U.K. company says it's close to unlocking iPhones

U.K.-based Uniquephones has been working around the clock to figure out a way to unlock iPhones so they can be used with carriers other than AT&T

A company that unlocks cell phones in Europe said it is close to having an application that will allow customers to unlock their Apple iPhones so they can use SIM cards from carriers other than AT&T to activate the phones.

In an interview this week in New York, John McLaughlin, founder of Belfast, U.K.-based Uniquephones, said he has engineers working around the clock in several countries who are close to cracking the complex security system Apple has set up to ensure customers can only use iPhones with AT&T Wireless service.

Hackers cracking iPhone activation process ]

The race by hackers to unlock iPhones has been on since the phone was released last Friday. Currently, AT&T Wireless has an exclusive deal with Apple to provide service for iPhones, and customers must agree to a two-year service plan with the company. However, customers have complained that the carrier's wireless service is slow, and according to McLaughlin, there has been tremendous interest in the ability to unlock the phone.

By Sunday night, he said, more than 150,000 inquires had come in through the Web site he set up to request IMEI (International Mobile Equipment Identity) numbers from customer iPhones. While not everyone would volunteer their IMEI numbers, they still expressed interest in learning how to unlock their iPhones, McLaughlin said.

When the site was set up, he thought it would be an easy case of supplying unlock codes from AT&T to unlock iPhones. But sometime over the weekend after iPhones went on sale, unlock codes from AT&T for about 6,000 iPhones disappeared from the carrier's database, and McLaughlin's team also realized it would be a more complex matter than simply providing an unlock code to release iPhones from AT&T's grip.

There is at least a two-step process to unlocking an iPhone, McLaughlin said. His team has been able to unlock the activation process to the AT&T SIM card specific to an iPhone so another AT&T SIM card can work with the phone and be activated through iTunes. However, any attempt to change the firmware of an iPhone so it can support another carrier's SIM card breaks the phone, he said. The key to unlocking the phone is breaking the encryption process that protects the token sent through the iTunes activation process to an iPhone's firmware, McLaughlin believes.

Norwegian hacker Jon Lech Johansen, also known as "DVD John" because he cracked the DVD encryption scheme, claims he's been able to unlock the iPhone beyond the activation process that requires an AT&T account but said the device can't be used as a phone when that happens.

Even after an iPhone were unlocked, it still could only work on carrier networks that support the GSM network, which is what AT&T's service is based on. In the U.S., T-Mobile is the only major carrier on a GSM network. And there is no guarantee Apple will not lock down the phones again in a future firmware update through the iPhone synchronization process or create a new way to unlock the next wave of iPhones they put on the market.

That is, in fact, exactly what one analyst said will happen. "I assume that someone will succeed in unlocking the iPhone," said Avi Greengart, principal analyst, mobile devices at Current Analysis. "I also assume Apple will close whatever loophole is open the next time they synchronize [the software]."

It's also likely there will be complications with special features of the phone that are designed to work only on AT&T's network, such as the visual voicemail feature, he said.

Greengart said that he sympathizes with those that might want to use an iPhone with another carrier but "that's not the way the product was designed."

"Exclusive agreements are not that unusual in this industry at all," he said.

Aaron Santell, an iPhone user in New York, said that he would have preferred to use the service provider he has for his Blackberry device, Verizon Wireless, when he purchased an iPhone. But using AT&T's service is "a small price to pay" to use a device that provides such a rich user experience as the iPhone does, he said.

As one might imagine, unlocking phones is a thorny issue with carriers, which certainly don't condone it. Carriers will give users unlock codes upon request for a fee, but they don't encourage the practice.

In the U.K. and Europe, third parties have been unlocking handsets for several years, although there is no law that specifically protects them, McLaughlin said. However, in the U.S., it is legal to unlock mobile handsets under an amendment to the Digital Millennium Copyright Act that was passed in November 2006.

McLaughlin said that even though it's legal in the U.S. to unlock phones, he anticipates that if his team is successful, Apple may take legal action against them based on their tinkering with the firmware. "They'll probably come after us for copyright infringement," he said.

Apple did not reply to requests for comment Thursday.

McLaughlin plans to charge customers about $49.99 for software to unlock iPhones. Even if Uniquephones is not the first to offer unlocking capability, it won't be hard for them to replicate what others have done once the encryption is cracked, he added.

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