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The rise and fall of the iPhone niche

Kevin McMindes of iWireless - Photo by Erik Petersen/Chronicle

“You can’t get an iPhone in Montana. It’s impossible.”

For four years, Kevin McMindes heard this line uttered again and again. People knew that Apple’s popular cell phone was only available on the AT&T network, and since AT&T service was not offered in Montana, there could be no iPhones. Simple logic.

Except it was wrong.

You could, in fact, get an iPhone in Montana, one with a 406 area code and service from a Montana cell provider. It was a relatively simple process, and Mc-Mindes helped so many people get iPhones up and running that in 2009 he decided to make a business out of it, iWireless in Bozeman.

For two years, McMindes’ business was the only cell phone store in Bozeman where a customer could walk in looking for an iPhone and walk out making calls on it.

Then came the announcements. First, AT&T revealed that it was coming to Montana and bringing iPhones along. Then, just last month, Verizon announced that it, too, was bringing the iPhone to Montana.

McMindes’ niche was eroding.

“I was getting people going with the iPhone from day one,” said the 30-something business owner, who spends his days sitting behind a desk made from an old barn door in a store filled with similarly repurposed decorations.

When the iPhone was released in June 2007, it was heavily hyped and in high demand. People all around the world wanted one, yet for months the phone was available only in America.

That didn’t stop people in other countries from finding ways to get iPhones. McMindes, without really meaning to, became a part of that supply chain.

It began with a friend in Germany, who asked McMindes to buy an iPhone for him and ship it overseas. McMindes, who was working as a computer consultant at the time, didn’t mind making a few extra bucks on the side to help a friend.

But it didn’t stop there. Soon, McMindes was shipping iPhones all over Europe, making a “reasonable” fee on each one. And when Apple put limits on how many phones a person could order, McMindes asked friends, cousins and even his mom to place iPhone orders for him to keep his little venture going.

The whole time — despite handling dozens upon dozens of iPhones — the Wyoming-raised Bozemanite couldn’t get one for himself.

“I was frustrated,” he said. “I wanted the neatest phone, but you couldn’t get one in Wyoming or Montana.”

That’s what he thought, until he learned about “jailbreaking.”

“People have been unlocking phones for years, not just iPhones,” McMindes explained. “People are getting more and more savvy to what a jailbroken, unlocked phone is.”

It works this way. There are many kinds of cellular phone networks in the world. AT&T used a kind of network called GSM. Phones on GSM networks use small, removable cards called “subscriber identity modules,” or SIMs, to connect the phones with the network.

SIM cards also let people move their cell service from phone to phone. In some countries, McMindes explained, people keep multiple phones and just put their SIM card into whichever phone they want to use that day. SIM-card networks are also more common elsewhere in the world, which makes it easier to use a single phone in different countries just by buying a local SIM card that links to the local cell phone network.

Through his research, McMindes learned that there was one carrier in Bozeman that had a GSM network and could host the iPhone: Cellular One.

All you had to do was “jailbreak” and “unlock” the iPhone — that is, remove the software barriers that kept the phone tied to the AT&T network.

It was a simple process, but it was a controversial one. First of all, jailbreaking voided any warranty on the phone. Second, Apple considered the practice a violation of its copyright on the phone.

A lawsuit from Apple wasn’t likely, but it wasn’t impossible either, so McMindes said he kept his advertising low key, a few ads on the local Craigslist and on eBay.

“I didn’t try to keep it overly hush-hush,” he said. “But it just sort of snowballed.”

It wasn’t until last year that the U.S. Copyright Office ruled on the matter, rejecting Apple’s claim and declaring officially that it was a phone owner’s right to jailbreak his phone if he or she wanted to.

It wasn’t too long before Cellular One noticed that somebody was sending an awful lot of iPhones their way, McMindes said.

“They were trying to figure out who was this person who was sending people over to them all the time,” he said.

In February 2009, he moved into a store off Bridger Drive for a year before moving to his current location in March 2010. Along the way, McMindes become an official Cellular One retailer, so he could offer people unlocked iPhones and activate them, too. The cell company affiliation also lets him sell other phones, like the Nexus One and other Android phones.

The iPhone, though, is still his bread and butter. McMindes said he has moved more than 1,000 of the phones over the past four years and has hundreds of current customers.

And just as it was when he got started, foreigners make up a large portion of his sales. Now, instead of friends living overseas, they are Montana State University exchange students buying phones for themselves and family back home.

“I haven’t really had to take one big leap of faith. It just progressed in baby steps,” he said. “I’m still flabbergasted that I’m sitting in my own cell phone store.”

That store is quiet most of the time — McMindes calls it “calm” and “quaint.” Fewer than a dozen customers come in the door each day, and not all of them leave with phones or contracts.

While he’d like to see more customers, McMindes counts having a quiet store as a blessing.

“A person can come in here and sit in a comfortable chair for 45 minutes and talk, rather than get the kiosk experience at the mall or the line at the corporate stores,” he said.

Still, considering he doesn’t have a corner on the iPhone market anymore , McMindes is trying to diversify. He offers other kinds of phones and is just starting to sell satellite TV systems. He’s also pondering a kind of buy-sell-trade depot for Apple hardware.

Even though Verizon and AT&T may be taking some of his iPhone business away, McMindes doesn’t look at those companies as his direct competition. After all, he said, customers are still coming to him, knowing full well they could easily get an iPhone from the corporate stores.

“There has always been a certain kind of person who doesn’t want to go to ‘the man’ and do things the way corporations want you to do them,” he said. “I think that’s promising, that the people who know are still coming to me.”