How iPhone 5 Could Free Consumers From Wireless Contracts

Once Apple releases the iPhone 5, mobile carriers in the U.S. might actually see how much sense it makes to release consumers from their expensive and constricting wireless contracts. That's because Sprint, AT&T and Verizon collectively lost more nearly $10 billion on iPhone sales over the last three months of 2011. That's the time of year they sell the most phones because of the holiday shopping season. But, because the big three pay nearly $600 to Apple per iPhone, those holiday sales just mean more money lost due to their subsidized cost.

In the labyrinthine world of wireless contracts, this strategy is supposed to eventually pay off for mobile carriers because of the length and price of those contracts. As the months roll on, the contracts add up to cover the cost of the initial cost paid out by the carriers, at least in theory. The problem for those carriers then, is keeping up with each other's 4G networks, promotions, new devices and, of course, consumer demands. In other words, it becomes an arms race, and that's exactly why Sprint brought the iPhone on-board in the first place. Too many people were leaving because there was no iPhone available.

If mobile carriers were to simply do away with the contracts altogether, they wouldn't have to pay out all that money up front for the popular iPhone. Consumers would pay a higher price for their phones, but they would be free to shop around for their data plans and minutes. Additionally, this move would force carriers to focus more on their core service; providing the best voice and data connections to people's devices. This is actually how most other countries' wireless carriers operate. There's no contracts, but the devices are not-subsidized and cost much more. People could see just how much the devices cost, and take some of the guessing and hand-wringing out of choosing a carrier. Tell us in the comments if you have an unlocked phone and what you think of contracts.