iPhone: AT&T deal under scrutiny by government, Verizon - Page 2

To create a win/win scenario; Apple wins, the Carrier wins. Did I miss anybody out?

McD

Yes, the consumer. \

Actually, a lot of the more recent articles on the iPhone have been quoting the ATT exclusivity period at two years, not five.

Why the sudden change, I don't know.

Perhaps it's two years locked-in, with an option to extend it to five, if both parties want? I dunno. Neither Apple nor ATT has been super-forthcoming with the details of the arrangement, I guess so that either one of them can give the impression of the deal being more favorable to themselves than it really is.

For example, if everyone thinks its five years, then they are a lot less likely to 'wait out' ATT and get the iPhone on a different carrier. After all, its only going to be about a one year gap between the 'iPhone 2' being released and the end of a two-year exclusivity period. People who've had bad experiences with ATT/Cingular, or who are just not impressed with them period, might be willing to wait out that year.

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No! Really?

To lock you in to paying for the service for 2 years (which comes to $1440, minimum), whether or not you particularly like the service/network, and whether or not it works particularly well in your area.

To be fair, you do have that initial 30-day window in which to cancel, so if it's REALLY horrible, you can and likely will get out early.

Its more the people who get mediocre/inconsistent/deteriorating service who get screwed under the current arrangement, because the service isn't QUITE bad for them enough to cancel early, yet over the long haul said service may drive them bonkers.

I know plenty of people in this boat. But its too late for them to get out without paying a sizeable ETF. \


Again, to lock you in, even if the service is mediocre.

Also, the government does not require ETFs to be pro-rated over the life of the contract. The only carrier I'm aware of that actually DOES pro-rate the ETF is Verizon, and they don't pro-rate it fully (the ETF drops $5 per month over the term of the contract).

If Verizon, a carrier with a well-regarded network and low customer churn rate, is only willing to somewhat pro-rate the ETF, what then are the odds of carriers with lousy churn rates, like Sprint and T-Mobile, being willing to do the same without the government forcing them to?

Answer: A snowball's chance in hell, pretty much.

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Isn't part of the point of exclusivity to lift the game of both parties? Sure you can hide behind the chaos & numbers with a generic mobile service but with a high profile, high value product like iPhone wouldn't AT&T need to get their act together?

McD

FYI AppleInsider, Vodafone only own a very small stake in Verizon Wireless.

if you call 45% very small i guess.

These guys are just unbelievable. And any legislator who accepts this crap is either corrupt or a moron.

You apparently have not gotten around to reading some of the posts in this thread yet.

That's in the 'ideal' world. In the real world, ATT has been trying to get their act together for some time now, with only mixed results.

Their churn rate has gone down some, which is always good, but its still not as good as their best competition. Their customer service remains as poorly ranked as ever in the major nationwide surveys. And their network, while improving, still doesn't quite have it together like it should (check out JD Power or Consumer Reports). Plus they're 12 to 18 months behind Sprint and Verizon in rolling out their 3G network.

I think ATT is already trying about as hard as it can to improve... they have to, otherwise Verizon and others will hand them their head. Their deal with Apple can't really put too much more pressure on. Yes, sure, one could maintain that the threat of taking the iPhone exclusivity away the instant the contract runs out might motivate them. But frankly, Apple is probably out of there the instant the contract is up ANYWAY, because they don't want to sell to only 25-30% of the US market (which is all ATT has, even though they're the largest carrier).

So it doesn't really matter what ATT does. Apple just needed them to launch the iPhone, under Apple's terms. After that, ATT becomes just another carrier essentially, albeit a large one.

Cynical? Yeah. But look at how Apple 'used' Motorola with the ROKR. Moto taught Apple a lot about cellphones, but in return Apple hobbled the ROKR down to 100 song capacity, and then of course later blew them out of the water in the high-end phone market with the iPhone.

Sense a pattern?

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The market is still out. Are we sure the Verizon folks are looking at the right phone? It's either that or they are complete idiots. For folks I've talked to the only thing keeping them from owning one is price their existing service contracts with other carriers, but they all covet one, can't think of a single other phone that has had this much lusting after.

Thanks for the advice, Captian Obvious, that's just what I am doing.

In my house, we have three Macs, two iPods and we hold Apple stock. As you can tell by my nickname, I proudly support Apple, Inc. even at the risk of being called a "zealot", "fanatic" or "fanboi." My wife and I are both highly impressed with the iPhone.

