Editorial

Speculation: Why we know AT&T is losing exclusivity of the iPhone

The Verizon iPhone is a rumor that never seems to die and in fact, multiple sources have claimed to have heard independently of each other that a CDMA iPhone does exist or is in the process of being fabricated. 

Before looking at the latest evidence, take a look at the past rumors that have circulated the web recently.  On March 30th the Wall Street Journal ran a story claiming that a CDMA iPhone is in the works.  The story cites that production will begin in September but the phone may not be readily available at that time. For reference, Summer (this is important later) in the northern hemisphere will end on September 23.

Engadget has also reported that they have been receiving information about a Verizon iPhone that will be launching this “Summer”.  They state “we've gotten surprisingly specific details both from Verizon employees and tipsters whose companies are supposedly under NDA with Verizon to test enterprise deployments of the handset later this year, and they're all sending basically this same message”.

Cnet has reports that the CEO of Verizon said that “specifically, Seidenberg said that if Verizon were to offer the iPhone, it would most likely be available on its 4G wireless network rather than on the current CDMA-based cell phone network.”  Verizon will be launching its 4G network later this year.

Now looking at some recent information that has come out about AT&T, they have raised their ETF up to $350.00.  While this could be a ploy to match Verizon who recently raised its ETF (early termination fee) for high end devices, it’s still an interesting fact.  More so, why did AT&T move up contract expirations 6 months early which allowed anyone with a contract that expires in 2010 to upgrade to the new iPhone?

If AT&T did have an exclusive agreement beyond this Summer/Fall, it would make no sense to allow this as AT&T is losing revenue by allowing early upgrades.  Besides, more than likely, those with iPhone 3G’s (not 3GS) are the ones whose contracts are expiring, they would be more likely to purchase the new iPhone anyways when given the opportunity. 

Further, a report by the Yankee Group states that AT&T under its original contract does not break even until the 17 month of a 24 month contract; which means, by allowing users to upgrade six months early, on some users, they won’t make any money. So why would AT&T give up six months of revenue to resign a two year contract that the end user would have likely resigned anyways?  It’s because they want to lock users in for another two years so that when they do lose the iPhone later this year, there isn’t a mass exodus from AT&T.  Short pain now, for a two year gain, makes good business sense. 

While there are external theories that the CDMA iPhone being produced in September is for other markets and that the US won’t see it anytime soon is plausible, Telus, a large and primarily CDMA provider in Canada, has said that it will be getting the iPhone, albeit it could be the GSM variant. 

Let’s remember that contracts change all the time in the corporate world, especially since AT&T had to give up something to secure the exclusive iPad 3G deal.  By allowing users to resign a contract up to six months early, limits the revenue earned on a contract.  There has to be an ulterior motive on why they are doing this, and it’s not because they just being nice. 
 

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ATT already has a android phone.. the Motorola Backflip... so i not sure if having iphone had anything to do with no android devices seeing as they have had it a few months now. Also, it would be nice if sprint would get a version of the iphone they would probably get a decent amount of new subscribers if they the price was right. also what would make sprint more appealing is the plans that they currently offer which are cheaper then both Verizon and Att.

Speculation and why we know do not belong in the same sentence.

Anyhow, I've been thinking about the AT&T 6 month early upgrade deal. At first I thought the same, that AT&T was worried about losing exclusivity. Now not so much. I think they believe this new iPhone is enough of an upgrade in hardware that people want it. What better way to generate demand? If people had to wait another 6 months or whatever, another phone on another company could release and get folks to leave.

The title of this article is kinda contradicting itself no?

I'm surprised they haven't jumped all over Apple for this. If this was a Microsoft stunt people like EU would be all over their ass. "Windows 7 E" anyone?

The problem is CDMA providers here in the US had bad reputations as well.

Verizon artificially crippling phones...etc. I moved to AT&T from Verizon for that reason. AT&T was better in that regard. It appears the iPhone is artificially crippled now.

ObiWanToby said,
The problem is CDMA providers here in the US had bad reputations as well.

Verizon artificially crippling phones...etc. I moved to AT&T from Verizon for that reason. AT&T was better in that regard. It appears the iPhone is artificially crippled now.

Verizon has really nixed that policy as of a couple years ago, I bought a tour 9630 that is fully unlocked (sim and GPS)....along with all their android phones are wide open too

bdsams said,

Verizon has really nixed that policy as of a couple years ago, I bought a tour 9630 that is fully unlocked (sim and GPS)....along with all their android phones are wide open too

Pardon my dumbness, but what is crippled?

Wannes said,

Pardon my dumbness, but what is crippled?

