AT&T pushing to keep iPhone exclusive through 2011

[AppleInsider]

Having locked down the iPhone for at least three years, AT&T is now expected to take one more shot at an exclusive deal for the Apple handset and may keep it away from competitors until 2011.

Talking to the expected "people familiar with the matter," the Wall Street Journal hears that AT&T has a deal to keep the iPhone in its stable until 2010 and that negotiations are underway to have the device onboard for one more year.

Not surprisingly, there is no word from AT&T on the subject, and an Apple spokeswoman would only say that the two companies have a "great relationship."

The supposedly inside information echoes a report from last year that also said AT&T had struck a deal to keep the iPhone until 2010 and may provide insight into current talks. At the time, the cellular carrier reportedly agreed to allow iPhone 3G subsidies in exchange for a one-year extension of the iPhone's US exclusivity. Although the cost of discounting those phones has been severe -- as much as $1.3 billion to date, according to an estimate -- the agreement renewed interest in AT&T and gave it millions of users paying at least $60 per month (on grandfathered plans) for service.

Also, the iPhone gives AT&T a way of keeping customers from jumping ship to Verizon or another alternative at a time when the market is saturated and customers are more likely to have switched than sign up for the first time. The company added 1.9 million iPhone users just in the fall 2008 quarter alone and notes that many of these are less likely to give up on service than those who use other phones.

No matter how successful AT&T may be in lengthening its time spent with the iPhone, the firm is likely to maintain an inherent technological basis for holding the device close until two years later. As the only major US carrier with 3G using the HSPA standard on the 850MHz band, the iPhone as-is only supports its service for full data. Adapting the phone to T-Mobile USA would most likely require adding the 1,700MHz band, while switching to Sprint or Verizon would, for now, need a complete overhaul that swaps in CDMA calling and 3G access using EVDO; either of these is expected to gradually phase out.

Eventually, AT&T and Verizon will share the same network format when they both move to 4G using the Long Term Evolution format, but neither expects to have any significant networks until 2010, rendering any truly multi-carrier US iPhone impractical until the possible new expiry date for the agreement between AT&T and Apple.

[Trapt]

Unbelievable. This is wrong. We need to start a movement online to tell Apple we are not happy and this is not acceptable. We need some fair competition.

[iansilv]

^^^ I agree. The thing that scares me is the idea of data caps or restrictions on what kinds of data can be transferred- like Skype not being allowed to run on 3g. Also- if the next iPhone does video calling- it would really suck if ATT tries to charge those as separate minutes. We need carrier competition. And come on Apple- won't you make more money?

[wobegon]

Originally Posted by Trapt

Unbelievable. This is wrong. We need to start a movement online to tell Apple we are not happy and this is not acceptable. We need some fair competition.

Serious competition will only come when Verizon switches over to LTE UMTS. Currently, AT&T already does UMTS while Verizon is still using the old EVDO.

[l008com]

It sucks, but like the article says, theres no real way to use it with other carriers anyway. AT&T's network sucks. Verizons is much better but I doubt there will be a CDMA iphone. I'd get it if there was though. I have so many AT&T rollover minutes because I get such poor signal, I have to use skype to make calls when I'm at home.

[BenRoethig]

I don't see a reason not to if they're going to be staying GSM only for the iPhone 3G. the 4G, however, should not have an exclusive deal.

[Trapt]

Please Digg: at&t looks to keep its iPhone exclusive

http://digg.com/apple/at_t_looks_to_...hone_exclusive

[solipsism]

Originally Posted by AppleInsider

Although the cost of discounting those phones has been severe the agreement renewed interest in AT&T and gave it millions of users paying at least $60 per month (on grandfathered plans) for service.

I don't understand this sentence. It read to me that I could have gotten the cheaper iPhone data plan when i moved to the 3G iPhone because I had the original iPhone at the time. I'm sure this is not correct so what am I missing here?

Originally Posted by Trapt

Unbelievable. This is wrong. We need to start a movement online to tell Apple we are not happy and this is not acceptable. We need some fair competition.

What movement would that be? A movement to force Apple to engineer a second iPhone that works on CDMA-base networks and a third iPhone that works with T-Mobile's wonky cellular radio frequencies? A movement to force Apple to note have exclusive deals with carriers even though they existed long before Apple's foray into the cellular market and still exist today, the next major one being the Palm Pre on Sprint? Or would this be a movement to make Apple be a socialized company while all other companies can act normally within a free market?