Coincidentally, I am also a Cingular (which is now AT&T) customer and I am coming to the end of my contract in about two months. I am thoroughly disgusted with the service and am looking to leave when the sentence is up. Thus, as things stand now, I will not be getting an iPhone anytime soon (and neither will my wife).

Especially since we are required to pay the full cost of the device, I don't see why AT&T gets a monopoly. I understand if I get a Blackberry for $79 that they need me to commit to a two-year lock-in to recover their subsidy of the equipment. I think a business model where the customer pays the full price of the equipment, but gets to hop from provider to provider on a month-to-month basis will really drive superior value for the consumers and Apple (but it will make the phone companies compete for real.)

Reminds me of the gilded age (aka the era of the robber barons). A lot of the legislation we have today--controls on monopolistic business practices, attempts to provide consumer protection--date back to politicians' responses to public anger over the excesses of that period (usually with the support of the ruling class, who still found conspicious display of wealth distasteful, and were smart enough to know a little reform goes a long way to preventing revolutions).

It's uncanny reading wikipedia's entry on the gilded age and noting the similarites that characterize both periods: explosive immrigation, immense political divisiveness, widening gaps in wealth, massive economic and demographic change, mudlsinging, etc.

I'm not sure sitting back and letting freemarket capitalsim rage unchecked, because we're convinced the solutions offered by a congresss that sits at the pleasure of these business interests are probably going to be poorly conceived, and more poorly implemented, is the solution. Besides, iIt's not like the avg consumer has much choice--you can't just buy up a bunch of frequencies and open your own cell network. Nor can you ignore cell phones, which are pretty much essential ingredients for successful particiaption in the new economy.

Great point, macFanDave. I think that's the sytem they have in Europe (someone correct me if I'm wrong). In some ways we may be moving to that in the US, with the rise of pay as you go services. The problem I've noticed is that so far most people are restricted to certain phones for those arrangements. Again, I may be wrong, especially once your contract expires.

How can you presume that with the iPhone out the discussion has finally opened up? Could it be your slated view of the world given the obvious fanboyism shown in this post.

There hasn't been a sudden change. The contract between consumer and AT&T is 2 years, the contract between Apple and AT&T is 5 years.

he he he . . . iPhonobia, anyone?

Et tu, Verizute?

he he he ! ! !

Europe is not that homogeneous, we have differing practices in different countries, but usually yes you are allowed to buy unlocked phones here, or if you want you can sign up a contract with subsidized phone. I see no problems in this subsidized model, but I hate that companies hide those phone prices in telephone bills. I'd like to see a separated system where you can pay phones off by installments, and choose your operator separately.

Also one point that I find interesting is that do everyone who bought I.e iPhone consider the lifespan of the phone to be exactly 2 years? What happens if the phone dies on you before? Or your phone is still doing fine after 2 years, is it either garbage or you have to make another 2 year exclusive? I keep my previous phones as a backup, when I do outdoor activities or something that I think my current phone is too expensive to take with. In iPhones case to be able to do that, you'd have to continue being ATT customer. They are still limiting your choice even after your contract is due.

I'm an outsider so I don't have first hand experience of AT&T's service the comments seem pretty damning though. I would have thought one of the most powerful electronics brands around wouldn't have entered into an agreement with such a poor carrier without some strict SLAs.

Of course the inevitable breach of such SLAs could let Apple out of the tie-in prematurely especially after another carrier had become more agreeable to accommodating handset-driven services over their network.

I think I'm hearing you.

Can you site any sources that proves this? I know it has been speculated but look at a good hard the ROKR. It's a very poor device in both HW and SW. This limitation may have been a one imposed by Motorola due to significant speed issues with "iTunes" on the ROKR accessing the numerous files files from its DB. Did Apple even create the app for the ROKR or just let Motorola's programmers in on how it needs to be done in order to sync with iTunes properly?

This is all about some ____________ lawyer looking to get an iPHONE but doesn't want to switch carriers. It has nothing to do with what is right or "just". The consumer is getting screwed regardless of the carrier. I wanted an iPHONE, I made the switch. This is the same thing I would have had to do if I wanted a RAZR back when they first came out. The same could be said about the Samsung A900 I had. It was offered exclusively through Sprint. If I were a Cingular customer when that phone came out (and didn't realize it was a poor excuse of a RAZR knock-off) I would have had to switch carriers.

