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Comment by yyyfb | Hacker News Reader

Markets exist where SIM locking has been prohibited for a long time (Wikipedia says Canada, Chile, China, Israel, and Singapore at least). Financing still exists in these countries.

The phone is absolutely not "collateral". The carrier does not take it back if you default (even if they could, they wouldn't be able to get anything of value for it). Unlocking is just an inconvenience that prevents enough people from churning that it lowers the risk of financing.

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They'd still make you pay off the full amount before you could close off your account. Pretty standard in the US. Locking is just an evil way to add more friction.

People with nothing don’t care if they get sent to collections, hence the need to have some control over the device while monies are owed for it. Just like vehicle interlocks for subprime auto notes.

Until you pay off the collateral, it isn’t your ownership, simply permission to use while servicing the debt.

Then the companies should not extend that loan/credit

Then a lot of folks who finance phones on cheap or free installment plans currently won’t get phones, simple as that. If regulators are fine with that, that’s a reasonable position I suppose. Carriers aren’t a charity to take on aggressive credit risk in these financial consumer populations. Incentives->outcomes.

What are free installment plans?

Currently the most used phones in the US are iphones.

If the actual cost is not hidden behind monthly payments anymore, but some users can not afford iphones, people might start to consider cheaper phone options.

Alot of folks won't have iPhones.

You can get a darn decent Android for 200$ unlocked, and if your really struggling a 50$ phone will get the job done.

No one will suffer if they can't get an iPhone.

A lot of folks also can't do math. I pay about $20 a month for my phone plan, and I paid $700 for my phone up front. AT&t isn't giving phones away, you end up on a more expensive plan that's around $80 or so and then they'll tack on 30 bucks for the phone.

If you're lucky the bill credits will cover the entire cost of the phone, but over two years you've still spent an addition 700$.

Most Americans can afford a $300 phone, and that's enough to buy a pretty solid Android phone or a used iPhone.

Carriers will just make people sign two-year contracts at a guaranteed rate, plus an early exit fee. This is how all kinds of predatory scams work; the carriers will do just fine and low-income people will continue to get the newest iPhone.

Yup, arguably in the wider scale, more accessible unlocked phones will become available on the used market, serving low-income people better. Right now there are many locked phones on the used market, both wasteful and difficult to navigate.

Here in Europe they will actually ask you for a proof of employment/income before they sell you the cell phone plan. If you are unemployed then your only option is pre-paid sim, and those usually do not come with phones.

In which country?

Rather typical in Germany (they usually do it via Schufa, but the end result is the same). No idea for other countries.

In UK is similar to Germany, but for the rest of EU they will simply ask for an ID and a bank account. Some just do a credit card check.

I believe he meant financing will become more expensive, which may actually increase the consumer cost over a fixed period (if the carriers are not willing to decrease the plan prices which are jacked up to compensate the contracts).

It's purely anti-competitive and anti-consumer.

There's been kind of a silver lining consumer benefit, historically. In early years, SIM locking allowed carriers in Europe to subsidize device cost based on expected revenue, effectively offering financing outside of the financial system, and benefiting a set of customers who wouldn't otherwise have been eligible for normal credit.

Yes, because in Canada at least, if you terminate your contract, you have to pay out the phone. That's how it's done. Really, it's not a complicated solution.

Sounds like a reasonable thing consumers should be able to do.

Consumer protections in Canada are terrible, but in the very least they're not anti-consumer.

And in EU, it is technically not prohibited, but haven't really been a thing for a long time.

One caveat: carriers do not really pay for your phones. Your phone bill would list two separate charges: service charge, for calls, internet use, etc., and then the monthly payment for your phone. If you add all those monthly payments over the whole contract period you get maybe 5-10% discount to the regular market price.

Yes but what is prohibited in Europe is to hide the cost of the phone in the payments of the cell plan. They must make clear exactly what part of your monthly payment is to pay off the phone and what part is the cell plan. That has basically blown up subsidised phones in Europe..

It seems that Croatian operators didn't get the memo about the discount.

Here the phones that you can get from your carrier and pay off on a monthly basis often end up costing more than in retail.

Collateral has two functions:

1. Incentivize the borrower to continue paying so as to not lose the collateral.

2. Allow the lender to recover some of the value of the loan.

A locked phone serves the first purpose because the lender can disable its primary function.

Yes. In Canada, the phones are not locked, but if you terminate your contract before the term (max 2 years) you have to pay the remaining cost.

What happens if you don’t pay?

I ask this out of genuine curiosity - I’m not sure what happens in the US either, I don’t believe they brick carrier-locked phones that a customer stops paying for but I’m not sure. But I’ve enough experiences with enough people to know this is probably actually a fairly common scenario and I wonder what the consequences are. (A surprising amount of the time, there are no real consequences.)

A phone contract is on one's credit report. If they don't pay, the phone company will try to recover the debt like any other debt (via nagging, and then selling the debt to a collection agency). It's not fundamentally different from not paying the bill at the end of the month.

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