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Why AT&T Wants To Keep the iPhone Away From Verizon
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.'"
What this means is that after the bidding war that will ensue when Apple's contract with AT&T runs out, Apple will end up getting the bulk of the profits.
The cake is a pie
They might actually have to deliver that iPhone you see in the commercials. I'd love to trade with THAT iPhone but if they used mine in the commercials the commercial would have to end before it brought Slashdot up on the edge network...
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
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.
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.
I would personally like to see the iPhone available on other carriers, but at least for now this doesn't look likely as Tim Cook has stated that he is happy staying with AT&T and GSM technology: http://www.appleinsider.com/articles/09/04/22/apple_happy_with_att_indicates_no_plans_for_cdma_iphone.html
It makes sense for him to say they are happy with ATT. If he said they were not happy or if they were planning on offering to other customers, potential iphone buyers may be tempted to wait it out.
I think, at least until another model ships, iPhone sales have peaked in the US.
is the price of the iphone should drop because AT&T is paying more into the kickback fund at Cupertino.
I don't see this as a particularly bad thing, as long as AT&T doesn't hike their contract cost to offset it. Chip away some of that 26% and put it back in my pocket thx.
I work for the Department of Redundancy Department.
This is really too bad. Out of every carrier I've used in the last 5 years -- Edge, US Cellular, Sprint, Verizon, T-mobile, then AT&T -- Verizon has seemed the most solid. I am always on the brink of going back to Verizon, were it not for the boring but entirely functional razr. No other phone seems worth using for cool factor other than the iPhone. Too bad it's proven to be such a trade off for reliability.
Rim, Nokia, HTC, Sony-Ericsson, Samsung, every phone maker is bringing out competing products, if they have not already.
There is maybe 1 more year of dominance by Apple here, then it's over.
If I was ATT, I would let Verizon overbid to get a share of the I-phone market, then promote competing products that have the same capabilities.
It would help if they upgraded their network more quickly to handle the traffic though.
It makes sense. The iphone has grown on me but not enough to switch to AT&T. if Verizon gets it then it will be something I consider
Since they will be paying some ridiculous amount to Apple, they have no reason to give good deals on the phone and service. Like AT&T they will have an "iPhone" tax. $70 a month seems high to me, yet is the cheapest plan you can get. Why not a $40 more limited plan? They don't nearly as much then!?!
Verizon rejected the iPhone in the beginning, and they will do it again for the same reason: they want control over their network. They don't want to become just a dumb pipe, because then they are a commodity. Apple having complete control over the iPhone sets a dangerous precedent, it was the first time a phone maker had so much control.
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.
Qxe4
Before the iPhone, and after all the mergers of the mobile companies in the US, ATT and Verizon had about each shares, maybe a bit more than 25%, and t-mobile was just barely in double digits, and the new companies, like boost and cricket were barely on the radar. It is my opinion that these later companies are where the growth is going to be, not Verizon.
The only reason people are talking about Verizon is because people know with Verizon want an iPhone. I don't know why. Everyone says it is just another phone, and they can go get a G1 from t-mobile, or a superior blackberry from Verizon, or a cheap phone from the other dealers, but some people seemed really annoyed they can't get a iphone from verizon.
There is a reason for this. In the US every carrier wants a custom phone, and they want a custom phone with sub custom features. You know how you can update the phone now? It would be more difficult and more confusing if Verizon got it pesky fingers on it.
The other reason is that there would be little benifit to apple. There would be no differentiation, but there would be added expense of producing a phone with either extra circuitry or two phones, again confusing the public.
Here is what te next iPhone should do. A $99 phone sold through boost and cricket. Here is why. Right now it is reported tat 90% of teens with an MP3 player has an iPod. As they grow up, they will continue to buy iPods, and will likely upgrade from the models they use know. They start with a shuffle, continue with a mini, then buy an iPhone. It works for cigarettes, why not music players. It would make sense to apple to make a phone so that the first phone will be an iPhone mini.
