Apple predicted to extend exclusive contract with AT&T

[AppleInsider]

While most predictions of late suggest Apple will end its exclusive iPhone arrangement with AT&T next year, a new analysis bucks that line of thinking.

In a new report filed Thursday, iSuppli Corp. predicts that Apple will extend its exclusive deal with AT&T next year, based on anticipated growth of High Speed Packet Access technology being adopted by the wireless carrier. The report states that HSPA subscribers are projected to hit 1.4 billion in 2012, while competing standard EVDO, used by Verizon, will have only 304.6 million users by 2013.

"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," said Francis Sideco, principal analyst, wireless communications. "However, iSuppli doesn’t believe this will be the case."

But the same report questions whether extending the contract with Apple would be a good idea for AT&T. It states that the iPhone has been a "mixed blessing" for the wireless carrier, bringing new subscribers but creating bandwidth shortages across the network.

"Facing dropped calls, service interruptions and slow download speeds, iPhone users in certain markets are blaming AT&T," said Jagdish Rebello, director and principal analyst. "iPhone users are overloading AT&T’s network with data traffic generated by the download and usage of apps. However, the real problem is that AT&T has not found a way to monetize data traffic generated by the iPhone."



In recent weeks, AT&T has conceded that its network performance has been less than optimal. In response, the company has vowed to improve, and plans to invest more than $17 billion in the next year to improve its wireless service.

However, the report suggests that Apple could still strike a wireless data deal with Verizon -- but for a product other than the iPhone. The report states that there is no evidence that the current contract with AT&T would prevent Apple from going to Verizon for its long-rumored tablet device, a connected iPod touch, a netbook, or perhaps a new model of the iPhone.

[ View this article at AppleInsider.com ]

[anonymouse]

Originally Posted by AppleInsider

However, the report suggests that Apple could still strike a wireless data deal with Verizon -- but for a product other than the iPhone. ... or perhaps a new model of the iPhone.

Talk about waffling.

[bigdaddyp]

The article states that Att will invest 17 billion in its wireless network. I believe what the Deathstar company actually said was it would invest 17 billion in its entire network which would include its land lines, dsl service, etc.

[ranson]

The thing iSuppi is overlooking is Verizon's massive push to incorporate 4g technology into it's network, which will be HSPA compatible. Apple would be right to avoid an EVDO-based phone, and won't need it to work with Verizon come next year. The ATT iphone userbase is almost saturated, it would be completely asinine to extend an exclusivity deal with them, when they can sell many more iphones by opening up to Verizon 4G when that network comes to fruition next year.

[eh270]

I don't doubt they'll continue to offer the iPhone through AT&T, but why on earth would they extend an exclusivity contract? Seems to me at least one other carrier out there must be willing to bend to Apple's demands to get a piece of the iPhone pie. AT&T would be crazy at this point to hit Apple with an exclusivity ultimatum.

[domerdel2]

maybe part of that 17 billion will be a exclusive signing bonus to Apple??

I can't see why Apple would extend the exclusivity, considering the current status of the saturated data network of AT&T.

[tacojohn]

"AT&T has not found a way to monetize data traffic generated by the iPhone."

Uhhh– so me paying $30 a month for my data plan is not monetizing? WTF?

[BrooksT]

Originally Posted by tacojohn

"AT&T has not found a way to monetize data traffic generated by the iPhone."

Uhhh– so me paying $30 a month for my data plan is not monetizing? WTF?

No, it's not. At least, it's not monetizing demand for bandwidth. You pay $30 whether you look at a web page every now and then or whether you're streaming Pandora all day and night. Maybe it'd be more accurate to say that AT&T hasn't found a way to monetize the heavy usage that the iPhone has generated.

At least they're smart enough to not try to limit data usage. Or maybe it's a contractual agreement with Apple that they won't. *That* would be the obvious, and totally disastrous, thing to do.

[SpamSandwich]

To quote Will Smith...

[Jerseymac]

Nooooo!

I want choice and competition!

[Roc Ingersol]

Originally Posted by ranson

Apple would be right to avoid an EVDO-based phone, and won't need it to work with Verizon come next year.

Only if they don't feel like selling iPhones to users in markets without full 4G coverage. Which will be nearly all of them.
4G-only won't be a feasible solution for at least 2 years. Even with VZW throwing money at the problem the way they have been.

Apple sticking with AT&T for another year would be a mistake.

[nagromme]

iSuppli's guesswork has little relevance. They're promoting themselves and getting press attention--and I suspect that's about all this is worth.