I think most phones are pretty exclusive when it comes to which carrier they go to... at first.

If you list all the available phones how many of them work on every network? Include the crappy freebies you can get for buying a T-Shirt with your carriers logo on the front.

I love my iPHONE, it's unfortunate we can't connect with EV-DO and make the thing purr like a kitten, but quite frankly, it is pretty good with the EDGE network and amazing with the wi-fi connectivity. Don't knock it until you own it. \

As for the legal BS, it doesn't matter what happens unless you work for APPLE or AT&T.

Nope, I'm not referring to the consumer contract. I'm referring to the length of the ATT-Apple exclusive:


Wednesday, July 04, 2007

Apple has signed up top U.S. telecoms operator AT&T Inc. (T) in an exclusive deal for at least two years to sell the phone in the United States, where customers willing to sign a two-year contract are expected to pay $500 to $600 for a handset.

http://www.foxnews.com/story/0,2933,288049,00.html


By Kristin Graham July 2, 2007

...a significant portion will switch to AT&T, as it is the only cellular service permitted to sell the iPhone for two years. Polls have shown that nearly 40% of those planning to buy the iPhone are not yet AT&T customers.

http://www.fool.com/investing/genera...ne-review.aspx



Both are very recent articles. I'm sure I can find more if I felt like.

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AI and many other, more reputable sites than Fox News, are reporting 5 years. I beleive Verizon also stated that Apple suggested a 5 year contract.

PS: I just checked foxews.com expecting to find an alternate story reporting the common 5 year exclusive deal but was able to find one. I think Fox News is the only one to not be reporting the 5 year deal.

This 4-page article will give you some good background:

http://www.wired.com/wired/archive/13.11/phone.html

Its really not a great technical feat to have over 100 songs on a phone... even back in '05, solip.

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This is just usual crap from politicians with nothing better to do, it happens all the time and when the individuals realise what an ass they have made of themselves we will hear no more of it. I however think there is a real issue here but am smart enough to realise that in a capitalist economy the market will address any issues in due course.

Forget for a moment the first 3 month sales of the iPhone, this is no way guaranteed to be a benchmark for future sales, all those on these boards who believe that are deluded. The Apple fans who would buy the phone regardless would have bought one within the first 3 months, it is what happens over the next 21 months that will make or break the iphone. It is the "normal' mobile phone users who will decide the future when their current contracts are up for renewal. Do they pay $600 and sign up for 24 months for an iphone or do they pay a highly subsidised price for one of the many other phones on the market now or the iPhone copies that will no doubt flood the market from the japanese manufacturers over the course of the next year.

We can all have our opinions but in the end as always the market will make the decision, if Apple's route to market can show a sustained growth in sales then they may well make a success out of it, but there is a big chance they may also have to re-evaluate this route if sales slow down, talk to other carriers, reduce the price etc...

Personally i would not dream of paying US$600 for a phone that ties me into a 24 month contract, now matter how much i love apple products. And this is the real test for Apple, what most people still want from a mobile device is the ability to make voice calls, send texts and take a few photographs. This is not an opinion btw, this is a fact based on the one billion handsets that will be sold in the world this year, the vast majority are not smart phones by any stretch of the imagination.

But will enough people buy an iphone to make this venture a success? Who knows, the only thing i do know is that the government will not decide this, the consumer will. So to the people who think the consumer is getting a bad deal by all of this then you know what to do, don't buy one! But you cannot claim the consumer gets a bad deal as the consumer will always dictate the market. Its as bad as all these idiots who complain about WalMart but yet still shop there citing "But we have got no choice" ! Bollocks, shop somewhere else, if everyone did it there would be no monopoly.

Yeah, I read the same articles as you. But many of those articles seem to be from a few weeks back, at least. Given the mix of recent articles, the issue seems to be more unclear now.


No, Motley Fool, the investing site, was the source of the other quote.

And, if you want to hear from Reuters (a reputable source, I'd think):

Apple was criticized in the United States for striking an exclusive deal of at least two years with the largest U.S. telecoms network operator, AT&T Corp, because some customers might suffer weak signal strength despite paying $499-$599 for a handset on top of a pricey two-year contract.

http://www.reuters.com/article/techn...5?pageNumber=2

The date on that article? July 5, 2007.

