Apple, AT&T originally agreed to iPhone exclusivity until 2012

Posted:
in iPhone edited January 2014
After poring over court documents from 2008, Engadget has confirmed that Apple and AT&T originally agreed to a five-year exclusive arrangement for the iPhone. Whether that deal is still in place, however, is unknown.



Nilay Patel reported Monday that Apple, in a court filing in October 2008, admitted that AT&T had exclusive distribution rights in the U.S. for the iPhone. Apple specifically admitted to reports from USA Today in 2007, in which the newspaper said that the two companies had agreed to a deal through 2012. The paper also reported in 2007 that Verizon passed on a similar five-year arrangement.



Apple's admission was made as part of its defense in a class-action lawsuit filed in 2007, accusing both the iPhone maker and AT&T of illegally exerting a monopoly over iPhone customers. The suit alleged that iPhone users were forced to stay with AT&T after their two-year contract expired, because neither AT&T nor Apple would unlock their handset for use on another carrier, such as T-Mobile.



While the original agreement meant Apple's iPhone could not jump to a competing carrier until after 2012, Patel noted that "the real question is whether or not the exclusivity deal is still on the books."



"Contracts can be canceled, amended, and breached in many ways, and AT&T's spotty recent service history plus the explosion of the iPhone and the mobile market in general have given Apple any number of reasons to revisit the deal," he wrote. "In addition, the two companies obviously hit the negotiating table again to hammer out the iPad's pricing plans, and there's no way of knowing whether that deal involves the iPhone as well."



The lawsuit against Apple and AT&T remains ongoing, but many of the documents in the case have been sealed from public view since 2009. Patel noted that the plaintiffs argued Apple exerts illegal monopoly power over applications on the iPhone, by requiring company approval of all App Store software, and the court deemed the argument valid to go forward.



Though the five-year deal was originally announced in 2007, in the last year many analysts have suggested that the Apple-AT&T deal actually expires this summer. Whether the contract was amended to shorten the agreement has not been revealed.



Last week, one analyst speculated that Apple and AT&T extended their deal six months, with AT&T retaining exclusive access to the iPhone, and Apple gaining no-contract $30-per-month data plans for its just-released iPad.



Talk of Apple's handset becoming available on other carriers cooled earlier this year, when Apple executives defended AT&T, and the iPad was announced as compatible only with AT&T's 3G network in the U.S.



But in March, The Wall Street Journal reported that Apple is currently working on a CDMA-capable iPhone that could run on the Verizon network. Such a device would not likely arrive this summer, when the next-generation iPhone is expected to go on sale, as the Journal reported that manufacturing of the CDMA model is not expected to begin until September.
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Comments

  • Reply 1 of 91
    mcarlingmcarling Posts: 1,106member
    I cannot imagine Apple offering a special iPhone compatible only with Verizon. When Verizon get onboard with GSM standards i.e. when they support LTE/4G, then they can sell calling/data plans for (unlocked) iPhone. Who would ever buy a locked phone??? Not me.
  • Reply 2 of 91
    therobintherobin Posts: 11member
    Why is all this so secret? These kind of things most definitely effect the companies earnings etc. Both of these companies are publicly traded. Shouldn't they be letting their shareholders know details like this?
  • Reply 3 of 91
    christopher126christopher126 Posts: 4,366member
    Quote:
    Originally Posted by TheRobin View Post


    Why is all this so secret? These kind of things most definitely effect the companies earnings etc. Both of these companies are publicly traded. Shouldn't they be letting their shareholders know details like this?



    I would like to know the answer to that question, too!
  • Reply 4 of 91
    anantksundaramanantksundaram Posts: 20,304member
    Quote:
    Originally Posted by TheRobin View Post


    Why is all this so secret? These kind of things most definitely effect the companies earnings etc. Both of these companies are publicly traded. Shouldn't they be letting their shareholders know details like this?



    This is a good observation.



    I cannot think of any particularly compelling competitive reasons for such secrecy on this front. If anything, it provides clarity and makes decisions easier for customers.



    PS: While I am not their biggest fan -- the site is chock-full of anti-Apple snarks and whiners -- kudos to engadget.com for their detective work!
  • Reply 5 of 91
    ewtheckmanewtheckman Posts: 309member
    I certainly hope Apple is planning an iPhone for Verizon. Both the iPhone and Android (which is starting to eat Apple's marketshare, in part, due to the AT&T exclusivity) have a form of lock-in to their platform: applications.



    Some of us refuse to switch to AT&T just to get an iPhone because we like using cell phones to, gasp, make phone calls!



    But if Apple continues screwing around, when they finally do arrive on Verizon, they'll discover customers who won't be willing to switch platforms because they will have an investment both in money and familiarity in applications for Android. While I expect it won't be quite as bad as switching from Mac to Windows and visa versa, it's still a reason why customers will be reluctant to switch.



