower-cost voice services and still carry an iconic iPhone.

Of course, Sprint Nextel (NYSE:S) and Verizon Wireless (NYSE:VZ) operate CDMA networks that are not compatible with iPhones used on AT&T's GSM-based networks.

AT&T's unlocking move also means travelers who bought an iPhone for AT&T's network will be able to use local SIMs in their iPhones when they travel to GSM markets, enabling them to pay local voice and data charges just like other owners of unlocked iPhones. Apple began selling an unlocked version of its iPhone 4 in June 2011 and an unlocked iPhone 4S in October 2011, with both carrying a starting price of $649 for the 16GB model.

Last week, numerous rural U.S. operators announced they would begin carrying the iPhone. They include nTelos Wireless. Alaska Communications, Matanuska Telephone Association, GCI of Alaska, Kentucky-based Appalachian Wireless and Cellcom. Most will subsidize the handset for contract customers, offering the iPhone 4S for $149.99 for the 16 GB model, $249.99 for the 32 GB model and $349.99 for the 64GB model. The carriers also said the 8 GB iPhone 4 will be available for $49.99. The prices charged by the regional carriers for the iPhone 4S and iPhone 4 are $50 cheaper than what Verizon Wireless, AT&T and Sprint Nextel charge for the same models. 

 For more:
- see this New York Times article
- see The Mac Observer article
- see this GigaOm article
- see this BGR article
- see The Register article

Related articles:
More regional carriers grab pieces of the Apple iPhone pie
Will today's next-generation MVNOs shake up the U.S. market?
Analyst: Apple's iPhone outpaces competition at AT&T, Verizon and Sprint
FreedomPop to allow customers to share data, earn more through customer referrals
Nielsen: Half of U.S. subscribers own smartphones
FreedomPop to offer 1 GB of free data via WiMAX-enabled iPhone case

This article was updated on April 10, 2012, to indicate that it is possible to use a locked iPhone with H2O's service, with some restrictions.

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