It was recently revealed that Verizon sells the iPhone 5 factory unlocked out of the box. Not only can you use the Verizon iPhone 5 on another CDMA carrier, but the device will also work on non-LTE GSM networks, like AT&T. U.S. carriers will typically unlock off-contract iPhones for free, but Verizon is selling the iPhone 5 unlocked with a two-year contract as well.
Buying an iPhone 5 at the full, unsubsidized price on AT&T doesn’t guarantee that it will be unlocked, but AT&T will typically grant unlock requests for customers in good standing. The same goes for AT&T iPhone owners who have fulfilled the life of their two-year contract.
There’s been multiple theories suggested to explain why Verizon is behaving this way, but the real reason is much simpler than you would think.