Typically with their own "feature" set incorporated into the phone. I can't speak for Verizon, but Bell phones here would have the custom ringtone functionality disabled, you had to purchase ringtones. Also, on my last Samsung phone, the interface itself was locked down; I couldn't change the theme although it was supported on non-carrier phones.

Brian said,

Typically with their own "feature" set incorporated into the phone. I can't speak for Verizon, but Bell phones here would have the custom ringtone functionality disabled, you had to purchase ringtones. Also, on my last Samsung phone, the interface itself was locked down; I couldn't change the theme although it was supported on non-carrier phones.

Wow, I find that crazy. I'm sure our law has something against such actions. Lucky for us.

I think it would do the public and AT&T well when they don't have the exclusivity any more. By having some fair competitors in the running AT&T will have to optimise their services in order to keep their old customers and obtain new ones. The current online remarks - even though the internet only shows the bad side - proofs that the current strategy is a misstep and that some action needs to be taken. When people decide to switch it will hopefully open their eyes and allow changes.

I'm not American citizen and therefore I have not encountered the problems AT&T has but I know the telecommunication market in my own country. Monopolization in such market is not the way to tackle new devices nor is it a way to obtain customers. Down here in Belgium the iPhone is sim-lock free allowing you to use it on any carrier network you like and the supplier still has the most customers, even though it's not the biggest carrier in Belgium. They do, however, make sure the customers get what they want by allowing continuous support and the service as promised. Customers want what they pay for and I feel, as outsider, that the problem with AT&T is just that: Customers don't get what they pay for.

We'll see what the future brings up but I hope Apple opens up their eyes and allows the iPhone to be carried and delivered by multiple carriers. I'm a big fan of fair competition.

I thought I read somewhere that the iPad deal with AT&T had a provision in it to prolong the exclusivity of the iPhone to AT&T... I hope I'm wrong.

" Telus, a large and primarily CDMA provider in Canada, has said that it will be getting the iPhone, albeit it could be the GSM variant. "

Of course it's going to be the GSM variant. Bell & Telus built an HSPA network last year with one of the big reasons being the iPhone.

Am I missing something? Telus already has the iPhone and it's a GSM version. They've had it for over a year now.

And why would Telus want the 1X/EVDO (CDMA) version? It's basically crippled and can't do simultaneous data + voice. In all probability, Telus will not carry the CDMA iPhone 4. If HTC released an HSPA+ Evo, I hope Telus gets that though, but they could technically carry the current CDMA version as well if they wanted to since they have both a 1X/EVDO (CDMA) & UMTS/HSPA+ (GSM) network.

Apple just added two additional 3G bands (800 and 900 which expands support for existing networks in europe & asia) to the iPhone 4 making it penta-band 3G.

I think that if at&t exclusivity was going to run out soon, that Apple would have put 1700 3G band into the phone as well so that existing stock could be sold through T-mobile USA as well without any changes being made.

profets said,
Apple just added two additional 3G bands (800 and 900 which expands support for existing networks in europe & asia) to the iPhone 4 making it penta-band 3G.

I think that if at&t exclusivity was going to run out soon, that Apple would have put 1700 3G band into the phone as well so that existing stock could be sold through T-mobile USA as well without any changes being made.

In New Zealand the iPhone is already supported on 4 networks and can be bought outright and unlocked so you can use it on any of the four networks. Its sad that the US still operates on a model that most countries threw out over 10 years ago.

rawr_boy81 said,

In New Zealand the iPhone is already supported on 4 networks and can be bought outright and unlocked so you can use it on any of the four networks. Its sad that the US still operates on a model that most countries threw out over 10 years ago.

Nice. We're half lucky in Canada as well as we have 5 carriers (3 companies) that carry the iPhone and allow them to be purchased unsubsidized, though we're stuck with 3 year terms if you want the 199/299 price points.

profets said,
Apple just added two additional 3G bands (800 and 900 which expands support for existing networks in europe & asia) to the iPhone 4 making it penta-band 3G.

I think that if at&t exclusivity was going to run out soon, that Apple would have put 1700 3G band into the phone as well so that existing stock could be sold through T-mobile USA as well without any changes being made.

Too bad the iPhone doesn't support the 1700 MHz band. If it did, I would dump Rogers and get an iPhone with WIND by the end of this year. The ETF would still suck, but WIND's plans are still cheaper.

rawr_boy81 said,

It's sad that the US still operates on a model that most countries threw out over 10 years ago.
You can buy the iPhone unsubsidized but aost no one does because of the cost. You pretty much have to be with at&t in the states anyway because T-Mobile isn't all that great especially since the iPhone doesn't operate on their 3G network. Plus it's quite easy to unlock the phone once you've jailbroken it.

