Definition of a Factory Unlocked iPhone

If you are considering purchasing a new or used iPhone, you may be wondering what the differences are between buying a locked iPhone, a factory-unlocked iPhone or a user-unlocked iPhone. Locked iPhones are cheaper, but they come with an added price. User-unlocked iPhones have no warranty. If you want a device you can activate on any carrier but still keep your warranty, consider a factory-unlocked iPhone.

Before Apple started selling factory-unlocked iPhones, all of the iPhones sold in the United States were "locked to" their original carriers, whether the customer bought the phone under contract or paid full price. The phones are locked using a passcode called a master subsidy lock or service programming code. The code prevents the user from accessing the iPhone's programming menu and using the phone on another carrier's network.

Factory-unlocked iPhones in Europe have always been available, but they only became available in the United States in 2011. The phones were locked to discourage and prevent customers from moving across networks without unlocking the phone. Unlocking the phone is not always easy and requires a long call with customer service or a store visit.

In the past, unlocking the phone was far more difficult but modern iPhones are available unlocked from the factory. A modern locked phone can also be unlocked through the traditional customer service lines. Loyal customers are not concerned with this issue but customers wanting to shop networks will prefer the unlocked version of the iPhone.

When the iPhone first launched in the United States, Apple and AT&T signed an exclusive contract. While it was still possible to activate the iPhone on another GSM carrier, it required hacking the phone using a process called jailbreaking. When you buy a locked iPhone, the carrier sells the phone at a discounted price as an incentive for you to sign up for a lengthy contract. The company recoups the price it lost selling the iPhone at a discount over the life of the contract. Breaking the contract early can result in a penalty to the user in the form of a substantial cancellation fee.

The main disadvantage of a factory-unlocked phone is the price. Since the cost on locked iPhones is subsidized by the carrier, locked phones are cheaper to buy up front. If you plan to use the original carrier for as long as you have the phone, and do not travel to foreign countries, you have no incentives for buying a factory-unlocked phone. The other disadvantage is the factory-unlocked iPhones still have the other limitations of locked iPhones. If you want the advantages of jailbreaking an iPhone along with the ability to activate it on another carrier, you still have to jailbreak.

The major advantage to buying a factory-unlocked iPhone is the ability to transfer the service to another carrier without jailbreaking the phone. Jailbreaking is a complicated process and voids the manufacturer's warranty on the iPhone. You can activate a factory unlocked GSM iPhone on any carrier simply by switching the SIM card. This allows you to use the phone on foreign carriers while traveling. Activating a CDMA iPhone is a bit more work — you have to use special software to change the phone's network settings, but you can activate a CDMA iPhone on any carrier that accepts this.