Classroom Companion: Business

12.3.4 
 Potential Loss of Information
If a company changes its computer platform, the new system may not support the 
old software. This may result in loss of information or instigate major work to be 
done to convert the software. Even if this is not the case, the belief that information 
may be lost for some unspecified reason may be enough to cause lock-in. Database 
systems tend to grow because of the fear that the removal of an old database may 
cause loss of information or that deleted information may turn out to be useful 
after it has been removed.
12.3.5 
 Investments and Economic Lifetime
Most expensive equipment and systems usually have long technical and economic 
lifetimes and cannot be replaced without substantial cost. The manufacturer of the 
system may then earn money on maintenance, by upgrading the system with new 
functionality and by expanding the system. This is the case, for example, for tele-
communications equipment—long equipment lifetime (GSM is, for example, almost 
30 years old and still in operation), together with expensive training and mainte-
nance, may be an efficient lock-in of network operators over long periods of time.
12.3.6 
 Difficult-to-Terminate Contracts
Suppliers of services may impose real or perceived penalties upon customers trying 
to terminate the contract. Examples are:
5
Loss of interests on savings.
5
Paying back expenses for expensive training if the employer decides to quit the 
company before the end of a contractual period.
5
Binding time for mobile subscriptions; see 
7
Example 
12.4
.
12.3 · Lock-In Mechanisms

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12
 
► Example 12.4 SIM-Lock
SIM-lock implies that the smartphone will not accept a SIM from a different mobile 
operator either permanently or for a limited period. This is referred to as SIM-lock. 
Switching to another operator then implies that the customer must buy a new phone 
or pay a fee to the original operator to unlock the SIM. In the early years of mobile 
communications, such subscription contracts were common. This was one reason why 
operators heavily subsidize mobile phones, thereby reducing the direct switching costs 
for subscribers churning from a competing operator. This practice is now usually regu-
lated by the authorities stimulating competition and reducing the power of dominating 
operators. In some countries, binding is not allowed at all, while in other countries, 
binding is allowed for a limited time (e.g., 1 year). A supplement to SIM-lock is to offer, 
as part of the subscription contract, non-transferrable insurance of the phone in case 
of damage.
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