Apple may be forced into Verizon iPhone within 2 years - report

Posted:
in iPhone edited January 2014
Even as Apple has insisted it's content to give AT&T exclusive access to the iPhone, a closer look at Apple's own devices -- and a likely dead-end in growth through its existing carrier strategy -- shows that Apple may have little choice but to sell its smartphone through Verizon and other carriers by 2011 at the latest.



A research note from Citigroup sent out late on Tuesday stresses that the US cellular market is quickly hitting a wall in terms of growth and that even the iPhone can't save AT&T from the same fate. Although Apple's handsets may have saved AT&T in the last quarter by improving the company's bottom line and preventing dramatically reduced subscriber additions in the midst of an economic collapse; the American wireless industry as a whole is only likely to grow 1 to 3 percent per year from here on out, analysts say. Much of the growth in other carriers in the early part of 2009 was ultimately due to Sprint customers abandoning their carrier rather than true expansion.



As such, Apple under its current tactics is more and more likely to end up selling only to existing AT&T customers and to serve iPhone users replacing their earlier devices, neither of which is likely to grow quickly. Citigroup doesn't see any mobile platform, including Apple's, ever garnering more than a quarter of AT&T's customers and already sees Apple representing as much as 18 percent of the carrier's base by 2010. It may also become increasingly difficult for AT&T to offer more incentives and extend iPhone exclusivity any later than 2011, as the potential for more customers elsewhere may be too strong for Apple to ignore by that year.



The hard ceiling on expansion, in turn, means Apple can't afford to leave money on the table by artificially limiting who can buy an iPhone in the US. Instead of selling to just a fraction of AT&T's 78.2 million customers, Apple is predicted to have access to as many as 150 million customers across Verizon, Sprint and T-Mobile if it chooses not to renew its exclusivity contract. Estimates have Apple's likely actual customer base nearly doubling from 17 million to 30 million users. The Cupertino company would have to accept a hit to its jealously-protected high profit margins but could well generate more revenue in addition to expanding its market share.



That may play into Apple's expressed preference for sticking to one device. While Apple's only avenue to expand the iPod's market share was to release lower-cost models, expanding the iPhone's footprint is described as possible if the electronics giant simply agrees to lighten the steep subsidies it wants on each phone in return for the rights to sell iPhones beyond AT&T.



Technical hurdles that would force a second model are also less likely to be a concern. Notably, Qualcomm is known to be making a hybrid CDMA and Long Term Evolution (LTE) chipset for mid-2010 that would let users make calls on Verizon's existing CDMA phone network but have access to its 4G, LTE-based network when it goes live the same year -- and roughly when the current deal is likely to expire. Accordingly, while Apple has publicly decried CDMA as a dead technology, the Qualcomm chip could let Apple take advantage of Verizon's network for at least the next few years -- a gain Citigroup sees as likely worth the extra customers it would bring. Verizon alone could add between 10-20 million new iPhone users within 5 years, but it would also open the door to Sprint and would grant access to those few Chinese and Indian cellular networks that depend on CDMA.



And even if Apple doesn't see a multi-carrier deal as a pure revenue grab, it may see the gesture as a purely reactionary move tailored to stifling obvious competitors in the touchscreen phone arena. Palm and Research in Motion both consciously chose to launch their iPhone rivals on CDMA networks where Apple was unlikely to surface and steal their sales; a CDMA iPhone for Verizon (and possibly Sprint) would, the analysts believe, quickly destroy the competitive shelter provided to these phones through networks the iPhone can't touch.
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Comments

  • Reply 1 of 101
    cu10cu10 Posts: 294member
    Jailbreakers have won!
  • Reply 2 of 101
    801801 Posts: 271member
    Interesting logic.
  • Reply 3 of 101
    eodchopeodchop Posts: 12member
    I am getting rid of my iphone until i can get someone besides ATT and their absurb 3g rates. Only two more months left on the contract. I would love to see Sprint, Verizon, Alltel etc be able to distribute the iphone. This vendor lock, corporate bargaining shit needs to end.



  • Reply 4 of 101
    iharryiharry Posts: 42member
    I plan to be first in line the day Verizon offers an iPhone. AT&T sucks in my area.
  • Reply 5 of 101
    john.bjohn.b Posts: 2,717member
    Huh? The iPhone has been stealing CDMA users for two years now. Sprint is currently losing over a million subscribers per quarter. People with Sprint or Verizon or US Cellular that want an iPhone can just ditch their CDMA service and old phone and still keep the number.



    And, unless I missed something, CDMA phones don't have swappable SIM cards. So how the hell is that going to work?



    I think there is no doubt that Apple will migrate to LTE iPhones when the AT&T and Verizon start to build out those networks, but I don't think they have much reason to abandon GSM when that works worldwide right now.