    If Apple really does have such a long agreement still in place, then I will probably be one of them.
  • Reply 6 of 91
    mcarlingmcarling Posts: 1,106member
    Quote:
    Originally Posted by EWTHeckman View Post


    I certainly hope Apple is planning an iPhone for Verizon. Both the iPhone and Android (which is starting to eat Apple's marketshare, in part, due to the AT&T exclusivity) have a form of lock-in to their platform: applications.



    Some of us refuse to switch to AT&T just to get an iPhone because we like using cell phones to, gasp, make phone calls!



    But if Apple continues screwing around, when they finally do arrive on Verizon, they'll discover customers who won't be willing to switch platforms because they will have an investment both in money and familiarity in applications for Android. While I expect it won't be quite as bad as switching from Mac to Windows and visa versa, it's still a reason why customers will be reluctant to switch.



    If Apple really does have such a long agreement still in place, then I will probably be one of them.



    The only sense in which Apple can be accused of "screwing around" here is by allowing their phones to be locked to a particular carrier, but all phone manufacturers do that. Verizon built a network that is not compatible with standard phones. It is inconceivable that Apple would build a non-standard phone just to accommodate Verizon -- especially with Verizon in the process of building a standards-compliant 4G/LTE network.
  • Reply 7 of 91
    mudpudmudpud Posts: 38member
    Quote:
    Originally Posted by mcarling View Post


    - especially with Verizon in the process of building a standards-compliant 4G/LTE network.



    you need some basic technology courses. Even when the Big Red does launch a full 4G network, they will ALWAYS rely on CDMA/3G (1x EV-DO signal), a WORLD-WIDE ACCEPTED STANDARD - albeit in fewer countries than GSM - and a BETTER standard in terms of reception and signal passage through buildings and objects. So please - next time - before you post some ridiculous thing - read up! Don't embarass yourself. EV-DO will be used for voice and data in the future. Right now - they haven't even figured out how to enable LTE-EV-DO or LTE-GSM switching.



    Verizon will get LTE this year. And you people on AT&T will have to wait until 2012. And that's a maybe.



    HTC INCREDIBLE with GOOGLE the way to go for all the iPhone-aspiring people who want a normal network!
  • Reply 8 of 91
    thomprthompr Posts: 1,516member
    Quote:
    Originally Posted by anantksundaram View Post


    I cannot think of any particularly compelling competitive reasons for such secrecy on this front. If anything, it provides clarity and makes decisions easier for customers.



    I can think of several compelling competitive reasons for such secrecy. But I can't tell you what they are.



    Thompson
  • Reply 9 of 91
    welshdogwelshdog Posts: 1,815member
    At east they didn't agree to the AT&T deal "in perpetuity" like they stupidly did with Microsoft all those years ago.
  • Reply 10 of 91
    mstone18mstone18 Posts: 1member
    Quote:
    Originally Posted by AppleInsider View Post


    After poring over court documents from 2008, Engadget has confirmed that Apple and AT&T originally agreed to a five-year exclusive arrangement for the iPhone. Whether that deal is still in place, however, is unknown.



    Nilay Patel reported Monday that Apple, in a court filing in October 2008, admitted that AT&T had exclusive distribution rights in the U.S. for the iPhone. Apple specifically admitted to reports from USA Today in 2007, in which the newspaper said that the two companies had agreed to a deal through 2012. The paper also reported in 2007 that Verizon passed on a similar five-year arrangement.



    Apple's admission was made as part of its defense in a class-action lawsuit filed in 2007, accusing both the iPhone maker and AT&T of illegally exerting a monopoly over iPhone customers. The suit alleged that iPhone users were forced to stay with AT&T after their two-year contract expired, because neither AT&T nor Apple would unlock their handset for use on another carrier, such as T-Mobile.



    While the original agreement meant Apple's iPhone could not jump to a competing carrier until after 2012, Patel noted that "the real question is whether or not the exclusivity deal is still on the books."



    "Contracts can be canceled, amended, and breached in many ways, and AT&T's spotty recent service history plus the explosion of the iPhone and the mobile market in general have given Apple any number of reasons to revisit the deal," he wrote. "In addition, the two companies obviously hit the negotiating table again to hammer out the iPad's pricing plans, and there's no way of knowing whether that deal involves the iPhone as well."



    The lawsuit against Apple and AT&T remains ongoing, but many of the documents in the case have been sealed from public view since 2009. Patel noted that the plaintiffs argued Apple exerts illegal monopoly power over applications on the iPhone, by requiring company approval of all App Store software, and the court deemed the argument valid to go forward.



    Though the five-year deal was originally announced in 2007, in the last year many analysts have suggested that the Apple-AT&T deal actually expires this summer. Whether the contract was amended to shorten the agreement has not been revealed.



    Last week, one analyst speculated that Apple and AT&T extended their deal six months, with AT&T retaining exclusive access to the iPhone, and Apple gaining no-contract $30-per-month data plans for its just-released iPad.



    Talk of Apple's handset becoming available on other carriers cooled earlier this year, when Apple executives defended AT&T, and the iPad was announced as compatible only with AT&T's 3G network in the U.S.



