When you purchase a cell phone on a two-year contract in the United States, you get a substantial discount that ranges from half to all of the phone’s retail price. While this might seem like a good deal, the balance of the cost of the phone is built into the provider service payment over the life of the contract. Just like a home mortgage or a car loan, you will pay a hefty premium for the privilege of spreading the payments over a two-year period. Conversely, many Europeans are used to paying full price for their phones and subsequently enjoy lower service charges while paying month-to-month.
Nokia recently introduced the N900 phone, billed as a mobile computer, and it is available only in the unlocked version. With holiday cash to burn, Dayton, OH resident Nathan Coffee tracked down the popular Nokia N900 online for well below retail and included free shipping, but what really excited him was the freedom his new purchase would bring.
"I'll never be stuck with a two-year contract again," Coffee said.
And he's right. Here's how it works: All unlocked phones contain a SIM (Subscriber Identity Module) card, a small rigid card that fits inside the phone and which can be transferred from one phone to another. The SIM card stores provider and owner information. In this country, only AT&T and T-Mobile offer unlocked SIM cards for purchase.