    If anything, what Apple needs to do is hold AT&Ts feet to the fire to continue to upgrade the existing GSM network today.
  • Reply 6 of 101
    Quote:
    Originally Posted by iHarry View Post


    I plan to be first in line the day Verizon offers an iPhone. AT&T sucks in my area.



    God I hate AT&T-but I hate Verizon just as much.



    I do not hear good things about Sprint, but their everything for $80 a month (I think) is a pretty good deal.



    I was with Voicestream then T-Mobile for many years. They have THE BEST customer service by far. If they could build out their 3G and Apple would make a compatible phone, I would be back in a second. LOVED THEM-and they are cheap-much cheaper than AT$T.
  • Reply 7 of 101
    I'm currently on Verizon (and have been for the past 6 years) and am planning on switching to AT&T this summer for the new iPhone. I would love it if they release the iPhone on Verizon this summer, but I know that's too soon (even if it is possible).



    It makes me mad because I want to get an iPhone this summer, but I love Verizon and I don't think I could wait another year or two for a Verizon version.



    I guess I'll just be switching to AT&T this summer, but I've heard the service isn't as good as Verizon...
  • Reply 8 of 101
    tenobelltenobell Posts: 7,014member
    <sarcasm> Yeah, AT&T is way out of line on its data rates. Verizon's rates are far more reasonable. <sarcasm>





    Quote:
    Originally Posted by eodchop View Post


    I am getting rid of my iphone until i can get someone besides ATT and their absurb 3g rates. Only two more months left on the contract. I would love to see Sprint, Verizon, Alltel etc be able to distribute the iphone. This vendor lock, corporate bargaining shit needs to end.



  • Reply 9 of 101
    john.bjohn.b Posts: 2,717member
    Quote:
    Originally Posted by Enigmafan420 View Post


    I do not hear good things about Sprint, but their everything for $80 a month (I think) is a pretty good deal.



    The insurmountable problem with Sprint is that their customer service is terrible.
  • Reply 10 of 101
    I don't see how having a CDMA/LTE chip available fundamentally makes it more likely for Apple to switch to Verizon. The problem with supporting CDMA or Verizon is having to design a separate phone in addition to the current GSM type for AT&T. A CDMA/LTE chip still doesn't support GSM and would still be a separate device from say a GSM/LTE future iPhone for AT&T and existing partners. Apple can't simply abandon GSM, because the technology is still prevalent and needed for areas that don't support LTE yet.
  • Reply 11 of 101
    dr millmossdr millmoss Posts: 5,403member
    Interesting, but the use of the word "forced" to describe why Apple may change their strategy in the future is somewhat unfortunate. Saying that they may be "forced" to go with more than one carrier is like saying they were "forced" to sell a Windows version of the iPod. The implication is that Apple never adjusts their approach unless they have no choice.
  • Reply 12 of 101
    iworkiwork Posts: 6member
    Quote:
    Originally Posted by John.B View Post


    The insurmountable problem with Sprint is that their customer service is terrible.



    Indeed, Sprint's customer service is lacking and inferior to other major cell carriers in the US. However, based on my experience in the NYC tri-state area, Sprint's 3G (EvDO) footprint and service quality is superior to AT&T's 3G service. It's important to note that cell service varies based on geography, topography, population density, etc.
  • Reply 13 of 101
    Quote:
    Originally Posted by John.B View Post


    Huh? The iPhone has been stealing CDMA users for two years now. Sprint is currently losing over a million subscribers per quarter. People with Sprint or Verizon or US Cellular that want an iPhone can just ditch their CDMA service and old phone and still keep the number.



    And, unless I missed something, CDMA phones don't have swappable SIM cards. So how the hell is that going to work?



    I think there is no doubt that Apple will migrate to LTE iPhones when the AT&T and Verizon start to build out those networks, but I don't think they have much reason to abandon GSM when that works worldwide right now.



    If anything, what Apple needs to do is hold AT&Ts feet to the fire to continue to upgrade the existing GSM network today.



    Why on earth would I want to do that? CDMA is a superior technology. GSM vs. CDMA is like VHS vs. BetaMax, or even PC vs. Mac. Popularity (and especially not ubiquity) and superiority seldom go hand-and-hand.
  • Reply 14 of 101
    ecvoyagerecvoyager Posts: 1member
    The genius is in Apple, not Citi, not Verizon, not RIM, or others. (May be a few in Palm.)



    No one thought of Apple could make a new phone succeed before iPhone. The market was already crowded. That's how Verison refused Apple.



    And who ever forsee iPhone have such a big impact? Citi group certainly didn't see it.



