China Unicom's IPhone Policy Draws Attention From Gov't

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New contract rules at China Unicom meant to prevent Chinese iPhone 4 owners from reselling their phones have drawn the attention of the Chinese government, which has called on the network operator to respect consumers' rights.

China Unicom, the country's sole mobile carrier of Apple's iPhone 4, implemented the contract rules starting this month for new users who sign a contract to buy the device. If the iPhone 4 is found being used with a SIM card other than the one provided, China Unicom will shut down the user's phone number and "lock" the device, preventing it from operating.

China Unicom has taken the extreme measures as way to stop scalpers, who are signing contracts for the device only to resell it. But the country's Ministry of Industry and Information Technology (MIIT), has become involved by asking China's Consumers' Association to issue an opinion on the matter. The ministry has also demanded China Unicom "respect and protect the legitimate rights of telecommunication users, improve their service agreement and enhance service quality," according to state media reports.

The ministry was contacted on Friday afternoon about the comments, but would not elaborate any further. "We are currently trying to better understand the situation," said a ministry spokesman. China's Consumers' Association could also not be reached for comment.

The government's involvement comes as Apple continues to sell out of its iPhone 4 in the country. China Unicom has reported receiving more than 600,000 pre-orders for the device and has yet to meet the demand.

China Unicom responded to the ministry in a statement on its website, saying that it had already issued a report concerning the new contract rules to "relevant parties", which then replied with "understanding and support." Those parties then asked China Unicom to ensure it would protect user's rights and improve the company's service agreement and service quality, the posting said.

As the only official carrier of the iPhone 4 for the country, China Unicom has a big advantage in the market, said Mark Natkin, managing director of Beijing-based Marbridge Consulting. Now the company not only wants to protect that advantage from scalpers, but also from rival China Mobile, which has been offering users a way to make it so that the company's own SIM cards can fit in the smaller SIM card slot of the iPhone 4.

"In the end, MIIT may decide that the way China Unicom is approaching this is not consistent with current regulations. Or that they may just need to modify their policy slightly. Regardless of the concern, I don't think this will affect user demand," he said.

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