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Why AT&T Wants To Keep the iPhone Away From Verizon

Posted by Soulskill on from the all-about-the-benjamins dept.

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.'"

15 of 237 comments (clear)

  1. Yeah God Forbid They Actually Have to COMPETE by Greyfox · · Score: 4, Funny

    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?

    1. Re:Yeah God Forbid They Actually Have to COMPETE by cpt_drewbie · · Score: 4, Insightful

      Ever used AT&T's 3G network on an iPhone? Most of the time you probably would assume it's running over EDGE.

    2. Re:Yeah God Forbid They Actually Have to COMPETE by peragrin · · Score: 4, Informative

      last year called they want their criticism back.

      when i first got the 3G network performance was bad. Over the last six month AT&T has brought it almost to the point where the iphone processor is the limiting factor. With rendering times almost equal between 3G and wi-fi.

      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?

      --
      i thought once I was found, but it was only a dream.
    3. Re:Yeah God Forbid They Actually Have to COMPETE by Otterley · · Score: 4, Informative

      The article claims that both AT&T and Verizon will be moving to LTE in the future. If this ever comes to pass, and Apple releases an LTE-compatible iPhone, the technology roadblock should vanish.

  2. Don't worry, AT&T by Daffy+Duck · · 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.

    1. Re:Don't worry, AT&T by aesiamun · · Score: 5, Informative

      GPS is locked out on my 8830 from Verizon. I needed to buy a bluetooth GPS device to go geocaching.

    2. Re:Don't worry, AT&T by 93+Escort+Wagon · · Score: 5, Interesting

      If Verizon tried to pull something like that, i'm pretty sure Apple would just renew their agreement with AT&T.

      Verizon WILL try to pull exactly that - they've demonstrated pretty much identical behavior to this many times. I left Verizon for T-Mobile because of it - when Verizon finally released its first Bluetooth phone, it disabled basic sync between a person's phone and his/her computer. I really wonder how many non-techie Verizon are blissfully unaware of some great features their Bluetooth phones would be capable of if only Verizon didn't disable them?

      Now what I'd really like to see is the iPhone on T-Mobile's network...

      --
      #DeleteChrome
  3. CDMA / GSM by jmauro · · Score: 4, 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.

    1. Re:CDMA / GSM by Anonymous Coward · · Score: 5, Informative

      Apple said from the beginning it did not want to use CDMA because of its limited range to only North America. GSM is used around the world. Verizon Wireless execs have recently said (check out macrumors and appleinsider.com for the specifics) they don't expect to make an offer to carry iPhones until they roll out 4G LTE technology (aka the next GSM version), the same 4G technology ATT is using.

      You won't see an non-ATT iPhone until LTE hits.

  4. Verizon rejected.... by phantomfive · · Score: 5, Insightful

    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
    1. Re:Verizon rejected.... by phantomfive · · Score: 5, Informative

      Switching from a GSM phone to a CDMA phone is simple, on the software side it's a matter of changing a few low level AT commands, and on the hardware side it's a matter of swapping out the modem. If Apple chooses to do it, they will.

      Furthermore, you've done bad research. Not only did Apple consider making a CDMA phone, Verizon completely rejected them. In essence neither the latter half nor the former half of your post has merit.

      --
      Qxe4
  5. Re:Whoever writes the biggest check will lose by Brett+Buck · · Score: 5, Insightful

    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.

    Sounds a lot like....

    No wireless. Less space than a nomad. Lame.

          Brett

  6. Apple doesn't want to make different iphone models by alen · · 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?

  7. Verizon is in Apple's Best Interest! (Re: Apple) by StCredZero · · Score: 4, Interesting

    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!

  8. Re:Verizon is in Apple's Best Interest! (Re: Apple by GizmoToy · · 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.