Efforts to unlock Apple's iPhone continued on Monday, with hackers claiming "very significant progress."

The locked iPhone only works with AT&T's EDGE network, and cannot be used with cellular service from other providers. Locked phones are generally used to help operators recoup the cost of subsidizing handsets for their customers, but AT&T is not subsidizing the iPhone, which is priced at either $499 or $599, depending on the model. Instead, the phone is locked because AT&T has a five-year agreement with Apple to be the sole iPhone provider in the U.S.

Unlocking the iPhone would be a boon for users locked into a contract with another U.S. carrier, or for users outside the U.S. who want an iPhone. While initial signs indicate an unlocked iPhone is possible, hackers must first overcome several challenges. One of those involves circumventing the authentication process in iTunes that both lets users register for an AT&T service plan and turn on the phone's features, including its camera and music player.

By Monday evening, U.S. time, hackers had made headway towards circumventing the activation process. But the phone remained locked at the time of writing.

"We have been fairly successful in spoofing iTunes activation processes. This should allow us to activate the phone," poster gj wrote on the iPhone Dev Wiki, one of several Web sites tracking efforts to unlock the phone. "It may in fact also prevent the SIM locking from occurring in the first place ... though we haven't verified this yet."

These advances allowed hackers to set and read data on the iPhone, including the ability to query whether a phone has been activated. "The rest of our work is legwork really, in understanding how certain functions operate with the rest of the phone," the site said, adding hackers are close to the ability to browse system files on the iPhone, a key step toward unlocking the handset.

Once the activation problem has been overcome, hackers will be faced with other questions. For instance, does iTunes have the ability to recognize a phone that was not activated for use with the AT&T network? If so, how will iTunes react?

After these questions are resolved, hackers can focus on unlocking the handset itself. That task is made easier by the iPhone's use of a removable SIM (Subscriber Identity Module), a smart card that contains a user's phone number as well as storage space for contacts and messages, instead of one that was hardwired into the phone. The use of a removable SIM card means the iPhone is locked using its firmware, which can likely be cracked.

While hackers race ahead to unlock the iPhone as quickly as possible, iPhone Dev Wiki poster gj criticized those hackers competing against each other to unlock the phone, saying the lack of cooperation had slowed progress.

"I can't emphasize enough how much this s*** stinks. Trust me, your ego is not as important as you think it is. If everyone worked together we would have been done by now, but instead we have a******* all over the world trying to 'beat us to the punch,'" the poster wrote.