[tacojohn]

Originally Posted by BrooksT

No, it's not. At least, it's not monetizing demand for bandwidth. You pay $30 whether you look at a web page every now and then or whether you're streaming Pandora all day and night. Maybe it'd be more accurate to say that AT&T hasn't found a way to monetize the heavy usage that the iPhone has generated.

At least they're smart enough to not try to limit data usage. Or maybe it's a contractual agreement with Apple that they won't. *That* would be the obvious, and totally disastrous, thing to do.

Regardless– they're still making money from my plan price. If they're not– then they're stupid for offering that service at a price they couldn't afford to sustain.

[teckstud]

Hmmmm- this comes the day after Apple opts not to include a mic in the camera-less iPod Touch?

[Wings]

Originally Posted by ranson

The thing iSuppi is overlooking is Verizon's massive push to incorporate 4g technology into it's network, which will be HSPA compatible. Apple would be right to avoid an EVDO-based phone, and won't need it to work with Verizon come next year. The ATT iphone userbase is almost saturated, it would be completely asinine to extend an exclusivity deal with them, when they can sell many more iphones by opening up to Verizon 4G when that network comes to fruition next year.

Come next year? When Verizon's 4G will be in some (or even most) areas, what would a 4G Apple iPhone fall back on when in locations where 4G isn't available? Did you say CDMA? Everything I've read about Apple & CDMA says that ain't ever gonna happen. So if Apple ever does come to Verizon I think it won't be until Verizon's 4G is *everywhere* (i.e., long time, not next year).

[swtchdtomak]

It seems illogical to me to compare world wide GSM/CDMA stats considering that:

1. CDMA for the most part is not used outside of North America; and

2. AT&Ts iPhone contract does not extend beyond the border of the U.S.A.

[Gazoobee]

Originally Posted by Wings

Come next year? When Verizon's 4G will be in some (or even most) areas, what would a 4G Apple iPhone fall back on when in locations where 4G isn't available? Did you say CDMA? Everything I've read about Apple & CDMA says that ain't ever gonna happen. So if Apple ever does come to Verizon I think it won't be until Verizon's 4G is *everywhere* (i.e., long time, not next year).

That doesn't change anything re: extending exclusivity. It just means that only *some* Verizon customers could take advantage. There's no reason for Apple to throw away those customers for two years until the coverage is complete.

[John.B]

The minimum deal Apple should make is that AT&T should not be allowed to extend features like tethering, etc. to its subscribers who use crackberries without also allowing that option (at the same pricing) to iPhone users.

AT&T's whining about investing tens of billions into their network every year is a red herring. They'd have to do that anyway, just to keep up with their peers. Even cash-strapped Sprint invests similar money in developing and upgrading their network.

[John.B]

Originally Posted by Wings

Come next year? When Verizon's 4G will be in some (or even most) areas, what would a 4G Apple iPhone fall back on when in locations where 4G isn't available? Did you say CDMA? Everything I've read about Apple & CDMA says that ain't ever gonna happen. So if Apple ever does come to Verizon I think it won't be until Verizon's 4G is *everywhere* (i.e., long time, not next year).

Well said, and exactly right.

[KangaMoJo]

I think they'll release the 'tablet' branded as the new iBook and 3G and/up upwards in speed will be sold through ATT, especially as a piggy back to your iPhone plan now. And they'll add books to iTunes as a service similar to Apps and books on the Kindle but using an open source format. Why on earth would I sign extended contracts with both Verizon and AT&T based upon my device. That's why ATT will continue to get exclusivity because the tablet will augment the already existing huge install base of iPhones, just like the iPhone took advantage of the install base of the iPod. Think about the whole line of Apple devices and their respective purpose: iPod (Music and Games), iPhone (Music, Phone, Web Lite), iBook (Books, Web w/Flash, Computing Lite), MacBook (Computing).

[joe in miami]

Originally Posted by tacojohn

"AT&T has not found a way to monetize data traffic generated by the iPhone."

Uhhh– so me paying $30 a month for my data plan is not monetizing? WTF?

That's exactly what I felt when I read that. Pretty soon they will be charging as much as cable broadband for this lousy data plan.

[Wings]

Originally Posted by Gazoobee

That doesn't change anything re: extending exclusivity. It just means that only *some* Verizon customers could take advantage. There's no reason for Apple to throw away those customers for two years until the coverage is complete.

And when "some" of those customers travel outside their 4G area and run up against no service when 10 miles from home, think about the flak Apple (&Verizon) would take for that! I don't think Apple would go for a half-assed solution.

[aduzik]

Thank God iSuppli is almost always wrong, huh?