Sorry solip, but something really does seems to be up. \

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I guess you haven't heard that there is NO CONTRACTUAL REQUIREMENT for buying an iPhone. Now, if you want to have a voice plan with your iPhone then you do need to sign up with AT&T, but again, there is NO CONTRACTUAL REQUIREMENT. Just simply put in an SSN like 999-99-9999 or use one with a very poor credit rating, like Wilcos. Of course, you'll be paying higher monthly fees that those with a contract but that is to be expected.



I don't know if what people currently own can be construed as to what people ideally want. I know I have hated, save for the Blackberry, every "smartphone" I have tested due to it's confusing interface. The Blackberry was not a good fit for me as its excessive focus on enterprise business does not fit my needs.

Yet I decided to buy an iPhone site unseen because it's specs matched my needs. Full internet, video iPod and simple syncing in an eay to use device is what I was after and what I've wanted for a long time.

Jobs stated that he wants to capture 1% of the cell market by the end of 2008. That is 10M iPhones. But what percent is 10M of the smartphone market? Or the expensive $350+ cell phone market?

It's one possible scenario. Not saying its a certainty, by any means.

Nor am I saying that ATT is a terrible carrier. Just terribly average. \


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ZING! Nicely done.

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I'm not familiar with Motely Fool and with their DNS name being fool.com I didn't even check them out.

Rueters I do know and I would like to point out that they say "of at least two years" which is exactly what I'd expect to see from a respectable source.

You may be on to something here, but I still feel that the deal is for 5 years. A two year deal just doesn't make much sense to me.

That's odd... a 5 year deal just doesn't make sense to me, at least from Apple's point of view.

Why would Apple want to be limited to selling through only one carrier in the US market for an extremely long period of time? Both Sprint and Verizon are nearly as large as ATT. Even 'little' T-Mobile has around 25 million customers, many of whom likely want an iPhone.

Sure, some will switch to ATT just to get the iPhone. But others, happy with their present service, will say no. And no one carrier has great service everywhere. There are plenty of areas that have poor enough ATT service that folks residing there won't have the option of getting the iPhone. Those are potential sales, lost. But if the iPhone were multi-carrier, that wouldn't be so. \

I think Apple, being Apple, was looking to the future when it negotiated with ATT/Cingular. And because they did, its my strong hunch that the exclusive period is for two years, with an option for five. I'm thinking Apple won't be exercising that option, and likely never intended to.


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I don't think 5 years is a long time. I think it's a perfect amount of time for the iPhone platform to mature and for Apple to get a handle on the cell market. They can also bank on the monthly revenue generated by AT&T's payments for "the privilege of being the sole US iPhone carrier." Without this the iPhone may cost several hundred dollars more than it does now.

If Apple came out with two unlocked phones--one for GSM and CDMA--or one WorldMode phone they immediately up their production and R&D costs for now having to deal with both radios. They also lose any monthly revenue from a lack of contracts and are unable to forward the cellphone market by adding features like Visual Voicemail, though this is really just a benefit to the consumer.

Also, if Apple released an unlocked phone then carriers like Verizon (assuming it was CDMA) may decide to cripple many features of the phone like they do with so many others.

An unlocked iPhone turns a device designed to turn the cell market (from the network to the hardware to the software) into a device that becomes a short-lived "Ooh!" factor in HW and SW but quickly fades away as cool, but highly flawed device like the Newton.

It's funny to read this from a European perspective - especially from all you free market evangelists out there. This is a classic example of a market failure. Some people here wrote that the carrier lock-in is good for innovation, but the contrary is the case as you can see with the carriers blocking useful functions just to make more money to force you into paid services.

In Europe you generally do not have locked phones - except for pre-paid contracts. It seems that the American cellphone market is one of the most restrictive in the world.

I always by my phone separately and have a contract that I can cancel within 8 days. I can buy any (GSM) phone in the world and if I see a cheaper carrier I can switch in no time - without any cancellation fee. Most European carriers are even moving away from the subsidized cell phone model. They don't want it anymore.

This is also were Apple potentially runs into trouble with their negotiations with European carriers. I'm curious what model they will adopt over here...

It's also quite interesting that the American market has this "airtime" model, meaning that you even pay if you receive a call. It doesn't work like this in most other places. In Europe, if you are called you don't pay a dime - the caller pays a higher fee than if he would call you on your landline. Which is great because it actually encourages people to talk longer on their phone.

t.lo

Considering iPhone sales lost by not being multi-carrier, 5 years is an eternity.