What do many parents want? Control over the phone. We have parental controls in Mac OS X, why not the iphone? What do kids want, unlimited text. Both want no contract. Some families have the resources to pay $200 for a phone and already have a family plan, but other do not. Will Verizon allow apple to leverage this base? No. It will only help with the business user than wants a blackberry, so why bother.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
There is NO WAY I'm paying the exorbitant fees for at&t/apple.
I KNOW I'm not alone. Most of my friends/family/coworkers are all agreed: They're waiting for an iPhone killer that isn't encumbered by DRM and the lock in. Plus the monthly plans are way too high.
The moment there's a good iPhone killer and cheaper monthly plans (I'm looking at what the G1 SHOULD have been), everyone will get that.
My dream phone:
Looks like an iphone, but it has:
a full FOSS stack, including media viewing/listening, an SDHC slot, a headphone jack, a standard USB jack, GPS, a SNES emulator, and a camera on both sides so I can skype where wifi is available.
It's not rocket science, you could have this phone out in numbers for $100 at volume.
It's ludicrous that none of the apple competitors have put one out yet.
I hold very few opinions. I hold information based on observation and fact. If you wish to disagree, please use facts.
If AT&T can't hold their customers away from Verizon (and all the current customers are locked into 2 year contracts with nasty termination fees) it's because of their crappy service and high rates. If they fixed that then they would need to worry about the competition so much. In fact, competition is exactly their problem - they don't want any!
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
What really gets me though is verizon can never have the iphone. Ever. It would have to be made exclusively for verizon customers. As Verizon uses phone technology that is incompatible with the majority of the world. GSM may not be the best solution, however it does have the largest user base. When will people understand this?
Verizon has already announced that they will use GSM's 4G technology (LTE) for their network.
http://consumerist.com/consumer/unlocked/verizon-to-go-gsm-328914.php
http://arstechnica.com/old/content/2008/12/verizon-says-early-lte-deployment-in-2009.ars
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?
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!
I spoke to a Verizon rep about this about a year ago. He said that Apple and Verizon were talking about an exclusive agreement before they went with AT&T, but the money wasn't right for Verizon to do the deal.
I understand that the major complaint from most iPhone users is the network, and Verizon's is the best, but is that enough to warrant the agreement with Apple, now that Verizon is doing pretty well with the BB Storm and some of the other competitors?
Frankly, I think that losing the iPhone would kill AT&T as a major competitor. The iPhone is really about the only reason to consider them as a network.
that has been manipulating the market and the public for years. Sadly, many consumers have bought into an elitist, exclusionary scheme to milk the world, all so a few people can live like kings.
Personally, I believe Apple never would have been successfully in a free and open market. We citizens tragically have let the greedy overrun the ethics and principles that America was built upon and should stand for. Sadly, we've become tools of the overly-affluent and power-mad.
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.
These companies gouge and placate their "valued" customers. They only care about just how far they can reach into our pockets. So here they are now scrambling for a bigger piece or to protect their monopolistic cartels.
2) AT&T's customer service sucks. DNA from a big telco. Monopoly mindset. Nuff said!
Because Verizon (nee Bell Atlantic) is so much less of a big telco then the current AT&T (nee Southwest Bell)? Both are spinoffs of Ma Bell who gobbled up as many of their smaller siblings as the could.
That said, competition is a Good Thing.
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.
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?
Doesn't it seem logical that if the phone is a big money maker they would want to promote it?
Here in California I have seen many AT&T ads for other brands of cell phones. Never for the iPhone. Is it different where you live?
Come to think of it I've seen many Apple ads for the iPhone and AT&T is never mentioned.
So, if these guys are making each other rich, why aren't they more friendly to each other? Makes me doubt the NYT analysis.
...omphaloskepsis often...
I don't know. I just switched from Verizon to an iPhone and everyone I talk to tells me that my iPhone sounds clearer.
That's because of hardware, and has nothing to do with AT&T. The iPhone sounds absolutely fantastic. When it works.
Link. Apple allowed it, then (I'm assuming) AT&T complained, and Apple removed it.
Make sure everyone's vote counts: Verified Voting
That's the average? I pay around 75$/month.
