An unlocked cell phone refers to the phone that has not been locked by the carrier to work only with their network. However, like everything else in life, it’s not exactly that simple.

Without getting into the nitty gritty of the technological wonder that is the modern cell phone, let’s just explain some basics about the cell phone. Cell phone operates over radio waves, hence their wireless capability. However, in the world today, there are two major standards for how cell phone work and utilize the radio spectrum.

On one corner, stands Qualcomm, the owner of the CDMA (Code Division Multiple Access), and on the other, GSM (Global System for Mobile communication). Neither is compatible with the other. GSM as a standard, tend to be more widespread across the world, especially in Asia and Europe.

CDMA, however, is used by two large mobile networks in the US, Verizon and Sprint. AT&T and T-Mobile, on the other hand, operate on the GSM network. Unlocked phone doesn’t usually apply to Verizon or Sprint because of the way CDMA works, explained later.

Unlocked phone usually only refer to GSM phones because of the use of SIM cards. All GSM cell phone require the use of a tiny card embedded with a chip, aka the SIM card. SIM stands for Subscriber Identification Module; it is issued by the carrier and contains core information such as the assigned phone number and the directions to access the carrier’s network. Think of it as your key to the cell phone network. When you insert the carrier issued SIM card into your GSM phone, it will function with your phone number and network. Because all of the relevant information is contained in the SIM card, including any address book contact you may have added, if you insert the same card into a different GSM phone, that phone will be assigned with your phone number and address book. This is a powerful concept because if you ever damage your phone, you can simply insert the SIM card into a replacement phone and you’re ready to go. Conversely, if you don’t like the service from your carrier, you can simply insert a SIM card from a different carrier into the same phone. CDMA phones do not use SIM Cards, so this would not apply.

Economically, cell phone carriers operate differently here in the states when compared to Europe. In Europe, you usually bare the full cost of the phone, which can be anywhere from free to couple hundreds for the latest and greatest. However, in return, for paying full fare upfront, you usually get a cell phone that is unlocked and can be used on any GSM carrier. In addition, contracts are rare, and customers often switch from one carrier to another while keeping their phone by simply switching SIM cards. In the US, cell phones are usually subsidized by the carrier, keeping the phone prices low. For the benefit of the low phone prices, customers are usually required to sign an annual or two year contract with the carrier. The logic being that the carrier will recoup the cost of the phone over time through the service. The carriers go one step further by “locking” the phone to operate only with their network. So if you’re an AT&T customer with a brand new IPhone, you can’t just take the phone over to T-Mobile, even though it is technically possible to use it. So even after you completed your contract and paid for your phone through the service, your phone is useless without the assigned carrier’s network.

Why do phone companies do this? Simple, greed, this drives up tend reduce churn for the carrier. So if you want to switch to a new wireless company, you will have to purchase new phones just to use the service.

If you’re a frequent traveler, especially to Asia or Europe, you should purchase an unlocked phone or have your existing GSM unlocked. By purchasing a local GSM card in the country you’re visiting to make calls, you’ll be avoiding the high roaming cost associated with using your US based service overseas. Unlocks can be done by software, carrier (Rare), or some phone stores.