iPhone Runners Beat Apple to Beijing

Even as Apple toils to build exclusive deals with local phone companies and gradually release iPhones abroad, smugglers aren’t holding their breath, and the device is already taking China by storm. As many as one in three iPhones sold last year was unlocked and reprogrammed, the New York Times reports—a blow that could cost Apple $1 billion over the next 3 years.

Chinese entrepreneurs are paying tourists and flight attendants $30 per iPhone smuggled from the US or Europe; the $400 devices cost up to $600 on the Shanghai street and $25 to unlock. The new users who flout exclusive deals are costing Apple real money—AT&T pays Apple up to $120 a year per user—and potentially ruining the company’s business model. (More iPhone stories.)