What do you do to pay that much? Or is that in New Zealand dollars?
In Netherland, a T-Mobile iPhone subscription costs EUR 30 per month, which would convert to about US$40.
I would never in my life pay $90 for any phone subscription that doesn't come standard with tethering plus lots of spectacular extras. Many years ago, when UMTS was still new, my UMTS PCMCIA card cost EUR 70 per month. Nowadays it costs about EUR 30 or less.
Any the EUR 30 per month subscription is still profitable enough to pay for much of the iPhone itself; if you ignore the price of a subscription, an iPhone is way cheaper than an iPhone Touch which can do less. So the subscription could have been even cheaper than that.
I want a phone.
If that's really all you want, then the iPhone is obviously not for you. I was never interested in a phone with a camera and tons of other useless gimmicks. I have always been interested in a tiny portable computer, however. And that's exactly what an iPhone is (or would have been, had it not been locked down).
And it just so happens that the crappy, unreasonably limited photo camera in my iPhone actually makes better pictures indoors than my beautiful Olympus 4 megapixel camera.
Here's the CliffsNotes version.
If you do the calculations (insert calculations), AT&T selling a product and related services makes AT&T money. Here's the tricky part. If VERIZON were to sell those *same* products and related services, THEY would be making the money, and not AT&T. Since AT&T considers the amount of money made to be a good indicator of company success, they greatly prefer if people give THEM money, rather than Verizon.
You don't want an iPhone. You want a Jitterbug.
That's because of hardware, and has nothing to do with AT&T. The iPhone sounds absolutely fantastic. When it works.
I've just got one issue with the iPhone. Yesterday it decided to fill up 1/2 of it's memory with "other". Nobody could tell me what it was. I head to the local Apple store and there I get a unpleasant surprise. I was told that the water submersion sensors were tripped and that they couldn't help me anymore. I'd like to know how a water sensor trips when it doesn't get wet.
You can be replaced by a very small shell script.
It's funny because free markets encourage monopolistic behavior, and any kind of antitrust activity is regulation of the otherwise free market.
Everything seemed to be going so nice
'till the end of all beings punched right through the ice
Switching from a GSM phone to a CDMA phone is simple, ... on the hardware side it's a matter of swapping out the modem.
Ring Ring!
It's for you!
It's analog radio engineers, everywhere, saying they want you to come over for a... a party. Yes, a party. To celebrate the ease of switching out radios.
I think I hear the FCC in the background gathering pitchforks too. Not quite sure what the intent is there.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
I already said comparing to a year back is fine, the problem is that no-one seems to wonder why Apple chose that particular number to highlight in their report...
Gee, do you think it might just be because it's the QUARTERLY report. As in the report for the phones sold this QUARTER. And for comparison, you'd probably want to compare against the SAME QUARTER last year. Right? Surely you see that?
We don't WONDER because we KNOW. We all of us understand why you compare like quarterly sales instead of cherry-picking quarters on either end. That would be a hell of a report, comparing sales from 1978 Q4 against 1989 Q1. "Those were some mighty fine quarters. Never mind what we sold just now".
"There is more worth loving than we have strength to love." - Brian Jay Stanley
The current AT&T is really SBC, which is the same as Verzion: one of the RBOCs created by breaking up the old AT&T. Neither one has any more or less history as a monopolistic big telco than the other because they're both cut from the same block.
Apparently someone forgot to tell you that they dropped your iPhone in the toilet...while downloading something mysteriously called "other". My vote is porn!
I saw the Sign, and it opened up my eyes
I know Americans think that paying for things outright is the devil, but its how the rest of the world probably operates? At the moment, the iPhone 3G, bought officially, costs about 1200 NZD for the 16GB, without a plan. Put it on prepaid, and boom, away you go. Then again, I dont use my phone much for calls etc, because they are too expensive for me, and I use my iPhone on Wifi daily, never use the gprs speed service, that costs a dollar per day for up to 10MB.
---
No way will Verizon be willing to give up control over app approval for phones on its network (look at the BREW crap they have on their phones now).