    But in March, The Wall Street Journal reported that Apple is currently working on a CDMA-capable iPhone that could run on the Verizon network. Such a device would not likely arrive this summer, when the next-generation iPhone is expected to go on sale, as the Journal reported that manufacturing of the CDMA model is not expected to begin until September.



    Did anyone ever think that the reason that the iPad has pretty much the same price as an iPhone ($30 each month for unlimited data) because it is just an iPhone with a larger screen? I mean everyone knows that it is not a computer, so why does everyone think this is such a special deal. I feel the special deal is the no contract part. I dont think that the iPad would ever do well with a $60 per month charge and 2 year contract. Does anyone else see this. Yes the iPad has a larger screen and yes it must use more data compared to the iPhone, yet it cant use that much more not to mention that it is not going to be used as much as the iPhone which is in everyones pockets ready to be taken out. Everyone seems to think that apple and AT&T had this special deal with data but in reality apple probably said to at&t... "Hey we have this cool new device that doesn't use much more data than the iPhone, it wont be used as much, lets do this with the same price as the iPhone because it's not a computer. At&t said Cool, lets do it. But no contract to pull'em in. Deal done. Apple is simple at&t needs apple, end of story... I mean I am sure this talk about this 6 month extension sounds good causing talk and something to write about but really?
  • Reply 11 of 91
    g3prog3pro Posts: 669member
    The iPhone will never be on Verizon anytime soon for many reasons, but one in particular: inability to use voice/data at the same time.



    Apple Corporate would explode with irony if the feature they lambasted is suddenly a feature on their own product.
  • Reply 12 of 91
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by TheRobin View Post


    Why is all this so secret? These kind of things most definitely effect the companies earnings etc. Both of these companies are publicly traded. Shouldn't they be letting their shareholders know details like this?



    Agreed. Also, the recipe to the Colonel's chicken definitely impacts KFC's earnings, so it should be public. Oh and the recipe for Propecia please.
  • Reply 13 of 91
    camroidv27camroidv27 Posts: 523member
    Quote:
    Originally Posted by g3pro View Post


    The iPhone will never be on Verizon anytime soon for many reasons, but one in particular: inability to use voice/data at the same time.



    Apple Corporate would explode with irony if the feature they lambasted is suddenly a feature on their own product.



    Just this past weekend I was on a phone call with someone who needed an address, brought up the web browser on the phone and was able to help them out, all without dropping the call, ending the call, or using a separate device.



    Palm Pre Plus on Verizon.
  • Reply 14 of 91
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by g3pro View Post


    The iPhone will never be on Verizon anytime soon for many reasons, but one in particular: inability to use voice/data at the same time.



    I'm sure you meant never on CDMA Verizon, not NEVER on Verizon. I agree though, it'd be like releasing another Edge phone on ATT. Not having data access while on a phone call KILLS me!
  • Reply 15 of 91
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by camroidv27 View Post


    Just this past weekend I was on a phone call with someone who needed an address, brought up the web browser on the phone and was able to help them out, all without dropping the call, ending the call, or using a separate device.



    Palm Pre Plus on Verizon.



    WiFi was on or did Verizon secretly update to EVDO Rev. B?
  • Reply 16 of 91
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by solipsism View Post


    WiFi was on or did Verizon secretly update to EVDO Rev. B?



    Option 3 - the rumor mill is heating up again as Apple preps to release a new iPhone. Verizon fans and employees everywhere get very loose lips around May and June to keep their friends from jumping ship. I'm amazed how many rumors I hear from my clients who plan to wait for a Verizon iPhone, which according to someone they were talking to (usually a Verizon salesperson) is coming any week now
  • Reply 17 of 91
    camroidv27camroidv27 Posts: 523member
    Quote:
    Originally Posted by solipsism View Post


    WiFi was on or did Verizon secretly update to EVDO Rev. B?



    Bluetooth tethered to a desktop PC, running off of a network that was shared with a 56k dialup modem to AOL.
  • Reply 18 of 91
    mdriftmeyermdriftmeyer Posts: 7,503member
    Quote:
    Originally Posted by TheRobin View Post


    Why is all this so secret? These kind of things most definitely effect the companies earnings etc. Both of these companies are publicly traded. Shouldn't they be letting their shareholders know details like this?



    It was a 5 year deal known in 2007 and later the WSJ claimed it was only 3 years.



    From the start Apple and AT&T signed a 5 year deal.
  • Reply 19 of 91
    hmurchisonhmurchison Posts: 12,351member
    5 yr deal = tactical error by Apple.



    I presume they will just give up some $concessions$ and breach the contract. Another two years of AT&T exclusivity will simply ensure the rapid loss of market share for the iPhone.
  • Reply 20 of 91
    cxc273cxc273 Posts: 46member
    I find it hard to believe that the deal is iron-clad and that there's two more years left in this Apple-AT&T pact. There must be some escape clauses available for Apple should they decide to end exclusivity. Or at least a lot of us hope.
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