Why AT&T Wants To Keep the iPhone Away From Verizon 237
Hugh Pickens writes "Saul Hansell of the NY Times has an interesting post analyzing AT&T's earnings report and highlighting the enormous stakes involved in the renewal of its exclusive contract to distribute Apple's iPhone in the United States. Hansell does some rough calculations: 'If the average iPhone customer brings in $90 a month, or $1,080 a year in revenue, and the operating profit margin stays constant at 26 percent, that means an iPhone customer represents at least $561 in operating profit over a two-year contract,' says Hansell. 'Put another way, if the company gets 2.5 million new customers a year because of its iPhone exclusivity, the deal represents at least $700 million a year in operating profits — profits that it could lose if Verizon sold the iPhone, too.' With those sort of numbers, AT&T has every reason to make Apple an offer it can't refuse to keep its exclusive deal for another few years. Of course, the incentives for Verizon are presumably the mirror image, so expect Verizon to come to Cupertino, checkbook in hand, to see what sort of deal they can make. 'The benefit of somewhat more iPhone sales from wide distribution is likely to be swamped by a huge bid from AT&T to keep exclusivity, and an equally high bid from Verizon to win some (or maybe even all) of the business for itself.'"
Don't worry, AT&T (Score:5, Insightful)
You have some breathing room. It will take Verizon at least a year to figure out how to disable all of the iPhone's features so their customers have to buy them back one at a time.
CDMA / GSM (Score:5, Insightful)
I thought Verizon couldn't use the iPhone because it's GSM and Verizon uses CDMA. There isn't a CDMA version marketed anywhere in the world, they're all GSM. The only options in the US are AT&T and T-Mobile, any bid from any of the other companies would pretty much require them to front the cost of making a CDMA version of the phone since it'd only sell in the US.
Re:Apple (Score:1, Insightful)
Well...yes. Who else? They made the device, they should be able to profit from it.
Re:Don't worry, AT&T (Score:2, Insightful)
If Verizon tried to pull something like that, i'm pretty sure Apple would just renew their agreement with AT&T.
They want to sell as many units as possible. It hurts Verizon so badly not to be able to sell iPhones, that they'll cave, and not demand any features be disabled.
Sure, Apple would make a deal to turn off features in a heartbeat if they could make a profit from it and it wouldn't sully their brand.
Letting Verizon cripple the iPhone, which is advertised as a computing device, not just a phone, could do just that...
Verizon rejected.... (Score:5, Insightful)
From my perspective the commoditization of the networks can't happen soon enough. The network maintainers SHOULD be separated from the service providers, and the service providers should lease the network from the maintainers, like Virgin Mobile does now. This will increase competition, and be the best for the customer. The same thing should happen with internet service.
Re:Apple (Score:0, Insightful)
I personally will not buy an iphone, until I can get service from a company other that AT&T.
Re:Yeah God Forbid They Actually Have to COMPETE (Score:4, Insightful)
Re:Whoever writes the biggest check will lose (Score:5, Insightful)
Sounds a lot like....
Brett
Re:Verizon rejected.... (Score:3, Insightful)
Re:Aren't iPhone sales down? (Score:1, Insightful)
Comparing to a year ago is fine, but you know what they say about statistics... Let me tweak your comment just a bit (it's still factually correct):
Not nearly as impressive anymore, is it? I always get suspicious when I see a specific percentage figures used like Apple often do in their result announcements... It's childishly easy to find a single large figure that looks good (especially in a market like this) and the media and bloggers seem to all happily repeat the same number over and over: 123% growth! Wow, 123%!
Apple doesn't want to make different iphone models (Score:5, Insightful)
just like with computers, apple wants to make only minor variations of a model. for the iphone it's how much storage you want. with their computers it's only a few minor variations as well.
more choices means more expensive to produce, more testing, etc. Less profits due to higher costs.
and with CDMA, why make a phone for a dying technology?
Re:Don't worry, AT&T (Score:3, Insightful)
Apple has caved to AT&T in ways that sully their brand before.