[joe in miami]

Originally Posted by BrooksT

No, it's not. At least, it's not monetizing demand for bandwidth. You pay $30 whether you look at a web page every now and then or whether you're streaming Pandora all day and night. Maybe it'd be more accurate to say that AT&T hasn't found a way to monetize the heavy usage that the iPhone has generated.

At least they're smart enough to not try to limit data usage. Or maybe it's a contractual agreement with Apple that they won't. *That* would be the obvious, and totally disastrous, thing to do.

Some use the bandwidth (myself), others do not (my wife), and yet others use wi-fi (my son)...in my case 1 out of 3.

In the end, they ARE monetizing the service. $90/month for data plan that is painfully slow (most of the time) is more than enough as far as I'm concerned. If ATT wasn't making money, they wouldn't be interested in preserving the exclusivity agreement.

Major league quants were involved in developing the pricing plan...don't feel sorry for ATT.

[BrooksT]

Originally Posted by tacojohn

Regardless– they're still making money from my plan price. If they're not– then they're stupid for offering that service at a price they couldn't afford to sustain.

Bingo. The article didn't say they were smart or had great foresight, it said they hadn't found a way to make money from the massive amounts of bandwidth iPhone users consume. If you're a heavy data user (like I am), they lose money on you. They were stupid.

AT&T basically employed the "if you set yourself on fire, you'll win the marathon because you'll run faster" business strategy. It hasn't been an unmitigated disaster, but it's getting uglier by the day.

[ekim]

AT&T doesn't have ANY coverage in important areas I travel to, therefore, for me, the iPhone simply does not fulfill its basic mission -- to be a phone. So, very sadly, no sale for me. Verizon DOES have coverage everywhere I go in North America, so I must stick with Verizon as a practical matter.

[Jaybyrd76]

Good!!!! Know all you verizon morons will STFU for a year!!

[mdriftmeyer]

Originally Posted by Jerseymac

Nooooo!

I want choice and competition!

Every Telco gets control over a product, but AT&T and that's what gave us the iPhone growth.

Verizon is ramping up costs in plans for smartphones and how that means Apple is going to jump ship and let Verizon dictate how it manages the iPhone is true ignorance.

[mdriftmeyer]

Originally Posted by ekim

AT&T doesn't have ANY coverage in important areas I travel to, therefore, for me, the iPhone simply does not fulfill its basic mission -- to be a phone. So, very sadly, no sale for me. Verizon DOES have coverage everywhere I go in North America, so I must stick with Verizon as a practical matter.

You must not be that important or travel in commonly important areas.

[mdriftmeyer]

Originally Posted by KangaMoJo

I think they'll release the 'tablet' branded as the new iBook and 3G and/up upwards in speed will be sold through ATT, especially as a piggy back to your iPhone plan now. And they'll add books to iTunes as a service similar to Apps and books on the Kindle but using an open source format. Why on earth would I sign extended contracts with both Verizon and AT&T based upon my device. That's why ATT will continue to get exclusivity because the tablet will augment the already existing huge install base of iPhones, just like the iPhone took advantage of the install base of the iPod. Think about the whole line of Apple devices and their respective purpose: iPod (Music and Games), iPhone (Music, Phone, Web Lite), iBook (Books, Web w/Flash, Computing Lite), MacBook (Computing).

Stop being rational. People love chaos.

[noexpectations]

Apple has a choice....they are choosing higher subsidies versus customer satisfaction.

[dapple]

A tablet will be more likely to utilize wifi and tethered internet signals, while a cellphone will be more likely to have a paid data subscription and provide the tethering to a tablet in the limited environments where the tablet is used outside of wifi range.

Therefore, a cellular provider is strategically correct to value a long term relationship with a cellular device like an iPhone over a tablet device, IMO.

[Maestro64]

I think what happen is AT&T modeled data usage base on pass experience which generally is not bad as a start and made assuming how the iPhone would increase this usage and they set a flat rate price since they have learned in the pass if you have per usage people get that first huge bill the first time and say no more and cut back usage and AT&T ends up making a lot less.

What happen in reality is the iphone probably caused a 10 fold if not more in the data usage since AT&T was not aware of all the possibilities that app programmers would come up with that would use data and it brought their network to its knees and now they are also realizing the flat rate price was too low that is why 3G network access is $30 a month verse $20.

Now AT&T is probably trying to figure out how to recoup what they feel they gave away, but the cat is already out of the bag and they can not go backwards, this is also why they probably held up MMS and Tethering. Today AT&T make more money on the mobile Broadband access cards then they do on data plans for cell phones, and they do not want to give that up too.

[chrispy]

Nooooooooooooooooooooooooooooooo!!!!!!!!!!!!!!!!!! !!!!!! Please Apple, DO NOT do this!!!!

