John Paczkowski

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Apple to Extend AT&T’s iPhone Exclusivity Deal?

September 10, 2009 at 10:41 am PT

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att_iphoneAT&T’s iPhone exclusivity deal with Apple is set to expire as early as next year, but that doesn’t necessarily mean it won’t be renewed–despite complaints about the carrier’s network. That’s the word from iSuppli, which predicts Apple will extend its agreement with AT&T because it has no reason not to.

“Speculation is rife that Apple will end its exclusive U.S. iPhone service deal with AT&T when the current contract expires in June 2010 and begin to offer phones that work with the Verizon network,” iSuppli analyst Francis Sideco said in a research note today. “However, iSuppli doesn’t believe this will be the case. The main reason Apple is likely to stick with AT&T beyond 2010 is the relatively wide usage and growth expected for the HSPA air standard used by the carrier for 3G data.”

As Sideco explains, “Cumulative global subscribers of HSPA wireless services, consisting of High-Speed Downlink Packet Access (HSDPA) and High-Speed Uplink Packet Access (HSUPA), are set to rise to 1.4 billion in 2012, up from 269.1 million in 2009. In contrast, cumulative subscribers for the EVDO standard used by Verizon will amount to 304.6 million in 2013, up from 145.2 million in 2009.”

A point worth noting, though it’s hard to imagine that Apple (AAPL) doesn’t harbor some resentment toward AT&T (T), which has undermined its carefully crafted iPhone experience. And if that’s the case, wouldn’t it make more sense for the company to extend its deal with AT&T, but not as an exclusive? That would allow Apple to hammer out a second deal with Verizon (VZ), which, according to some analysts, would more than double U.S. iPhone sales in the near term.

As Bernstein Research analyst Toni Sacconaghi noted this summer, “Verizon’s postpaid subscriber base is not only larger than AT&T’s, but more importantly, is untapped whereas we estimate more than 10 percent of AT&T’s postpaid users already have an iPhone.”

Tagged with: 3G, agreement, Apple, AT&T, Bernstein Research, carrier, contract, data, deal, digital, EVDO, exclusivity, expire, Francis Sideco, growth, hardware, High Speed Uplink Packet Access, high-speed downlink packet access, HSDPA, HSPA, HSUPA, Internet, iPhone, iPhone 3 Feature, iSuppli, John Paczkowski, network, phones, postpaid, research note, sales, services, smart phone, standard, subscribers, Toni Sacconaghi, U.S., usage, Verizon, wireless

comments so far. Add yours.

  • Dave Small

    Renewing could be a good thing if, and only if, Apple seizes the opportunity to fix some of the badly broken aspects of the current deal for users. For instance:

    ->450 minutes a month minimum for phone calls is way too high. I use my iPhone constantly and someday I might break the 100 minutes a month mark. However, that’s unlikely. I find the telephone one of the less often used functions and the one that is way overpriced. The data plan pricing is OK.

    ->Free laptop tethering. We know tethering is coming and we also figure that AT&T will grab for more $$$$. That’s their style. Let’s not cripple laptop tethering from the start with an AT&T toll booth.

    ->Reasonable international roaming charges. Free would be a good starting point for Apple’s negotiators. The iPhone would make a marvelous international travel companion but that’s not the case now because of outrageous and predatory charges for roaming.

  • Michael Morrone

    Dave, all 3 of your points make no sense.

    1. AT&T has no plans less than 450 minutes. Why should the iPhone receive a special plan.

    2. All AT&T phones with tethering capabilities require a tethering package, if you are going to tether with it (legally).

    3. Why should someone with an iPhone get a special price on international roaming? Why can’t I get that with my Blackjack 2 then? I pay the same extra for a smartphone package as someone with an iPhone…

  • Ted Todorov

    @Michael Morrone:
    You clearly don’t understand the post you are responding to: Apple has huge leverage over AT&T — to agree to extend the exclusive contract, Apple can get AT&T to give them all sorts of concessions they give no one else.

    The Blackjack 2 is just some random POS phone, who’s maker has no leverage with AT&T — AT&T couldn’t care less if they lost it to another carrier.

  • http://digitaldaily.allthingsd.com John Paczkowski

    To your point, Ted. Pali Research recently said that nearly a third of AT&T’s post-paid customers are being retained by AT&T primarily because of the iPhone exclusivity.

    That’s a lot of leverage.

    http://digitaldaily.allthingsd.....clusivity/

  • Nicker Dellozini

    Here is the issue for me as an iphone user with ATT:

    I cannot log in to my account and see texts, voice messages, or even who is in my favorites.

    They are super weak in this area.

    ATT absolutely SUX at customer service for iphone users.

  • Fred Hamranhansenhansen

    > it’s hard to imagine that
    > Apple (AAPL) doesn’t harbor
    > some resentment toward AT&T
    > (T), which has undermined
    > its carefully crafted iPhone
    > experience.

    The problem I have with this statement is it fails to take into account that Verizon and Sprint by their very nature would undermine Apple’s carefully crafted iPhone experience. Both are non-standard, proprietary networks that require different hardware and function differently than all of Apple’s current 100 carriers. The whole worldwide iPhone platform would suffer if Apple includes even one non-standard carrier. Would that really be worth … what? The possibility of better network service for some US users after they switch networks? Selling iPhone 3G(S) to a few million committed Verizon and Sprint customers?

    To support Verizon, Apple would have to make a phone just for Verizon, which would be a 100% increase in SKU’s and remove the advantage of making and supporting just one model per year. Because Verizon functions differently than all other iPhone carriers, training and marketing materials would have to incorporate the fact that you won’t have a SIM card if on Verizon, that you won’t be able to access the Internet and make a call simultaneously if on Verizon, that you can’t use your iPhone in other countries if on Verizon. There are iPhone commercials that hinge on the fact that you can put a call on hold and check a movie time on the Internet, but that would not be possible on Verizon or Sprint.

    So what I’m saying is that if you want to compare AT&T, Verizon and Sprint for iPhone carrier fitness in Apple’s eyes, I think “compatibility with the iPhone” is an important measure. I think AT&T gets 99/100 points just for that alone.

  • http://www.gftraders.com/ Trader Jobs

    It's very wise of Apple to do that, I think. This will do good in the future, if not now.

  • thisway234

    The CDMA network is diminishing with the advent of the 4g network that is rolling out with att and verizon within the next couple of years, apple may be wise to go ahead with a extension now but in a couple years, why not include verizon… also you can make a phone that does both CDMA and GSM… Look at the Blackberry Storm 2