The biggest example is the in-store-activation-only fiasco with the 3G launch. Compare and contrast that experience versus the original iPhone; when you could go in, plonk down your money, get the hell out of there, go home, and activate at your leisure. That idiocy alone pretty much guarantees that as soon as the iPhone is available on another carrier, I'll be dropping AT&T.
Apple has also pulled apps from the store at AT&T's behest. And despite by "unlimited 3g data" plan, if I want to download the arger apps or podcast episodes; I can't do so over the cellular data network; I have to connect to WiFi.
Granted... *I* know that none of that is inherent to the iPhone itself; but to AT&T's asshattery. But I suspect that there are plenty of people out there who don't quite make the distinction between the two; and who see Apple as something less than they should because of it.
cya,
john
Re:Verizon is in Apple's Best Interest! (Re: Apple (Score:3, Insightful)
I don't know. I just switched from Verizon to an iPhone and everyone I talk to tells me that my iPhone sounds clearer. And my house is in a Verizon dead-zone (I live about 10 miles outside of Boston -- there should be no dead zones that close to such a large technology based city).
Still have not dealt with customer service, but its not like Verizon's service was particularly great. And it was also from a big telco.
Re:Verizon is in Apple's Best Interest! (Re: Apple (Score:5, Insightful)
A Verizon iPhone would be in the best interest of Apple, even if they had to give up some profits. Why?
1) AT&T's network Sucks. I have heard many complaints that the iPhone is wonderful -- at everything but being a plain cellphone.
2) AT&T's customer service sucks. DNA from a big telco. Monopoly mindset. Nuff said!
3) Mindshare is king. If there were a Verizon iPhone, there would be more Apple iPhone mindshare. I hated to leave Verizon's better network and service for AT&T's suckyness, but I did it anyways. Lower that barrier, and many more people like me would have an iPhone. In the long run mindshare = more profits!
Experiences with cell phone companies are so varied, it's impossible to draw any conclusions approaching 1) or 2)... if anything, all you can come up with is "All cell phone companies suck."
For every "AT&T's network sucks" you'll have a "Verizon's network sucks", and the same for customer service.
As an example, my wife and I both defected from Verizon. I've been with AT&T for 6-7 years, and her since the iPhone 3G launched. She left Verizon because of several experiences with rude customer service, and spotty coverage.
Re:Aren't iPhone sales down? (Score:3, Insightful)
Look at any quarterly sales report from just about any company and you will see a pattern for the quarters, it's almost never a steady anything (rise, loss, flat-line) it's always fluctuating by quarter. That's why it's customary to compare against the same quarter last year, it would be the same part of the fluctuation and would more accurately reflect a rise or fall.
Re:Apple is an unamerican, anticompetitive company (Score:3, Insightful)
This comment is rated Funny. I've reread this twice, but I still don't understand the joke. Can someone explain it to me please?
Re:Don't worry, AT&T (Score:3, Insightful)
Re:Yeah God Forbid They Actually Have to COMPETE (Score:3, Insightful)
People know Verizon uses CDMA. What you don't realize is that the applications, or any host-level networking protocol, doesn't care what technology it uses. Converting GSM to CDMA involves plopping a new chip in, and rewriting the data link and networking wrappers used by the OS. Properly written APIs won't even be aware of what technology is used. Blackberry has GSM and CDMA versions of phones, so it's already being done.
And it's not like Apple hates CDMA. They went to Verizon before they went to Apple, and Verizon walked away for essentially business reasons (greed, I would say).
Re:Apple is an unamerican, anticompetitive company (Score:3, Insightful)
It's funny because free markets encourage monopolistic behavior, and any kind of antitrust activity is regulation of the otherwise free market.
Re:Verizon is in Apple's Best Interest! (Re: Apple (Score:2, Insightful)
It's highly unlikely they will ever go Verizon. It would require a completely new design for the phone since it would need a new radio to support their system. It's far more likely for T-Mobile to get the phone next. Who cares if you get a big check to go elsewhere when you spend that money redesigning something that'll ONLY work in the US? They went with GSM/3G design for a reason.