Apple (AAPL) has begun the process of "unlocking" its new 3G iPhone, a move that caused controversy with the earlier version of the handset.

The unlocked phone can be used on any wireless network. That takes business away from Apple’s cellular distribution partners, lead by AT&T (T) in the US. An unlocked iPhone does not force consumers to sign expensive subscription deals with Apple’s carrier affiliates. That, in turn, undermines their ability to make money.

According to the AP, "Apple Inc. is putting on sale unlocked iPhone 3G in Hong Kong, allowing people to use it with any mobile phone carrier."

While Apple makes nearly $700 off of each unlocked iPhone it sells, it may be in a weak position to damage relationships with carriers. The new 3G iPhone has had connection problems when it needs to communicate with high-speed wireless networks. That has undermined some of the brand’s power with consumers. It also opens the door for competing products such as the Samsung Instinct and phones powered by the new Google (GOOG) Android wireless operating system.

Apple has not helped itself by launching a flawed 3G iPhone into a bad economy. It appears to be in the process of further battering its handset prospects.

Douglas A. McIntyre

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