You don't have to like it, but it normal business to have exclusive deals and it's completely legal. What is unusual is that handset is so successful that the carrier wants to extend the deal even longer despite the cost it incurs for maintaining this partnership. Though as the article stated, since there is no other viable non-MVNO carrier in the US that can handle Apple's GSM/UMTS-phone that is pretty universal in most major cell countries.

[old-wiz]

I'd love an iPhone not on AT&T. Their network sucks. Go to other carriers and I'll buy one.

[solipsism]

Originally Posted by l008com

Verizons is much better but I doubt there will be a CDMA iphone.

The non-stockholder part of me hopes that Apple doesn't make a CDMA phone for China Unicom. When they do these forums will be filled with all sorts of new posters whining "why isn't Apple releasing it here".

Originally Posted by BenRoethig

I don't see a reason not to if they're going to be staying GSM only for the iPhone 3G. the 4G, however, should not have an exclusive deal.

I would think that it wouldn't be, but if AT&T offers to pay Apple enough and to add the network features that Apple wants then it might happen as it would surely set the iPhone apart even further and let Apple play in areas that other cellphone vendors don't get to play in. Without the carrier lock in there are many aspects of the iPhone that would never had seen the light of day from a carrier with subsidy and the data plan would never have started at $20. We'd have to buy it from Apple Store and their retailers at full price.



PS: @ Trapt, Buried your Digg link for being incorrect of your assessment of what competition is.

[Trapt]

Originally Posted by old-wiz

I'd love an iPhone not on AT&T. Their network sucks. Go to other carriers and I'll buy one.

Exactly.

The AT&T network around here completely sucks. Even the demo iPhones (As well as my own) always say "No Service" at Wal-mart. It is laughable. Apple needs to think about what would benefit the customer who buys their products.

[iBill]

Originally Posted by old-wiz

I'd love an iPhone not on AT&T. Their network sucks. Go to other carriers and I'll buy one.

As has been said already, it's almost certainly not going to happen in the US until after 2010 when a carrier other than ATT migrates their network.

It's pointless to blame Apple, the cell market here in the US is wonky and it's not Apple's fault.

[bsenka]

I would really like it see Apple either end exclusivity altogether, or at least release different models to different carriers.

Tying a cell phone to one carrier is something consumers really should demand an end to. Imagine a computer that could only use cable internet and not DSL, or a TV that could only use one cable company, a car that was restricted to certain roads, etc. Yes, I'm aware that cell phones are subsidized. I'd like to see that end too. Bring on an era of truth in pricing.

[dukemeiser]

They are just delaying the inevitable. As soon as another major carrier (Verizon, T-Mobile, etc) gets the iPhone in their lineup, people will jump ship from AT&T in droves. I would buy an iPhone tomorrow if their service in rural areas didn't suck so much. Even in the big cities it sucks. The iPhone was the best thing to ever happen to AT&T and the worst thing to happen to Verizon. AT&T will fall into mobile obscurity once again, the sooner the better.

Personally want to see US Cellular get the iPhone, but since they are such a small company I doubt it will anytime soon. Would be great if AT&T would buy US Cellular though. End of problem.

[solipsism]

Originally Posted by Trapt

Exactly.

The AT&T network around here completely sucks. Even the demo iPhones (As well as my own) always say "No Service" at Wal-mart. It is laughable.

Let's consider your previous request. Let's say that no cellphone is allowed to be tied to a carrier in any exclusive deal. Now let's say that the iPhone can be yours and you can buy it outright at the full cost of $600-$800. What carrier would you choose and why would you choose them?

[AjitMD]

Apple is just being insensitive to the consumer needs. It is not big deal to have phones offered to different carriers supporting different radio technologies and frequency bands. Black Berry products are offered across GSM, CDMA, etc.

The CDMA tech with EVDO is actually much more mature than UMTS 3G. It uses synch CDMA and it is very power efficient as more reliable as the Verizon network indicates, especially in the lower frequencies. It is cheaper than UMTS to implement.

Companies like QCOM offer chipsets that can support both systems plus legacy GSM all in the same phone. Apple has a great product... the best. However, in tech there is always somebody trying to improve. 2011 is an eternity in tech.

I like the iPhone, and I have been to the ATT store thinking about switching over to ATT, but their onerous terms along with reported poor coverage was a bitter pill to swallow so I backed away.

[Jerseymac]

I dropped three calls today with a full five bars of 3G.

[solipsism]

Originally Posted by AjitMD

Apple is just being insensitive to the consumer needs. It is not big deal to have phones offered to different carriers supporting different radio technologies and frequency bands. Black Berry products are offered across GSM, CDMA, etc.

