To understand the concept of an unlocked cell phone, you must first understand what a SIM card is. SIM stands for Subscriber Identification Module, and it is a tiny data card with a microchip that stores data about the phone's subscriber. A SIM card is issued by the cell phone carrier. It provides cellular phone service by "activating" a phone that it is inserted into. A locked phone will recognize a SIM card only if it is issued by one particular cell phone carrier. An unlocked phone will recognize a SIM card regardless of cell phone carrier. "Locked" basically means that the software is set to keep the cell phone working with one and only one cell phone carrier.

Locked phones are a way of life in many parts of the United States where there are plenty of carriers that offer very inexpensive phones with their cell plans. The phones, which may have a great range of technical capabilities, are locked so that a user can't pick up a subsidized phone for next to nothing and then switch to another carrier with a lower priced plan.

Locked status, however, isn't always forever. After enough time has passed, a carrier may agree to unlock the phone if the user pays a fee. The problem is, that because of proprietary software settings in locked phones, the same phone may not work properly with another carrier, even after it has been unlocked.

If you're a cell phone customer, the common practice of carriers making proprietary settings and locking phones can be quite annoying because from the customer's point of view, it kills the whole purpose of having a SIM activated phone. Eventually consumer complaints made a bit of a difference.

In 2004, consumer complaints resulted in a class action lawsuit filed by the group FTCR, or Foundation for Taxpayer and Consumer Rights. At best, the lawsuit wanted phones to be unlocked from the beginning. At worst, the group argued that the phone should be unlocked after the customer's initial phone contract expires.

There are ways that consumers can get unlocked phones that do not have proprietary settings. They can buy new unlocked phones from a third party. This can be pricey, however. Phone buyers don't want to pay a premium for what they feel is an instrument in its original default condition, particularly when it can be had for free (or close to free) with a phone contract. Then again, the unlocked third party phone will work with any cell phone carrier that uses SIM cards.

Because of the great demand for unlocked cell phones, sometimes third parties will unlock your phone in exchange for a fee. That doesn't necessarily mean that the phone will work right, because there could be proprietary settings already on it that can't be changed. Some people cope with this by finding instructions on the internet on how to hack numerous brands of phones. Problem is that a phone that is improperly unlocked might not work at all.

In the United States, AT&T Wireless and T-Mobile operate on what is known as the GSM network. GSM stands for Global System for Mobile Communications and is one of two competing phone network technologies. The other is Code Division Multiple Access, or CDMA (please see our cell phone buying guide for more information on these technologies). Phone carriers that use the GSM network use SIM cards. The CDMA carriers don't use SIM card phones. The CDMA carriers in the US are Verizon, Virgin Mobile, and Sprint PCS.

It is clear to see why unlocked phones are highly desired by phone customers, but disliked by cell phone service providers. In the U.S., about 5% of phones sold every year are unlocked and can be bought from vendors other than carriers. Worldwide, unlocked phones make up about half the phones sold.
 
In Asia, 80% of phones are sold independent of a carrier. In Europe, about 70% of cell phones are available unlocked. There are several reasons for this discrepancy based on continent. The main one is that most of the world's cell phone providers use the GSM network, which allows for use of SIM cards. In the U.S., phones made by Sony Ericsson and Nokia, companies that have concentrated on making GSM phones, can only be used by two of the nationwide U.S. carriers, T-Mobile and AT&T.

We hope this guide has helped you learn more about what an unlocked cell phone is and if you still have any other questions please feel free to contact us and we'll be more than happy to help. You can also use our search feature above to help find cheap unlocked phones for sale.