When Apple was looking for a mobile partner for the iPhone, it originally went to Verizon. When Verizon turned down the device due to some of Apple’s demands, Apple turned to AT&T, which worked out an exclusive deal with Apple to provide service for the device. Smart move. Over 17 million iPhones have been sold since the device debuted less than two year ago — the majority of which have been in the US through AT&T.
Following the launch of the iPhone 3G last year, Apple and AT&T met again to look at their partnership. The two sides decided to extend the pact until 2010. But that apparently isn’t good enough for AT&T which now wants to extend its exclusive deal into 2011, The Wall Street Journal reports.
This should be absolutely no surprise as AT&T added over 4 million subscribers in the second half of last year just for the iPhone. And some 40% of those were new AT&T customers, as WSJ points out. Clearly, the iPhone is a major catalyst for getting users to switch services, which is important for AT&T as it trails the number one wireless provider Verizon in terms of overall users.
And the iPhone isn’t just important to AT&T for new users — I know plenty of iPhone owners who are not exactly fans of AT&T’s sometimes spotty service (see: Om Malik and anyone who was at SXSW). If AT&T loses its exclusive deal with the device, a lot of those users would be gone in a flash.
You’d have to think that eventually Apple is going to expand the iPhone beyond AT&T. It’s several million units in the US, which is huge, but is a small sliver of the overall market. And it could grow that several times over if it was available on all the carriers just in the US alone. But that would also mean headaches for Apple, as being on multiple carriers means dealing with multiple carriers and could mean irregularities for things such as applications. Maybe some carriers won’t mind certain bandwidth-heavy apps while others will, for example.
And Apple gets a sweet deal with AT&T. At first, it got a piece of each monthly contract that AT&T signed up for the device, but it switched that last year in order to subsidize the iPhone 3G (bringing it down to the key $199 price point). Now, Apple gets paid a reportedly sizable chunk of money by AT&T for each iPhone sold. This also removes the headache of worrying about users who are unlocking the device.
Another element to all of this that is pure speculation at this point, but is worth thinking about. Apple’s tablet device, rumored to be coming later this year, could very well have 3G connectivity built into it. Obviously, it would need a carrier to provide that. And you can bet AT&T wants to be that carrier as well.
[photo: flickr/thor dekov buur]
We need competition. Once the iPhone is available on T-Mobile and Verizon, maybe and just maybe they’ll have to start getting a little creative with how much they charge for their services. Oh my, maybe they’ll even have to be honest with us?
Thank you Apple for perhaps kicking the crap out of one of the scariest potential long running shams in consumer history.
more bars! {seesmic_video:{”url_thumbnail”:{”value”:”http://t.seesmic.com/thumbnail/rbAPsQFL1z_th1.jpg”}”title”:{”value”:”more bars! ”}”videoUri”:{”value”:”http://www.seesmic.com/video/ZLvCp4uEVf”}}}
Actually, what I’m hoping would happen is that it would give the mobile carriers a swift kick in the ass to improve their networks. If AT&T has to compete with Verizon, they’ll have to, or everyone will drop them for the better network. Locking a device like the iPhone to one carrier stifles innovation and improvement, which is bad for the customer in the end.
Your tweet about this post is broken. :/
Yes thx, someone failed to handle the ampersand correctly *cough* name begins with an ‘h’ *cough*
yeah i was like what the hell is at
As much as I would like to see the iPhone ’set free’ that wasn’t exactly a shocker
https://Spideroak.com
Agree they definitely will want to broaden things. You see lots of comments from people that they’d love an iPhone buy AT&T doesn’t cover their area. It’s a massive market out there and they’ve barely scratched it.
On the point of dealing with multiple carriers, it’s interesting to see Apple reportedly bend to releasing a non-3G iPhone in China in order to tap into that market (who can blame them), but I’d be surprised to see much bending in the US market. After all, Apple has shown that the carriers can get stuffed if they don’t play the new style game, and all the manufacturers who have produced a million and one different iterations of the same phones have serious problems there too. I can see Apple sticking to their guns to maintain a high quality product.
Also, is it 17 million sales just on AT&T?
No good point, worldwide, I’ll update that. Thx.
Seriously, Apple needs to open up for a much larger potential users groups they can tap into. AT&T might have a sweet deal for them, but the whole market opportunity is just much sweeter. Also, COMPETITION IS CRUCIAL!!
For me, AT&T gets no reception in my apartment, I want an iPhone a lot, but not calls in my room is just not acceptable.
There’s one thing good about all this… We are helping one big company to not fall down in this economy, sight
Hong, why not ask AT&T to put a tower inside your room?
I would gladly buy an iPhone at its full price if it was available to use for Verizon – it’s the only service provider that I get a signal with out in the country, where I live.
A lot of people are in your boat Edwin.