RiM has been making cellphones for how long now? I don't think it's uncommon for a company to start small and eventually expand once it's outgrown its comfort zone. Despite the excellent first release of the iPhone — which is partly due to not only releasing on one carrier but have an exclusive agreement with the carrier that allowed them to try some new things to improve the user experience — there is plenty of evidence that Apple had some growing pains with the cellular aspect of their popular device. Even Palm with their long history is starting out with an exclusive Sprint contract with their Pre, just as other before and other after them will do.

But despite this long term experience that RiM has had with US cellular carriers what you state isn't exactly true. The BlackBerry Storm debuted exclusively on Verizon's network in the same way that Apple first debuted its iPhone exclusively with AT&T. The Storm is considered a true world phone in that it has CDMA/EV-D0 and GSM/UMTS radios in it (though oddly lacking WiFi), Yet despite this inclusion of GSM/UMTS, the only data that will work on US GSM-based carriers is GPRS and EDGE as the 3G radios are incompatible with N. America. That doesn't sound like RiM is supporting all US carriers like you say.

[MacRR]

AT&T blows so hard in SF, CA I use it as a laptop and clumsily txt. i rarely use it as a phone- and if i do I have to run out of my house down to AT&T park to get a 5 bar 3G signal that will drop the call invariably.

it's shameful shit

[RobertMorein]

Originally Posted by Trapt

Unbelievable. This is wrong. We need to start a movement online to tell Apple we are not happy and this is not acceptable. We need some fair competition.

I have had no problems with AT&T, beyond those that one can experience with any carrier. In Chicago, AT&T 3G service has been terrific. I travel a great deal, and seldom have anything but the usual "transient" cell phone problems.

I accept that others can have problems elsewhere.

However AT&T have been a loyal partner with Apple, showing enthusiasm and opening up the whole cellphone world to a company (Apple) that most "experts" said would never break thru in the cell market.

Loyalty counts.

AT&T should of course be encouraged to make improvements and changes. But our whole experience will be degraded if any poor schmuck can offer iPhones.

Loyalty counts, and should be rewarded and encouraged, not abandoned at the first available opportunity.

[DavidW]

Originally Posted by solipsism

I don't understand this sentence. It read to me that I could have gotten the cheaper iPhone data plan when i moved to the 3G iPhone because I had the original iPhone at the time. I'm sure this is not correct so what am I missing here?

If I remember correctly. Since the original iPhone was not subsidized by ATT, ATT offered all it's iPhone users an upgrade offer. They could get the iPhone 3G for $399 and keep their current contract for the rest of their 2 year contract. Which was the special $60/month voice/data plan for iPhones. However, I don't think you got 3G with it. You were restricted to the orginal EDGE network. After the two year contract is up, you got to switch over to the $70/month voice/data w/3G if you want to sign a contract.

Or they let you off your old contract, with no cacellation fee, if you sign up for a new 2 year contract with a subsidized iPhone 3G at $199.

[DavidW]

Originally Posted by Trapt

Unbelievable. This is wrong. We need to start a movement online to tell Apple we are not happy and this is not acceptable. We need some fair competition.

There's no real competition in the carrier market. They all cost about the same for a standard voice/data package (in the US). The real difference is in the coverage. And not one of them can claim great or good coverage over their entire network. All carriers got coverage issue.

ATT would be smart to pay Apple to extend that exclusive deal for another year. One more year is all ATT would need (they hope) to improve their coverage. This would stop the main reason why any of their iPhone users would switch to another carrier. And maybe grab a some more market shares from the other carriers. Before the iPhone become availble for other carriers.

[dagamer34]

And Apple isn't going to use any immature chipsets for power reasons (see Jobs reasoning with the original iPhone not having 3G). I'd put Apple breaking off with their agreement with AT&T at 2011 at the absolute earliest, if not 2012. Of course, as soon as Apple comes out with a LTE-capable iPhone, Verizon kiddos will be using the phone anyway.

[iBill]

Originally Posted by dagamer34

And Apple isn't going to use any immature chipsets for power reasons (see Jobs reasoning with the original iPhone not having 3G). I'd put Apple breaking off with their agreement with AT&T at 2011 at the absolute earliest, if not 2012. Of course, as soon as Apple comes out with a LTE-capable iPhone, Verizon kiddos will be using the phone anyway.

Agreed. It will be interesting when that time comes to see if Verizon has turned over a new leaf regarding their obsession with locking out handset features. That of course is the real reason that there is no iPhone on Verizon.

