according to BoingBoing,

Analyst reports circulating in the news today indicate that about a million iPhones have been unlocked to operate on networks other than AT&T — and that’s said to be roughly 27% of all the iPhones sold in 2007.

This is quite a dilemma for Apple:

Unlocked iPhones generate 50 percent less revenue and as much as 75 percent less profit than those tethered to service contracts, Sacconaghi said. If 30 percent of the 10 million iPhones Chief Executive Officer Steve Jobs plans to sell this year are unlocked, Apple’s earnings may be lower by about 37 cents a share in each of the next two years, Sacconaghi said.

The story would have us believe that if Apple sells the product that people want (unlocked phones), then they lose significant earnings. This may even be true, but I personally believe that what we’re seeing here is the below-the-waterline hole in the wireless business model. If you consider this list of locations where people are quite willing to pay at least list for iPhones, then I would argue that Apple is throwing away a golden opportunity to grow their global brand presence and continue to drive demand across their product line.

Right now, the iPhone is, hands down, the slickest phone on the market. I’ve either had or gotten to play with pretty much every smart phone out there, and for overall user experience, the iPhone blows them all away in terms of slickness and cool factor. Yes, I’m aware of the numerous criticisms of broken or missing fundamental features, but I don’t know a single iPhone owner who is so irritated by those things that he or she considers it a bad purchase, even at its relatively high price point.

Now the thing that I’m really curious about is if Apple made a good risk decision by following the (U.S.) carriers’ subsidized lock-in business model.

Did they lack sufficient confidence in the strength of their product and brand? Or is this (more likely) a symptom of a “razor and blades” business model, only with a very expensive razor, and if so, what does Apple think are the “blades” of the cell phone market? Were they unsure that they could bring a successful phone to market, given the fiasco of the design-by-committee joint venture with Motorola, the ROKR.

Digital economies built on scarcity are withering and dying–witness the music industry, whose model has collapsed to the point where the middlemen of the Major Labels and the RIAA really have nothing but the threat of lawsuits against customers and a historical monopoly over access to audiences

Given the rate at which people are willing to risk voiding their warranty and “bricking” their phones with a bad firmware hack just to gain functionality that they believe they deserver, I find it hard to believe that Apple wouldn’t have been better off selling an unlocked, unsubsidized device and sold blades based on findability (like iTunes), authenticity (the one upside of walled gardens/captive portals), and patronage (the Cult of Apple) rather than scarcity.

Is this a risky move? Perhaps, but I would argue that the trendlines are on their side, and remind everyone that risk is ultimately the downside of reward, so by limiting their risk, Apple also limited their potential success.

Could it be that Apple considers those iPhones to simply be the low-end version not represented in their product mix we see on their website?

In other words, they have a $199 iPhone, but only selling in small quantities in undeveloped markets (read cell providers)?