Why mandatory unlocked phones ain’t happening here?

The recent report of Chile implementing the mandatory unlocking of all phones that are sold in the country this month got me thinking if this is possible in the Philippines. Of course it’s possible but I doubt it will be happening anytime soon.

The current norm is that all mobile phones and most mobile devices (the iPad 2 3G isn’t locked with Globe) being sold and provided by local telcos are given out to subscribers locked for the entire contract period.

In other countries, like Hong Kong or Singapore, handsets sold by telcos are required to be unlocked. Despite that, you wil still see gadget stores in Mongkok, HK selling locked phones although at a much cheaper price than the international versions.

The rationale behind locked phones is that since the carrier is the one subsidizing the price of the handset, they wanted their subscribers to use the device on their network and recoup the amount from usage of the plan or credits. The same is true to prepaid kit plans.

But in a country like the Philippines where prepaid users outnumber postpaid users 5 to 1, Filipinos tend to get their phones elsewhere and just buy a Php40 SIM card in the nearest sari-sari store. That means only 20% or less of the handsets are locked to their respective networks.

In some instances, having a handset locked ot a network is often used as a marketing tool. This is a huge deal especially when specific handsets are very popular — like the iPhone 3G or Galaxy S on Globe or the Nokia N9 or the Galaxy Note on Smart. In the early years of the iPhone in the Philippines, every time you see someone using an iPhone 3G, you’d definitely think they are Globe subscribers. These folks are like walking billboards — free advertising.

If and when mandatory unlocked phones be implemented in the Philippines, we might see those postpaid plans and prepaid kits to end up much more expensive than what they are right now. That’s the most likely scenario.

However, I believe that once your contract has expired with your carrier (normally after 24 months), you can now demand that your handset be unlocked (although I don’t think a lot of people know about this). This is why carriers often provide additional incentives to renew contracts or offer retention plans. (Update: Just got off the phone with one of the reps from a local telco and they explained the unlocking is not done on their end but on the manufacturers side.)

What I think is a more important move is the number portability scheme which allows a subscriber to bring their number to any carrier when they switch or move between telcos.

Update: After talking to both reps of Smart and Globe, both clarified that the devices shipped to the by the manufacturers are already locked to their network. It’s up to the individual subscriber if they want the device unlocked on their own accord, whether or not the contract has expired or not. Unlocking will need to be done by the manufacturer or by 3rd party.