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. 

Report a problem with article
Next Article

Microsoft's Office Web Apps go live

Previous Article

New Zealand to get 100Mbps fiber for 75% of population by 2020

27 Comments - Add comment