China Unicom to lock iPhones of contract breakers

11/30/2010 Source: Global Times

China Unicom, China’s second largest wireless operator and the official partner of iPhone in China, warned on Saturday that – starting on December 1 – users of the iPhone service bundle who break the service contracts would be penalized.

China Unicom said a new version of contract on iPhone services will be used from December 1. The contract states that if users’ iPhones – including iPhone 3Gs 8GB, iPhone 4 16GB and iPhone 4 32GB models – are not used with the China Unicom numbers, severe penalties would be imposed.

China Unicom said it will check the usage of services, USIM (Universal Subscriber Identity Module) cards and numbers via its back office systems on a monthly basis. If someone is found to be using an iPhone with another operator’s SIM card, the user’s number and mobile phone will be locked and a penalty will be imposed. If the user doesn’t re-activate the number and iPhone within 90 days, the penalty will be taken from the user’s account, and the profile and account will be deleted.

Xiang Ligang, a telecom expert, told the Global Times that the new regulation has two purposes: mainly to curb speculative reselling of iPhones and partly to beat back China Mobile in the domestic market.

China Unicom said that some people signed bundle service contracts, which include iPhones and related 3G services. But some members of the public have resold the mobile phones and the services at a high price – even higher than the total value of the service bundle, which disturbs the market order.

Xiang said that China Unicom’s iPhone 4 service bundle includes an iPhone 4 and 5,880 yuan ($881.89) deposit. The iPhone 4 reaches a price of around 6,000 yuan ($899.89) on the black market, and the services valued 5,880 yuan($881.89) can also be sold to other China Unicom users.

As China Unicom is the sole partner of iPhone in China, domestically sold iPhones are expected to belong to China Unicom’s network.

However, China Unicom does not manage to maintain complete control over the market due to iPhones from unknown sources. This gives China Mobile opportunities to compete in this area even though China Mobile can provide iPhone users with only 2G services due to a different 3G standard.

China Unicom and iPhone use the 3G standard of WCDMA (Wideband Code Division Multiple Access), while China Mobile uses homegrown 3G standard TD-SCDMA (Time Division-Synchronous Code Division Multiple Access).

Li Gang, vice president of China Unicom, said that 1.5 million units of iPhones have been imported into China, 30 percent of which don’t run on China Unicom. Taking smuggled iPhones into account, 70 percent of the iPhones in China are using China Mobile’s network.

China Mobile also launched a free SIM card cutting service soon after China Unicom’s debut of the iPhone 4 service bundles, which aims to lure China Unicom’s iPhone users, according to industry experts. The free SIM card cutting service enables iPhone4 users to use China Mobile’s SIM cards, for the SIM cards used in iPhone 4 are smaller than usual. China Mobile has also established an iPhone customer service hotline and launched its own iPhone service bundles in some regions.

He Zhengsheng, founding partner of Beijing Honor Base Law Firm, said that China Unicom will violate users’ right to fair deals if it uses its strong position to change the service contract arbitrarily, as the new regulation is an imparity clause. Consumers also pay China Unicom fees even if they don’t use the services, he added, and the company should be more careful and considerate in making service bundles.

Xiang Ligang said that the new regulation will have no impact on members of the public using China Unicom’s services. But those who try to profit by reselling iPhones will be dismayed by the regulation. Xiang suggested that people who really want iPhones and China Mobile services can buy the mobile phones with no services in Apple Stores, or overseas, but no 3G services can be provided by China Mobile.

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