In the U.S., the iPhone Dev Team (not affiliated with Apple) has released an unlock code for iPhone 3.0 software. The free hack is called Ultrasn0w and allows users of original iPhones or iPhone 3Gs upgraded to the 3.0 operating system to unlock the handsets and install jailbreak applications so they can use the phone on T-Mobile's network . The team's hack doesn't work with the iPhone 3GS.

"As soon as you start messing with the innards of your iPhone with anything other than an Apple-sanctioned software release, there is always the potential of running into problems," said Michael Gartenberg, a vice president at Interpret. "In the U.S. in particular, jailbreaking is almost a nonissue because the only other carrier you can use the iPhone on is T-Mobile. If you unlock a 3G or a 3GS, you can't even run it on 3G because the hardware isn't designed for T-Mobile's 3G network."

International iPhone Jailbreaks

But what about outside the U.S.? In the United Kingdom, iPhone Unlocking Ltd. Is promoting software it says allows iPhone 3GS users to unlock their 3.0 OS and use their handsets on any network provider. Consumers in the U.K. are otherwise restricted to Apple's exclusive wireless partner, O2.

"Our new software will unlock any iPhone, in any country, running any firmware version, including the latest 3.0," said Mark Scott, director of iPhone Unlocking. "The software can unlock iPhones, even unlock the iPhone 3.0 that have been damaged by other unlocking methods, and also iPhones that have been previously unlocked but have been relocked due to upgrading through iTunes."

iPhone Unlocking opened its doors in August 2007 and claims to have sold more one million jailbreaks. The latest software download unlocks the iPhone 3GS using a proprietary program. Consumers have to hand over their iPhone to a company representative for unlocking, which takes about five minutes. iPhone Unlocking offers regular updates and the option to relock phones for resale as part of a lifetime guarantee.

Who Wants an Unlocked iPhone?

iPhone Unlocking is actually taking credit for the demand for iPhone 3GSes, hinting at a correlation between the consumer interest and sales of iPhone locking software. Despite the claims, Gartenberg said iPhone unlocking has a limited attraction.

"It's a relatively small community of enthusiasts and hackers who are looking to go beyond what Apple has offered and don't mind if, in the process, they are voiding their warranty or potentially ruining their devices, because for them it's about the experience, not necessarily the functionality," Gartenberg said.

Unlocked devices carry a heavy penalty in terms of cost because there's no carrier subsidy. That's one of the reasons Apple doesn't offer them in the U.S., Gartenberg said. What's more, you can't activate an iPhone without a contract in the U.S.

"Someone would have to buy an iPhone, cancel the contract, pay the penalty, unlock the device, all for the purpose of using it on T-Mobile," Gartenberg said. "For most consumers, that's not a viable option."