[samthegreater]

Even though AT&T is gaining many new subscribers that are paying for their monthly phone plans through the iPhone, it still seems to me that it doesn't quite make up for the amount they lost through subsidizing the iPhone 3G. And let's face it, AT&T's phone service is simply sub-par. I think that consumers will begin to realize that an iPod touch has just as many application options as an iPhone, so they are better off financially if they stick with whatever phone plan they have (many provide customers with phones that come free with the plan) and get an iPod touch instead.

[toes]

... how about t-mobile? I know it doesn't use the same 3G frequency as AT&T in the US, but having used a Samsung Blackjack on AT&T for the past 2 months now here in Colorado and having used an HTC Pda for 3 years prior on t-mobile service I must say that AT&T's 3g is worthless.

More "bars in more places"? Pathetic. More like: "too many users, not enough bandwidth."

My old t-mobile EDGE/GPRS handset synchronized e-mail much more reliably and consistently with better coverage (no additional cost to use it in Europe either, where AT&T charges a ridiculous setup fee and huge additional data cost).

AT&T is a sad excuse and a bad partner for Apple as far as I am concerned. Still waiting for an unlocked iPhone (w/o do-it-yourself factor).

[addicted44]

I don't see it happening.

The only reason Apple might extend exclusivity is if that's the only way it can convince companies to subsidize the iphone.

The problem for AT&T is that Apple has realized (and I am surprised they didn't predict this) that the real money is in establishing a platform. Apple is not really into lock-ins (they have generally been forced by content partners, but most of their computing work, e.g. Webkit, tends to be very open, especially the many standards they create, e.g. Mini DisplayPort). The best way they can protect their competitive edge is by having developers create a bunch of applications for the iphone, which will hopefully restrict consumers (and maybe even business folks) to using only the iphone. Besides, there is just so much money in the App Store, which will get exponentially larger once companies start offering in-app purchases.

Apple will make a lot more money by establishing the iphone as the default development platform. The best way to do this is to get as wide circulation as possible, which will be hard if 50% of the US does not even have the option to buy your phone.

As far as the CDMA thing goes, I would be REALLY surprised if OS X Mobile isn't modular enough that inserting a CDMA chip wont be all that hard. Think about it. This basically just involves changing a couple of the apps (Phone & Messages). The new market opportunities (Verizon, and China, and more carriers in places like Canada) will be well worth the technical efforts needed to pull this off.

Finally, while initially the iphone has probably hurt the mac software eco-system, this will not be true in the future, once the "gold-rush" phase of the iphone is over. Mac and iphone development is so similar, that I am sure the folks new to the Mac platform will develop mac apps too.

[GregAlexander]

Originally Posted by iansilv

The thing that scares me is the idea of data caps or restrictions on what kinds of data can be transferred- like Skype not being allowed to run on 3g. Also- if the next iPhone does video calling- it would really suck if ATT tries to charge those as separate minutes. We need carrier competition.

Remember that if they go with another big player they have to either change frequencies or change the 3G technology entirely. Now... while the 4G "LTE" was forecast for 2010, it's looking increasingly like that'll take longer anyway, so there's less to 'lose' for Apple by going exclusive for an extra year.

Originally Posted by addicted44

The only reason Apple might extend exclusivity is if that's the only way it can convince companies to subsidize the iphone.

There's actually a lot to gain though. If AT&T wants an extra year exclusive on the 2010 iPhone, Apple may be able to redefine their relationship FOR THIS YEARS iPhone. For example, they might be able to encourage AT&T to allow ANYTHING that can be done on wifi to be doable on 3G. Or cheaper plans? Who knows.

Personally, I'd like to see AT&T offer a VoIP service on the iPhone so that phone calls can use home wifi OR the cell network with the same number... perhaps only using half your minutes for making a call while on wifi, and not using any of your own minutes when someone is calling you while you're on wifi.

Lets take pressure off the 3G network and save some money AND save our brains from radiation.

[GregAlexander]

Originally Posted by AjitMD

It is not big deal to have phones offered to different carriers supporting different radio technologies and frequency bands.

Apple really runs a tight phone, so if they had to use different chipsets that could bulk it up slightly perhaps. But yeah, certainly lately Nokia has been offering multiple versions of the same phone with each version supporting different frequencies.

Does anyone know if the iPhone chipmaker for the WCDMA bits has started offering chips with different frequencies, or better yet with more frequencies? In Australia (and Europe?) we really want to add 900Mhz support.

[NOFEER]

What about apple creating MVNO

[Stashman]

I think Apple needs to get its self setup as a virtual operator and keep their customers away the likes of AT&T, O2, T-Mobile etc. All mobile network providers as bastards, the worst part of the iPhone experience is receiving the bill operator.

