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An unlocked cellphone is a cellphone that will work with any network service provider. Mobile phone carriers typically offer subscribers a locked phone, essentially restricting its use to specific carriers and/or countries.
Network providers can lock a mobile phone by using a software setting that prevents the phone from accepting any subscriber identity module (SIM) except that associated with a particular carrier. The SIM is the microchip where subscriber data is stored, including the International Mobile Subscriber Identity information that is unique to every SIM and subscriber. With an unlocked cellphone, the phone will recognize a SIM card from any service provider.
In theory, most cellphones are designed to work with any carrier. However, many locked cellphones are given away or sold at highly discounted rates when purchased as part of a fixed service contract of one or more years. This allows the service provider to recover the cost of the mobile phone over the term of the contract.
Laws governing SIM locking vary from country to country. Countries such as Israel, Taiwan, Finland, and Hong Kong explicitly prohibit the locking of phones for the purpose of tying a subscriber to a network. However, most other countries have no specific laws on SIM locking.
For those under a contract with a network, unlocking services can be offered by the network provider after a certain period of time for a fee or as soon as the plan expires. Other carriers may unlock a handset that is still under contract if the account is in good standing and no unlock request has been made in the last 90 days.
There are many ways of unlocking a phone. These methods include entering a special code, using unlocking software offered by third-party services, or spoofing SIM data so that the phone will recognize the SIM as one associated with the carrier.