When someone signs up for a new cell carrier plan, they often get a phone at a free or reduced rate with their contract. The cell phones that come with a carrier contract are almost always locked cell phones. This means that they only work with that specific carrier's Subscriber Identification Module, or SIM, card, a microchip inserted into the phone to activate service. To put it simply, that person can only use that phone while still subscribed to that carrier's network and, if they want to change carriers, they have to get a new phone.

An unlocked cell phone will work with any carrier's SIM card. If an individual changes carriers, they simply have to insert a new SIM card into their unlocked cell phone, and the phone will be able to access that carrier's network.

Cell phone carriers use locked cell phones to their advantage. By locking the cell phones and offering them as part of their contract, they retain more customers. The customer cannot change carriers without getting a new phone and possibly spending more money. Because certain carriers may have contracts with specific cell phone manufacturers, a customer may not be able to get the phone they want with the plan they have. The carriers argue that locking the phones helps them offer the phones at a discounted rate. Still, these phones leave the customer with few options.

An unlocked phone, on the other hand, can be used for years, even if the customer decides to change carriers. The customer has more options as to the type and style of cell phone they choose because they are not pinned down to the phones offered by their carrier. While the customer will have to buy the unlocked phone outright, perhaps spending more money initially, over time, they actually save more money. Plus, unlocked cell phones are much more convenient.

Unlocked cell phones are offered by third parties and are not connected with the carrier companies. On occasion, a cell carrier will unlock a locked phone after a period of time, but these previously locked phones don't always work with all SIM cards, even once they're unlocked. As unlocked cell phones become more popular, the overall price of phones should come down.