Their network is atrocious, their customer service is the worst and they lie about everything. Starting a year and a half ago my 2G iphone bars went from 3 to 2 (when they rolled out their 3G network) and in the past few months it has dropped to 1/0 bars and lots of dropped calls from my house, where I work. I've called repeatedly and they tell me their network in my area is great and it must be me, my trees, my phone or Apple's fault.

And they repeatedly have told me I'm the only one complaining about network issues.

Apple even graciously swapped out my old iPhone with a new one to prove it wasn't the phone. I KNOW they moved capacity away from 2G to 3G in my neighborhood but can't get them to admit it. It's affecting my business and now I'm getting afraid, if I have a medical emergency (I'm a diabetic), I won't be able to get a connection.

Pleaseeeeeeeeee Apple, do not re-up with these slimy bastards!

[anantksundaram]

I can hear the sound of the collective weep from the two coasts.....

[solipsism]

Originally Posted by ranson

The thing iSuppi is overlooking is Verizon's massive push to incorporate 4g technology into it's network, which will be HSPA compatible. Apple would be right to avoid an EVDO-based phone, and won't need it to work with Verizon come next year. The ATT iphone userbase is almost saturated, it would be completely asinine to extend an exclusivity deal with them, when they can sell many more iphones by opening up to Verizon 4G when that network comes to fruition next year.

Originally Posted by Roc Ingersol

Only if they don't feel like selling iPhones to users in markets without full 4G coverage. Which will be nearly all of them.
4G-only won't be a feasible solution for at least 2 years. Even with VZW throwing money at the problem the way they have been.

Apple sticking with AT&T for another year would be a mistake.

Looking at history of the wireless carriers, it’ll be more than 2 years before anyone in the US can feasibly release a phone that is only LTE compatible. Even if Verizon gets LTE saturated in every major city (which I find unlikely) there will still be large areas that will still require the CDMA-based radios. Heck, we are moving to 4G tech and the nations best coverage is still with 2G.

[Gazoobee]

Originally Posted by Wings

And when "some" of those customers travel outside their 4G area and run up against no service when 10 miles from home, think about the flak Apple (&Verizon) would take for that! I don't think Apple would go for a half-assed solution.

Well at this point, both sides of this argument are still in the "wild speculation" category. I'm just arguing logical propositions.

It's a reasonably accepted proposition that Apple has milked the exclusive carrier side of the equation dry and that the lack of multiple carriers is the single biggest factor affecting (slowing) growth. I'm just saying that if there's no advantage to having the exclusivity anymore they might be wise to drop it.

If they can make a phone that will access more than one carrier by adding LTE to the phone or if they can make an LTE phone for a sufficiently large mount of people *somewhere* on the planet, they would be wise to do it because a customer is a customer is a customer.

Not only does no one really know if they will do this, even these high falutin analysts don't know any of the basic information that Apple would use to *decide* whether to move forward with one option or the other.

[kbsbeme]

Originally Posted by ranson

The thing iSuppi is overlooking is Verizon's massive push to incorporate 4g technology into it's network...

I think this is the possible key. Is there enough differentiation between a 3G and 4G product that Apple would not be violating exclusivity of the current iPhone by offering a 4G telecommunication device on another network—particularly if AT&T can't offer a 4G device?

Bottom line for me and, I suspect, many others, is I'm not getting an iPhone or updating my iPod Touch until Apple is on Verizon.

[mark2005]

Originally Posted by tacojohn

"AT&T has not found a way to monetize data traffic generated by the iPhone."

Uhhh– so me paying $30 a month for my data plan is not monetizing? WTF?

Fully agree that that was a dumb statement by iSuppli. That $30 a month from every iPhone owner is helping AT&T fund the development of their HSPA and future LTE network. Sprint and Verizon have to improve their 3G and add 4G without as many data subscribers, in the hope that they will get such subscribers. Think about it. If I was running a business, would I not want lots of customers providing me with the cash today to fund my expansion, instead of having to invest my own capital (or borrow) to fund the expansion in the hopes of getting customers later on?

If AT&T really improves their network, subscribers, especially iPhone owners, will rapidly forget all their prior months of dropped calls and data congestion. It's a big IF, but it's doable. AT&T just needs to move a lot quicker; i.e. hire more people to upgrade their equipment and add more towers. It's not rocket science.

[dasanman69]

As a Verizon (landline) employee I read a memo stating that Verizon Wireless has plans to open 30 markets with LTE in 2010 and be done with its entire footprint during 2013. That's one year before AT&T plans to start its LTE rollout. So I really think extending the contract would be really stupid of Apple to do. And last I checked Steve Jobs is no dummy lol