[Stashman]

Originally Posted by NOFEER

What about apple creating MVNO

Thinking the same!

[Gyokuro]

Realistically, if there are no major surprises with the new iPhone launch in June, I will be getting a BB. RIM's industrial design is nice and its solid functionality on Verizon's network are important to me as I have no landline. iPhone is sexy, but I need a PHONE I can count on for business and emergencies. Sorry ATT. My Mac is pissing at me now.

[gsteeno]

My initial thoughts:

It appears from the WSJ article that AT&T needs to pony up to keep exclusivity. But for Apple, the cost of adding and manufacturing another phone that uses the 1700 band for t-mobile may not be lucrative at all. And for Verizon, with LTE coming out next year, seems sensible to wait and hit both sets of customers at once.

ATT has to know this and maybe puts Apple in a tough spot in the short term.

Of course, Apple could have co-developed these non-ATT phones already and all that needs to take place is to flip a switch, in which case, Apple is more in the driver seat.

[iReality85]

As a long time Verizon Wireless user up until February when I got my iPhone (on a whim, mostly), I have to say the AT&T service where I live (upstate NY) is actually not bad. It's on par, if not slightly better, than Verizon Wireless's service. The caveat for offering the iPhone on other networks, with Verizon Wireless at least, are the strings that come attached, most notably all of Verizon Wireless's less-than-desireable services like Vcast, etc. Plus, the hideous Verizon Wireless logo being stamped on front. Apple will certainly not agree to such conditions. For the meanwhile, I am quite content with AT&T (thought I'd never say that). If Apple does offer one for Verizon Wireless, I may consider switching back in a year and half (which might be the time frame Apple would branch out the iPhone anyway, given 4G networks scheduled to come online in 2010-11).

edit: Might I add, though, that exclusivity is a good thing. Its a 1-2 punch, as a product like the iPhone fosters competition and innovation not only between smartphone makers, but also between carriers. The iPhone has forced RIM, Palm, etc as well as Verizon Wireless to better their offerings instead of offering the status quo/same old same old. So, while exclusivity means a lock in, it ultimately benefits we, the consumers.

[elliots11]

1. It can't be that hard for Apple to put the hardware in and write the drivers for the iPhone to work on CDMA for Verizon or whatever other network they choose to support. Maybe within the same device as exist GSM chips.

2. Waiting until 4G on these other carriers is going to put iPhone at a disadvantage because it'll only be using the least mature network, which won't have as good coverage as the legacy networks, which Verizon in particular has used to establish the reputation that it has the best coverage. This may lead to iPhone getting the reputation of a great mediaplayer/intertnet device/ etc., but is no good for phone calls, which would be accurate, right when actual competition begins to appear.

3. If they have to make another model, it doesn't matter, because they're about have multiple models anyway according to the rumors. What's one more? They'll sell millions more phones.

It's also on carriers like Verizon, who are known to be restrictive, to not screw it up. AT&T's had it's exclusivity, it's time for the other carriers to get it.

[mdriftmeyer]

Originally Posted by Trapt

Exactly.

The AT&T network around here completely sucks. Even the demo iPhones (As well as my own) always say "No Service" at Wal-mart. It is laughable. Apple needs to think about what would benefit the customer who buys their products.

Where is here?

[brownreese]

Is this the forum where we get to bitch about AT&T's crappy service? If so, sign me up.

I contact AT&T because I can not get reception in my house which is in the heart of Charlotte, NC. Their response to me was to advise me that trees--especially those with leaves--can impair the signal.

REALLY? Should I just wait until winter? In the meanwhile I will just continue to pay ridiculous rates for my land line since your network is worthless. Sigh. that does feel better.

[aiolos]

Man, as soon as there's an LTE iPhone that works with Verizon, I'm dumping the iPod Touch and the LG I got to make room for the 1 electronic device that I now have to carry. I can't wait to consolidize from 2 devices to 1.

[JeffDM]

Originally Posted by solipsism

The non-stockholder part of me hopes that Apple doesn't make a CDMA phone for China Unicom. When they do these forums will be filled with all sorts of new posters whining "why isn't Apple releasing it here".

They shouldn't make a device for just one provider. I would really like to see a CDMA device. GSM is really throwing me off. A GSM phone will induce noise into my land line telephone, sound system, clock radio, headphones and hearing aids. It even induces noise into disconnected headphones. I get that GSM is the worldwide standard, but damn, it's irritating. I never had those issues with CDMA using the same towers.