U.S. Markets closed

Who Really Owns Your iPhone? It May Not Be You

Rob Pegoraro
Contributing Editor

(Photo: Thinkstock)

So you just bought yourself a new iPhone 6S. Congratulations. But do you really own that new smartphone? Or is still the property of the company that built it and/or your wireless carrier? The answer depends on who made it and how you acquired it.

Today there are almost as many ways to buy a phone as there are phones worth buying. You can pay the full price upfront, or you can purchase it on an installment plan. You can buy it at a subsidized price (recouped through higher service fees), or you can lease the thing. Each of the four big wireless carriers offers at least two of those options, and Sprint gives you all four.

The math quickly gets confusing (see Dan Moren’s guide to buying a new iPhone for help picking up Apple’s latest), but it’s not just about the money. The choice you make also determines what you’re allowed to do with that expensive piece of personal tech sitting in your pocket. And you might not find all these restrictions to your liking.

Here’s how your property rights break down, based on what phone-procurement strategy you choose to pursue. 

Pay full price up front: You own it

The best way to guarantee you actually own a phone is to pay the full price upfront to the manufacturer. (This is my recommendation, by the way.) It ensures the device isn’t locked to one carrier — and also frees Android and Windows Phone devices from carriers who install unnecessary software on the phones or delay necessary software updates.

Paying full price also ensures that you can do what you want with the phone when you move on to your next one. You can sell it to somebody else and keep the proceeds, use it on Wi-Fi as a souped-up iPod Touch, or incorporate it into your next piece of postindustrial sculpture.

The downside? You’re out at least $600 all at once — more if you decide to buy an extended warranty to avoid costly repairs later when you inevitably drop it. And if you buy an iPhone, you still face more limits in what you can do with it than you would with other phones. More about that later.

Pay full price on the installment plan: They own it (sometimes)

Signing up for an installment-payment plan from a carrier, however, can erode your ownership rights. Under those offered by AT&T and T-Mobile, the phone stays locked until you’ve made the last payment. Sprint will unlock the phone for international use after 90 days, while Verizon’s phones always come unlocked.

The carriers can also exert control over the phone by making some features extra-cost premiums or not supporting them at all. Remember when AT&T held up iPhone multimedia messaging for months? I’m sure AT&T would rather you didn’t.

(Photo: CNET)

IPhone fans can also sign up for an installment plan from Apple. Apple’s iPhone Upgrade Program combines a new phone with AppleCare+ extended-warranty coverage and allows you to get a new model every year at no added cost. It also has the distinct advantage of giving you a phone that’s unlocked, not just internationally but domestically, from day one.

But Apple’s plan limits when you can qualify for a new phone (you have to make 12 lease payments) and what you do with your old one (you have to swap it for a new model). And you have to go to one of its own stores for each transaction, which one reader complained to me was 400 miles away.

Your carrier subsidizes the cost of the phone: They own it

Before T-Mobile decided to hang up on the industry’s standard practice and charge full price for phones in early 2013, all carriers subsidized the price of each phone — effectively brainwashing everybody that a new iPhone started at $199. They then made up the difference by charging higher rates for voice and data.

It was a bit like taking out a mortgage, except that the bank got to tell you where to build the house, how many bedrooms it could have, and what color curtains you could hang. 

(Photo: Yahoo News UK)

One unpleasant side effect of this was bloatware — useless software that came preinstalled on the phone and could only be removed through determined tinkering. Worse, the carriers would not just lock the phone but often keep it locked even when you were out of contract.

The carriers could also disable features the manufacturer had built in — see Verizon’s former habit of hobbling Bluetooth. (Some haven’t let go of that habit — see Verizon’s hemming and hawing about supporting Samsung Pay.)

In retrospect, it’s amazing (by which I mean appalling) how much abuse we (by which I mean I) accepted under the subsidy regime.

But even as subsidies fade, carrier ownership of phones isn’t going away. Last year, Sprint added a lease option to its iPhone 6 menu that lets you get a new one every year at no extra cost. That was sufficiently popular for T-Mobile to add its own lease deals.

I’m not a fan of renting my phone any more than I am of renting my music. At both Sprint and T-Mobile, you have to turn in the old phone to get a new one; at T-Mobile, the phone also stays locked until your payments total the list price.

I’m skeptical of yearly smartphone upgrades at any price, but losing traditional rights of ownership makes the cost particularly high.

You buy an iPhone: Apple owns it

It’s not just wireless carriers. Phone manufacturers can also cut into your autonomy by deciding which older models get system updates and security patches; Android vendors have been especially terrible about that.

But Apple goes a step further. Even if you pay full price for your iPhone upfront, Apple still asserts an extraordinary amount of control. It alone decides what apps can be distributed through the App Store, which is the only authorized way everyday customers can add third-party software to an iPhone or any of Apple’s other mobile devices.

Apple also goes to great lengths to ensure that you can’t hack an iPhone into a more open state. When car manufacturers say, “Thou shalt not tinker with our software,” annoyed drivers and mechanics often complain that it’s depriving them of ownership. 

Would you hit Apple with the same criticism? Or is that a reasonable price to pay for having a device that just works, most of the time, and may be the only computer you own that carries a near-zero risk of malware?

Email Rob at rob@robpegoraro.com; follow him on Twitter at @robpegoraro.