Editorial

Everything there is to know about the iPhone coming to Verizon

The iPhone and AT&T were a cute couple when first announced. Everyone was a little befuddled at the young couple as no one knew if Apple could make a phone that would live up to its standards. Fast forward a few years and AT&T grew its subscriber base by leaps and bounds because of the phone. Apple was also able to gain a tier one spot in the mobile marketplace. 

But like any good relationship, things eventually do come to an end and we have gathered all of the evidence that has recently surfaced and combined them into one logical conclusion, the relationship is about over.

Strongest Evidence:

1) While rumors have been circulating almost since the relationship first began that Apple would like to offer the phone on other carriers, we have heard little from AT&T about what it plans to do after it gives up the exclusivity agreement on the iPhone, that is, until now. 

AT&T in its latest filing with the SEC stated, according to electronista.com, “the carrier devoted a significant section of its warnings to the risks that occur when ‘exclusivity arrangements end’” and it doesn’t take much of an imagination to figure out which exclusivity agreement they are referring to. While they do not specifically call out Apple by name, as of now, it’s the only agreement we know of that could have a potential impact to AT&T’s revenue that would warrant such an inclusion in the SEC documents. 

If the evidence wasn’t clear enough, AT&T also states that “we believe offering a wide variety of handsets reduces dependence on any single handset”. Clearly they are talking about diversifying their handset lineup, which is odd for them to announce, considering they have always offered one of the widest selection of mobile phones compared to other carriers (before Android). 

2) Apple is a huge company, they have a lot of resources and the ability to single-handedly put constraints on supply chains. They have shown this with the iPad screen and also with the memory that is used in the iPhone. When Apple places an order for a component for an upcoming launch, it's hard for them to hide this fact. 

As such, TechCrunch has uncovered that there has become a constraint in the ordering of CDMA capable chips from Qualcomm. Qualcomm is the dominate (read: only major producer) supplier of CDMA chips to the world as it owns the rights to the platform. TechCrunch, through a trusted source, has learned that Apple has placed a large order for chips to be delivered this Decemeber. This lines up nicely with the Wall Street Journal reports that the Verizon iPhone will land in January.

Good Evidence:

3) CNET reports that the CEO of Verizon stated 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

4) 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 winter, 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 anyway 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 anyway? 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. 

Weak Evidence:

5) It’s no secret that every year carriers will release a phone around the holidays to entice shoppers to give them their hard earned cash. In the past couple months Verizon has dropped two blockbuster phones into its stores, the Droid Incredible and the Droid X within a relatively small time window. Why would Verizon drop two phones that drew a lot of attention so close together? 

While it’s possible that they could have other hit phones in the pipeline, it would have made more sense to release one of the phones around the holiday shopping season rather than release two phones around the same time that are essentially competing with each other. That is unless they are going to unveil something even bigger this holiday season and did not want any other phones competing with it. 

The only thing we can say for certain is that AT&T has admitted they are losing exclusivity on a phone in the very near future, while they haven’t specifically said which phone, it’s hard to imagine losing exclusivity on a BlackBerry model would affect their revenue stream like losing exclusivity on the iPhone.

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