I agree that those reasons add up to point to AT&T losing the iPhone.

Honestly, I hope they do. If anything, it should lead to a price war and it won't be on the price of the phone. It will be on the price of the services provided. The only reason I would go to Verizon would be if I was joining a family plan that made it more economical to do. I'm much more interested in going to Sprint, but I do not really have much interest in buying the EVO (I don't need 4G, and I don't feel like paying extra for it anyway, although it is in my area).

Honestly, the only thing that impressed me with the iPhone was the new screen. I would like that for reading text and they have probably successfully persuaded me to wait for a phone that has it, but not necessarily theirs (come on Windows Phones! hope they're not all OLED).

Anyway, the main reason I wanted to post was to play devil's advocate: AT&T could simply be raising their ETF to match Verizon (neither company cares for its customers), and providing early upgrades to buy possibly less expensive hardware than the original iPhone as well as tying people to a higher ETF and encouraging adoption of the $20 tethering. Even if they don't lose the iPhone, there are people like me that are waiting for the next big thing. Maybe it will be Android 2.3 or maybe it will be one of the first few Windows Phone 7's that get released, but whatever it is, the iPhone is starting to get much more serious contenders starting with Android 2.2 and the EVO and Droid Incredible. I want to tether my phone without jailbreaking my iPhone, and I could easily do that with a Palm Pre on Sprint (not that I want one, since it's now rather old hardware and I never found the phone attractive, but the software is good), and I could do that without paying an extra $20 to continue to use the "unlimited" data that they offer. At least their unlimited does not equal 5 GB like Verizon.

I hope I'm grasping at straws; I want a CDMA iPhone 4 for Sprint, or something with a similar quality screen (assuming it's as impressive as all of the websites claim).

I think other points help to point out that AT&T is losing its exclusivity: look at what they are doing with the iPad. They must have thrown the $30, no-contract unlimited data plan to Apple as a way to save themselves and secure the iPad 3G, and barely a month after the actual release of the iPad, we are watching AT&T reverse course and offer a stripped down 2 GB plan for $5 less, as well as dropping the unlimited plan (just for the iPad, and not for the iPhone) altogether. Something is up with that because if Apple wasn't removing their exclusive access, then I don't think AT&T would dare threaten the "awesomeness" of the experience. For anyone that uses the iPad to watch movies, over 3G, then their iPad experience just got a bit more expensive unless they lock themselves into an implied contract for unlimited data at $30.

For what it's worth, I'd be stunned if the iPhone 4 was modified to run on LTE when no one has a complete LTE network and I believe Verizon was having trouble running both voice and data at the same time on LTE--a key difference between GSM and CDMA networks. But, it's obvious that the exact same issue applies to CDMA, but at least CDMA is tried and true; I doubt Apple wants to be the first to bat for LTE rather than waiting for chips that don't eat batteries for breakfast as they experiment with it.

great response, one thing i left out is why ATT doesnt have any android based phones, i wonder if it has something to do wth Apple? And if so, ATT is getting an android based phone soon-ish...according to rumors

bdsams said,
great response, one thing i left out is why ATT doesnt have any android based phones, i wonder if it has something to do wth Apple? And if so, ATT is getting an android based phone soon-ish...according to rumors
I bet you're right. Although AT&T does have two Android phones (Motorola Flip and Dell Aero), at least the Flip is cripped by being locked into Android 1.5, and I haven't really heard anything about the Aero now that it's released.

After a quick search, it appears to be stuck in 1.5 land too, with hopes for a 2.1 refresh coming by the end of the year. Any Android phone not getting version 2.2 is definitely not worth buying.

pickypg said,
I bet you're right. Although AT&T does have two Android phones (Motorola Flip and Dell Aero), at least the Flip is cripped by being locked into Android 1.5, and I haven't really heard anything about the Aero now that it's released.

After a quick search, it appears to be stuck in 1.5 land too, with hopes for a 2.1 refresh coming by the end of the year. Any Android phone not getting version 2.2 is definitely not worth buying.

I should have said, any decent android phones but your point is spot on...

schiz-o-phren-ic said,
If I had a nickel for every time...

If one reads between the lines, Jobs said "carriers" a number of times during his keynote speech at WWDC10, and not specifically AT&T?.

Confirmation of sorts?

I can actually see some sense in all this, not that it bothers me at all, being in the UK and all, but everyone knew it was going to happen sometime. It wasnt if, it was when I believe