    I'd rather counting on Apple to have another innovative products or ways, rather than Citi group or Verizon that can only look at statistics.



    I'm also with Verizon that will expire in 2 weeks. I'm researching the available optiions and I can tell you for sure, the current smart phones from Verizon are very boring.
  • Reply 15 of 101
    iworkiwork Posts: 6member
    Quote:
    Originally Posted by ltcommander.data View Post


    I don't see how having a CDMA/LTE chip available fundamentally makes it more likely for Apple to switch to Verizon. The problem with supporting CDMA or Verizon is having to design a separate phone in addition to the current GSM type for AT&T. A CDMA/LTE chip still doesn't support GSM and would still be a separate device from say a GSM/LTE future iPhone for AT&T and existing partners. Apple can't simply abandon GSM, because the technology is still prevalent and needed for areas that don't support LTE yet.



    The cost of developing a CDMA/LTE (or even a CDMA/WiMax, based on an Apple job posting in early 2008) would likely be offset by additional market share and revenue.



    Apple may even choose to have a carrier subsidize the R&D of such a device.
  • Reply 16 of 101
    virgil-tb2virgil-tb2 Posts: 1,416member
    I read this earlier on another site and here is the giant clue that what they are talking about is total BS:
    Quote:
    Originally Posted by AppleInsider View Post


    ... the US cellular market is quickly hitting a wall in terms of growth ...



    The analysis is true if you imagine that the world consists of only the US market and that there are not other, much larger markets for the iPhone.



    So I guess if you live in Texas this is true, but otherwise it's just another case of American analysts stupidly (and in their defence I believe innocently), not realising that there is a world outside of the borders of the USA.



    The international market is growing in leaps and bounds and the untapped portion of it exceeds the untapped portion of the US market by many many many times. Apple *may* make a CDMA phone if it ties in with their goal of making the iPhone ubiquitous worldwide, but they certainly don't need to (and probably won't) make a phone just to grab Verizon's customers.
  • Reply 17 of 101
    djzappdjzapp Posts: 9member
    This device is freakin awesome. I think all carriers should have this phone, just like Blackberry. This phone would whip the crap at the BB if it was to go to all carriers.



    On another note: I have been with AT&T When it was just beginning service here in Phoenix, AZ. I have been through the good and bad times and I must say my overall satisfaction has been amazing. My coverage is excellent, Great 3G coverage on my partner's iPhone. Now if i didn't get service in places that matter to me then it would be a different story. But honestly I am tired of people that complain about AT&T. No they are not the cheapest but they most certainly are not the most expensive. This phone and a plan on Verizon is going to be expensive. Do you think this exclusive contact is cheap? They along with Apple have made this happen. I still think that all carriers should have this amazing phone. Why do I need a Netbook? I have the iPhone... Why do I need a Bulky Laptop? I have an iPhone....



    enuf said,



    Mike
  • Reply 18 of 101
    Quote:
    Originally Posted by iWork View Post


    Indeed, Sprint's customer service is lacking and inferior to other major cell carriers in the US. However, based on my experience in the NYC tri-state area, Sprint's 3G (EvDO) footprint and service quality is superior to AT&T's 3G service. It's important to note that cell service varies based on geography, topography, population density, etc.



    That's a given, but Sprint really *is* better once you get your phone setup. How often do you really call customer service? I've been a Sprint customer for more than a decade. The only time I've dealt with their customer service is when they've called me to offer a new phone, better plan or the occasional thank you and free month of service. Frankly, after my third year with them, they've seemed desperate to keep me happy...even sent me cookies and gift certificates.



    Serious question...other than getting your phone activated or getting service turned off, why would you need to call customer service? Lost your phone? Feeling lonely?
  • Reply 19 of 101
    zorinlynxzorinlynx Posts: 169member
    Quote:
    Originally Posted by John.B View Post


    The insurmountable problem with Sprint is that their customer service is terrible.



    How often do you find yourself calling customer service?



    I've been on Sprint with my Treo 650 since 2005 and I've had to call customer service zero (0) times. Yes, ZERO.



    Their network is incredibly reliable and I've had absolutely no problems with them.



    Everyone seems to complain about how bad Sprint's customer service is, but... Seriously, why are you calling customer service so much?
  • Reply 20 of 101
    dagamer34dagamer34 Posts: 494member
    Quote:
    Originally Posted by MadisonTate View Post


    Why on earth would I want to do that? CDMA is a superior technology. GSM vs. CDMA is like VHS vs. BetaMax, or even PC vs. Mac. Popularity (and especially not ubiquity) and superiority seldom go hand-and-hand.



    Companies don't care about quality when you can get "decent" things for cheap. Why do you think VHS, GSM, and PCs are more popular?



    Money talks dude. That's Business 101.
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