Apple's been getting a handle on the cell market since '05 and the ROKR. They'll be hitting Europe in a few months, and Asia next year. If they don't have a good handle by then, they're going to be in for a bit of a rough ride.


Apple would likely seek a cut of the monthlies from any carrier they do business with. The whole point of the ATT deal is to give them a cudgel (ATT's short-term success at the cost of its competitors) with which to force such a concession.

And there's really no way the iPhone can cost 'several hundred dollars' more. If Apple charged $1000-1500 for it, it would flop. Only the diehards would buy it then.


First off, I don't think Apple is going to go the unlocked route, unless of course it was mandated by the government.

Second off, making two versions isn't terribly tough. Many companies already do this... the RAZR is one example. It's not like Apple has to re-invent the wheel- the chipsets needed are widely available, the issues are well-known.


If they are forced to go unlocked, perhaps, because that removes their leveage. But what if the govt doesn't step in, and Apple simply offers the same deal to other carriers that they offered to ATT?

Given the huge initial success of the iPhone, plus a feeling that 'this is where the future is headed', plus the iPhone's ability to drive data plan adoption, carriers that were previously intransigent (hi Verizon) may be reconsidering, even if it means giving a cut of the monthlies to Apple.

And I know Sprint is getting pretty desperate right now.



Again, who knows if Apple is going to be forced to go unlocked. Also, Verizon has released phones on its network that were NOT crippled, such as the Nokia 6256i (a phone I own).


Again, it really comes down to unlocked vs 'multicarrier via the same deal that was offered to ATT'. I really can't tell you what the Feds are going to do on that one, though from what they're intending to do with the soon-to-be auctioned 700 MHz band (analog TV spectrum that is being freed up as TV goes digital), it seems that they're hot to promote 'device openess'.

Which, yeah, would seem to be setting a precedent that could expand later.

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Say what? It's the Democratic Party. Democrat was a derrogatory term used by the Federalists against the Jeffersonians and now the Republicans against the Democratic Party (usually as an adjective but also to shorten the name to Democrat Party) to imply something less than a...well...democratic party.

Who's too f-ing stupid now? Other than meddling democrats of course?

Vinea

Uh, yeah, except for the fact that European voice rates tend to be quite a LOT higher than in the US. Which is why texting is so popular over there... its cheaper to text than to talk.

Your usage patterns reflect this:

Irish Vodafone customers' consumption of voice minutes remained higher than the European average: Vodafone Ireland customers used on average 222 voice minutes each month in the quarter ended 31 March 2007 versus a European average of 142.

http://www.electricnews.net/article/10077221.html

Wanna know how many voice minutes Americans use on average per month? Over 700.

Even doubling the Euro average of 142 voice minutes to reflect free incoming calls (i.e. only one calling party is charged), Americans still talk more than twice as much as Euros do, on average. And for a bit less money (Vodaphone ARPU, in Ireland anyway, is ~45 Euros, or over $60 US. Typical US carrier ARPU is around $50.)

And, if you're a big fan of free incoming calls even so, Sprint does offer that in the US.

I'm not saying that the American cellular model doesn't have its problems... it most definitely does. But expensive voice minutes isn't one of them. We actually have it really good there.

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Americans need to start looking beyond their own borders occassionally. America consistently gets the worst phones on the planet (the iphone is an exception, simply because Apple understands the US market better than any other in the world, and only Apple was capable of making a product like the iphone). Even when the US gets good phones from around the planet, they are consistently crippled, and do not live up to their potential.

For e.g. The Razr. All over the world, outside the US, the Razr was being sold with iTunes, allowing users to download as many songs onto it as they wanted. Except, in the US, the carriers did not allow the razr to carry itunes, so in the US only the rokr series had itunes on it. It was a completely ridiculous situation, ensuring that the best selling phone in the US was still not half as good as its brethren abroad.

I'd say part of the reason why average voice minute usage in Europe is lower than in the US are:

1. Unlimited free incoming calls.
2. Higher cell phone penetration. In Ireland, it's at 110% right now. That's bound to have an effect on how many minutes are used. And if you do sign a 12-month contract here, most networks will give you free unlimited mobile to mobile calls within their network, or free unlimited weekend calls to all networks.

I'm sorry but, until January 2009, our current President owns the patent on f-ing stupid.... and he isn't licensing.

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