No way will Verizon be willing to give up the Verizon music/ringtones/movies/tv/content store for the ITMS
No way will Verizon be willing to allow GPS and other things without taking its cut.
Thank you for your explanation!
LOL...
AT&T's network sounds just like any other GSM network, anywhere in the world.
Verizon doesn't have DNA from a big telco or a monopoly mindset? Puh-leeze.
Who doesn't know about the iPhone? You're kidding right?
+++OK ATH
This article assumes that there is no competition for the iPhone. As a G-1 owner, all I can do is give a hooked grin to the author and snicker just a little. Android is that good.
-- $G
Apple will release a carrier-subsidized touchscreen netbook running the locked down OS X iPhone variant. This device will have a mini PCIe slot so that Sprint, Verizon, AT&T, et al, can offer plug-in access to their networks and offer data plans with the ersatz iNetPhoneBook.
The netbook will be nearly free; the price of the data plans will make your eyes water like a three-day-old onion.
Ask Me About... The 80's!
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.
Rim, Nokia, HTC, Sony-Ericsson, Samsung, every phone maker is bringing out competing products, if they have not already.
There is maybe 1 more year of dominance by Apple here, then it's over.
Remember when they said that about the iPod? Every audio player maker is bringing out competing products, if they have not already.
There is maybe 1 more year of dominance by Apple here, then it's over.
**Disclaimer: Happy iPhone owner, never owned an iPod, owner of many Apple Computers
Self proclaimed wannabe geek. You know how it is. Most of us who read this stuff probably fit in that category.
Most mobile manufacturers make both a GSM and CDMA version of their popular handsets. This is just part of the business in the US, and the Apple's lack of a CDMA iPhone is due more to a lack of a business relationship with Verizon than technical problems.
Well, verizon uses a frequency that has higher penetration, and longer range, but lower throughput. AT&T's 3G network is awesome if you're in most metropolitan cities. The only place where it can start to be a problem is if your out in the boonies, or in somewhere like NYC where there are 9000 iphones all sucking down streaming video from one tower at once.
But a Verizon version would not work outside the US because of their CDMA network. They would have to start producing 2 models of it, the other for the global marketplace.
Considering that T-Mobile has the German contract, O2 has the UK contract, and so on, it's only logical that the other GSM net providers would want in on the deal, the ability to switch the SIM card, and so on.
Come to think of it, I wouldn't be surprised if Apple planned it this way when they chose T-Mobile, O2, Orange and so on. Roaming within Europe is due to become a lot cheaper, so they may have set it up as a way to break the telco's hold much like they turned the tables on the music publishers with the iTunes Music Store...
I think the iPhone is a little overrated. A lot of potential exist in the Google Phone, Blackberry, and Windows Mobile markets.
Goddamn, I wish I had some modpoints.
No matter which carrier they went with, that one would have had people gnashing teeth and rending garments because of bad experiences. Conversely, you'd have people who use the chosen one who all say that they haven't had any problems. (We haven't really had much problem with AT&T, for what that's worth.)
All cell carriers suck a bunch of the time.
"Stupid! Stupid stupid stupid stupid! I touched the hot wire right there - I'm an idiot!"
Come to think of it, I wouldn't be surprised if Apple planned it this way when they chose T-Mobile, O2, Orange and so on. Roaming within Europe is due to become a lot cheaper, so they may have set it up as a way to break the telco's hold much like they turned the tables on the music publishers with the iTunes Music Store...
You may be on to something - just look at how easy it is to replace the SIM card on the iPhone - no need for a replaceable battery just for that.
Lars T.
To the guy who modded me down from perfect to terrible Karma - Apple haters still suck
My experience has been similar. For me, I never seem to get a medium-strength signal. It's either 0 bars or no bars. Gets a bit frustrating.
It all depends on where you live. I switched to Verizon years ago from AT&T (technically it was still Cingular at the time). Their coverage in my area (Minnesota/Wisconsin) is terrible. Verizon's is excellent. Sure, I'd love an iPhone. But what good is it if I can never use the phone feature. Then I might as well buy an iPod Touch.