Imagine customers are faced with these choices:

1) An $800 iPhone that requires $199 down payment and 24 monthly payments of $25. This phone is not tied to a plan.

2) A $199 iPhone that is tied to a $60 a month data plan.

I think the average consumers is still going to go for the second option simply because it seems cheaper. Voice and data plans for the phone are going to run around $50 anyway, so few customers would see the advantage of paying $25 + $50 when they could pay $60 per month and not be faced with the intimidating $800 price tag.

Even if the phone were cheaper and it worked out that a monthly plan was worse for consumers many might still opt for the phone married to the contract because they aren’t met with an initial price tag that’s so high.

I agree with you that the government should not be propping up failed anti-unlocking schemes. DRM, anti-unlocking software, and other such restrictions placed on technologies in order to get them to jive with existing business plans should be allowed in a free-market, but government should not come to the rescue of Apple when it’s schemes fail just as it shouldn’t prop-up the DRM on Blu-Ray players or anything else.

I think DRM is going to go the way of the dinosaur along with DHM—digital handset management. But shouldn’t we let it do so on its own? I believe that the market will find its way to open cell phones, but I think there could also be a place for DHM devices for many years to come. Why not let all market niches be filled instead of demanding that everyone conform to the business model that best suites the needs of the uber-geeks?

The problem with handset locking is that it requires enforcement — at public expense — to prevent handset unlocking. It’s not a “natural market” — it’s one that requires extraordinary incursions into the marketplace by government. It asks a regulator to place a heavy thumb on the scales in favor of this model.

I don’t object to them refusing to activate it without a service, what I object to is the idea that if you get it activated one way or another, and they didn’t have a written contractual agreement with you on how you would use it, they cannot legally cripple or shut off your property.