That’s the only thing standing between me and iPhone ownership!!! Verizon fouled it up for all of us.
come on samsung / motorola with your android phones; lets see some real competition to this glamor puss
The thing I am curious about is mass marketing the tablet. Having the tablet be AT&T only seems like a massive risk – consumers were willing to switch their cell phone provider – after all it was only one bill. But I am skeptical that consumers would be willing to switch their verizon blackberry for the AT&T tablet and iPhone and I think the second bill that would come along with an AT&T tablet seems excessive. Probably over thinking it but I think behavioral economics is going to have to come into play if Apple plans on dominating the netbook market like they have the high-end cell market.
Yeah the tablet angle, while only speculation, is really interesting here.
the ipone is a fad. the touch screen envy is wearing off. many competitors now have similar devices. the killer game changing ipone app has not raised its head yet. never will. the killer app is the safari tab. i hearby declare my website an ipone app in development.
GoldLocator.com – squat on it
The iPhone may be a fad but it’s opened doors to easy application creation with relatively fewer hurdles compared to previous phone platforms. Android and Pre will change that with their open software OSes but they’re not there yet.
pre is not open
I have wanted an iPhone since they came out. But I will not buy one until I have a choice of carriers or they offer it through my current carrier. I suspect I’m not alone.
How is this story even related to TechCrunch ? And except for quoting WSJ, the story didn’t add anything new, just rehashing a bunch of known trivial facts about the iPhone. Such a tedious article just to quote one sentence about ATT wanting to extend the exclusivity agreement until 2011, which is just a rumor anyway. Don’t you have better things to write about ?
Irony in this comment…
It’s Tech, oh unhappy armadillo. PHAT TECH.
Webster and Mirriam say ‘SUP
There are many good reasons why Apple might want to stick with a single carrier in the US, but the “dealing with multiple carriers” argument is not one of them. The iPhone is sold around the world through a variety of carriers and Apple doesn’t seem to have any trouble there.
AT&T is just making the exclusive deal too sweet here in the US for Apple to pass up.
Surely having the iPhone on dozens of carriers overseas (here in Australia it’s on all carriers) is proof that Apple don’t need AT&T. Having an exclusive deal is hurting Apple.
Damn – beaten by Adam. ^^
I recall Adam beating all of us, plus he was a gardener.
Come to think of it, he was also a Mac.
MG Siegler, I am totally digging your writing. I’d never heard of you before Techcrunch but I’m all over Paris Lemon now and I really like the insight of your articles.
Thanks Frank. Nice to hear.
Agreed.
How is this bad for Apple? There are only two nationwide GSM carriers in the US and only one has a nationwide 3G network built (AT&T).
Verizon and Sprint are both CDMA and Apple has no plans for CDMA – and would be dumb if they did. CDMA is dying and all carriers will move to LTE but that won’t really start rolling out until 2010 at the earliest and nationwide service will be 2011.
Bottom line, not much choice in the US. Come 2011 once LTE is available and Apple builds an iPhone that supports it then you’ll have viable alternatives. Or you can wait to see when TMO gets around to building out their 3G network coverage.
As long as iPhone is on AT&T I wont be getting one!
I would love to switch to Verizon service with an iPhone. I was driving from San Francisco to Silicon Valley today and AT&T dropped my call 3 times. I expect a little better living in the largest tech hub in the world. Totally unacceptable.
I seriously hope that SJ (or whoever is currently in duty) will have the balls to say Fu.. You to another round of carrier exclusivity.
Since the AppStore businessmodel seems to be working pretty nicely, why annoying your customers with this lockin crap?
Oh – I am traveling to another country – Oh, I am an iPhone user – I can’t use a local prepaid card.. and some ugly corporation is trying to convince me the it is illegal to unlock my device – Oh dear corporations.. I am of course industry-brainwashed enough to believe. Waiting for new instructions….. NOT!
Ugh…Apple should get out of att at some point! Hate att and I’m in with them because of iphone, not fair!
no wonder at&t wants to extend its deal with apple to 2011, most of the people are with att only coz of iphone including myself. many people want this partnership not to prolong any further….. for there own reasons. any ways i was searching for property to let in central london for quite some time and i accidentally found this amazing website no agents 24 with loads and loads of information about tips for tenants, tips for moving, hips. I really like my new house. i went out for some fresh air today early morning, although i am generally not the morning person type but i have to admit i really enjoyed it.
It will be nice when T-Mobile will offer the iPhone to create competition. Then Apple will have a lot more product on the market.
I suspect the Palm Pre nipping at Apple will force them to expand carrier selection beyond AT&T.
Of course Apple could always choose the big bag of money that I’m positive AT&T would dangle – but that certainly would be an unwise long term choice.
Perhaps they’d reach a compromise – allowing AT&T exclusivity for 6 months much like current phones are being distributed.
The other issue is a future (I’m just speculating) iPod Touch with WIMAX or or a 3G/4G data modem and Skype or Google Voice. Would this scare AT&T? (I’ll bet yes, even though they could sell reasonable data contracts.) Would it make more money for Apple by expanding sales volumes? I dunno. But it sure seems like the future as mobile voice transitions to VOIP anyways.
