The term box breaker pertains to the mobile phone industry, where these are companies or individuals that exploit the networks use of subsidies on handsets to create their own profitable business.
Business model
Mobile phone networks fundamentally have three different ways to connect customers to the network, each of which needs a SIM-card that locks the user to the network and provides for a mobile phone number to be associated with a handset: contract, prepaid or SIM-only. Contract customers are committed to a minimum monthly payment for perhaps 18 months, and generally get their choice of any phone handset. Prepaid customers have a more limited choice of handsets, also tied to the operator, but they can stop being a customer whenever they like. SIM-only customers simply buy a SIM card and put it into a handset that they already own, and again can leave whenever they like.
There has been a huge growth in the prepaid business in the last few years, and the prepaid handset business has become particularly competitive, with the handsets sold through every kind of outlet including supermarkets and online. Competition has driven prices down so that today in the United States you can buy a GSM handset over the counter for $20 or, in the UK, even cheaper deals, down to £10.
Operators sell their own branded version of prepaid handsets, bundled with a SIM-card. The handsets are subsidized to make them more attractive. The assumption is that a customer will buy the handset and then activate with the SIM-card in the pack, which will eventually lead to the operator making money via top-ups on the phone. Box-breakers subvert this by buying the phones and unlocking the phone (SIM lock) so that it can be used with any SIM-card, i.e. on any network. Unlocked phones fetch higher prices, so can then be sold on at a profit, and can even be used by contract customers. Online selling (like Ebay) has opened a world of new selling possibilities, and phones are often sold cross-border, so that box-breakers are exploiting fluctuations in currencies and price differences between countries.
The box-breakers need access to a large quantity of handsets, and in the past they have often just bought these directly from operators' high street stores. This was a double-whammy for the operators, since they paid commission to their own sales people for reaching handset sales targets, but then also missed out on the revenue from the SIM-card being activated. Chains like O2 and Carphone Warehouse have clamped-down on sales to box-breakers, but there are many other outlets including catalogue stores and supermarkets.
Handsets that are in much demand are often targeted by box breakers and this is especially true for handsets that are available in some territories but not in others. Handsets can be bought as prepaid, unlocked and then shipped to the target market for a profit. This grey-market activity is a problem both for handset vendors and for network operators.