Wow, what a terribly written article. I think people just like debating the iPhone. First of all, the date when AT&T and iPhone’s exclusive partnership comes to an end has always been and still is a rumor to the public. This info has never officially been released by AT&T or Apple. AT&T and Verizon aren’t playing the “who has more subscribers” game anymore, that ended a few years back. The two companies have emerged at the top and both are concentrating on ARPU now. Which in layman terms equates to making their consumers profitable. It doesn’t make any sense to add a new subscriber if there is no profit to be made from them, leave that to T-Mobile and Sprint. Apple has released the iPhone overseas already, AT&T is the exclusive for the US, not the world! The bit about how Apple is paid from AT&T is incorrect too. AT&T buys each 8GB iPhone from Apple for $625, Apple receives a profit from the sale to AT&T and from the cost of the data plan. Carrier coverage is all relative to your daily commute and travels. Apple is the new kid on the block and is already hot on the trail of RIM, who distributes through all carriers. Not only that, Apple is making a killing off the app store. Now every smartphone OS manufacturer is jumping on the app bandwagon but getting buried by Apple. Take a look at the newly launched Blackberry app world, complete garbage. Apple doesn’t feel any immediate need to find more US carriers, they are doing quite well where they are at. It doesn’t make any sense to make a device for the dying and US specific CDMA, the only sense would be to launch the iPhone on T-Mobile whose 3G is close to non-existent. I think some of you guys forget, where you live and your house is not the center of the universe. If Verizon would have taken the iPhone, we still would have been reading this same article.
Completely agree. Every carrier will have some coverage issues, especially in suburban areas where home owners don’t want a cell tower in their backyard, overall both carriers are on par with coverage.
AT&T’s upcoming femto cell solution will resolve anyones indoor coverage issues.
A similar femtocell to the one that Verizon Wireless already offers, by the way.
I will never do business with AT&T, a company that uses an old (formerly) trusted brand and questionable research to hide the realities of crappy service. And don’t you love the commercials about connectivity in Belgium via AT&T? Like, who gives a crap? Verizon is the only network I’ve encountered that served my needs well, beginning with, of course, the friggin’ phone! There is nothing the iPhone has that I want badly enough to justify dealing with AT&T, a company that I’ve had bad experience with in cellular, internet and cable. Sticking with them will be Apple’s undoing.
Try being stuck with QWEST.
Apple and Att are only thinking about their wallets and apparently care nothing for the actual end user of their products and services.
The cellular telephone service market desperately needs COMPETITION. TRUE COMPETITION driven by the wants and needs of the consumer–remember when the customer was always right? Hah! no more.
I have yet to see a cellular service company spell out what they will guarantee me in their service agreement. The agreement is full of limitations on what I can and can’t do with my phone and their service.
I would buy my phone outright, but agreements like the one between Apple and Att in the U.S. force me to use their selected service provider.
Both companies should step up their game and see if they would maintain their industry leads without binding their customers hands and choices.
Come on, I dare you both!
The number 1 reason I’m not getting an iphone is the crap service that is AT&T. Those people are evil. And the salespeople use questionable tactics to get you to sign on.
You could always by a phone *outside* the United States, and have it shipped, if you want it that bad.
Also @Latricia, by COMPETITION do you really mean COMPETITION, or do you mean you want an iPhone? There is plenty of COMPETITION in the “cellular telephone service market” (by the way, they aren’t “cellular” anymore). Get a different phone, on a different carrier. – There are a lot out there that are better than the iPhone.
Even though Verizon is an excellent carrier, don’t kid yourself into thinking that an exclusive deal with them would be any better than the exclusive deal with AT&T. For example, Verizon FORCES some Windows Mobile devices to deactivate the Bluetooth file transfer profile so that users can’t get their pictures off their phones without sending MMS messages. This is on hardware that already supports the feature, just like AT&T is currently forcing the iPhone to disable MMS and tethering.
The only way to stop this Draconian behavior is for Apple to stop with the carrier exclusive deals. It’s a battle the carriers can’t win anyway. The GPS/CDMA incompatibility of AT&T and Verizon already means you can’t unlock an iPhone and get it to work on Verizon. Only T-Mobile is a viable alternative here in the U.S.
So Apple, PLEASE do this: Sell an unlocked 3GS 16GB for $299 and the 32GB for $399. We already know your production cost is about $179 so you pocket $100 instead of $300+ up front but you add a user that will buy lots of music and apps, and will be an iPhone CONVERT which means they’ll buy more hardware down the road. Then let the carriers fight it out for data plan and voice plan rates, and let them compete with each other over features too, like tethering!
Apple stands as the only solution on the horizon to the problem of carrier abuse of power. In one fell swoop Apple can eliminate the early termination fiasco that carriers are charging, and strong-arm them into upgrading their network to compete with each other instead of leeching off customers who can’t get out of contracts and have little choice up front.