Apple may soon be free from AT&T
While everyone else was calling the iPhone the greatest device of all time and putting Steve Jobs on that pedestal he enjoys so much yesterday, AT&T quietly told its investors that the revenue sharing deal it had with Apple for the past year has ended.
At first glance, that development may not matter to most. After all, that agreement really only affected Apple and AT&T and consumers were still forced to pay the same price regardless of the revenue sharing.
But if you take another look, you might find that there may be more to this story than meets the eye.
Now that Apple and AT&T have squeaked out of the deal, what's holding the two companies together? Certainly some would say that it's that oft-mentioned exclusivity agreement the companies signed, but I don't know of one person who actually read the thing and no one really knows if Apple can get out or not.
But if I had to take a guess, step one in getting out of its contract with AT&T revolved around the revenue sharing deal. And before you know it, Steve Jobs' latest blockbuster may be on other carriers.
It may be hard to believe right now, but rest assured that the chances of AT&T and Apple no longer working with each other are greater than you might think.
Now that AT&T isn't sharing revenue with Apple, the agreement between the companies is all too similar to that between any other device manufacturer and a carrier. In essence, the carrier subsidizes the price of the phone and the device manufacturer offers the phone to the carrier. Nothing more, nothing less.
But in that same agreement, most of those device manufacturers sell the phones to other carriers too. And why not? In a market where competition is everywhere and the chances of rising to the top are so low, why wouldn't the manufacturer sell the phone to as many carriers as possible to (hopefully) profit off their investment?
Of course, Apple won't have too much trouble profiting off its investment, but why wouldn't the company explore other opportunities and try to offer the iPhone to as many customers as possible?
Last year, Apple's deal with AT&T made some sense after we heard about the revenue sharing deal. But now, I just don't see why the company would even consider maintaining its exclusivity deal.
When the revenue sharing was in place, Apple stood to make much more on an iPhone that was on AT&T's service than an unlocked device. But now, the tables have turned. Instead of caring which carrier the iPhone is on, Apple couldn't care less. As far as Steve Jobs is concerned, an iPhone sale means a one-time profit regardless of the service its connected to.
Hard as I might try, I just can't see why AT&T would want out of the revenue sharing deal unless it has some sort of bricking plan up its sleeve. Think about it: the company has said that it will subsidize the cost of the 3G iPhone to encourage more customers to its side, but what if that customer buys the iPhone, unlocks it and puts it on T-Mobile's service? AT&T not only loses the monthly revenue, but its subsidy, as well. All the while, Apple walks away with a solid profit and a smile.
So if AT&T really didn't want out of the revenue sharing deal (and the more I consider it, the more I don't think it did), but it happened anyway, what does that say about Apple? Doesn't it hint that the revenue sharing deal was the only thing holding the company back from going to other carriers? Doesn't it tell us that its plan is not to be in bed with one company, but to offer its device to any and all customers? Doesn't it tell us that it's sick and tired of a limited customer base?
AT&T is trying to put its own spin on the demise of the revenue sharing deal, but it knows all too well that it was the only thing keeping Apple on its side. Now that it's gone and Apple will enjoy the same benefit from selling the iPhone regardless of the service its connected to, the companies' tie is as flimsy as it has ever been.
And it's for that reason that Apple, smelling greener pastures and more customers, will find a way to sneak its way out of the exclusivity agreement and bring the iPhone to every major US carrier.
When? I don't know. But rest assured that it could happen sooner than you think.
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Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
True, but Apple / AT&T is only allowing activation of iPhone2 in store, not through itunes. I don't have my contract sitting in front of me, but I believe even the iPhone1 contract had a penalty for early cancellation. AT&T would be a fool to not include something for iPhone2 that at least equaled the subsidy.
The chances of somehow receiving an unlocked iPhone2 seem very low; the apple site isn't going to stock them, you need to purchase one a brick and mortar store. Thus, switching carriers through jailbreaking an iPhone2 seems an outside possibility.
Personally, I can't wait for another carrier to have the iPhone, especially now that enterprise support is so much more easily attained through the device. Just my 2 cents.
I don't know that an exclusivity deal would prevent Apple from working with other carriers to get things ready.
Most of the rest of the world might be on GSM but the U.S. CDMA market is still substantial and can't be ignored, which is why so many manufacturers make go through the trouble of designing models that work on CDMA when they already have a GSM version.
Steve Jobs may be vindictive, but business is business and he's too smart to lose out on an entire market segment over something petty. Besides, who's to say that the Apple/Verizon negotiations were rancorous. Just because they didn't consummate a deal doesn't mean that they left the table on bad terms. If anything, Apple was the one that tried to buck a long-standing business model in the industry when it asked for a share of the monthly plan revenues and in backing out of that arrangement with AT&T is a tacit admission that it was the wrong move. I don't see why Apple wouldn't want to make a CDMA version of the iPhone for Sprint/Verizon. There's a huge clamoring for it. A lot of Sprint/Verizon customer don't want to leave their network for it though because AT&T's service isn't good in their area. Apple would do boffo business if there was a CDMA version of the iPhone.
Note, this device will not work on any other 3G network in North America, only AT&T because it support only Band II networks and not the Band IV network T-Mobile is rolling out. It will support GSM and EDGE, so if you want some of the features such as GPS on an unlocked device, that would likely still work, but not in assisted mode (A-GPS). You would lose all of the high speed network aspects and gain some GPS functionality.
Unlocking these just became less attractive for US customers...oh well.
Apple also changed the activation process for the iPhone; it must be activated at the store when you first purchase your phone.
John
You are ignoring the rest of the revenue stream. App Store, iTunes? They're all free?
And we don't know what the deal will be for companies that want to have "push" messaging updates. Nor do we know details about the contracts international carriers made.
Now, with the iPhone, it'll be the same: they sell the appliance (iPhone) and generate recurring revenue with content - in this case applications. The games are going to be locked to the device, and people will download tons of gadgets, filling Apple's coffers with 30% of the application revenue. Moreover, they will sign up millions of users for the mobilME service. MobileMe is interesting because it creates a relationship with Apple, not the carrier. If a user would use AT&T's services, it becomes difficult to switch. But if a users uses for Laptops, Desktops and iPhones MobileMe, the carrier becomes merely a bandwidth provider. After the two years of loch up are over, users could hop from carrier to carrier, based on best network and bandwidth cost.
Too bad that the best network in the US is CDMA based. CDMA would require different antennas, and given that iPhone already has 8, I can't imagine they can fit those in. Unless, of course, Verizon would pay some money. How knows?
Now, with the iPhone, it'll be the same: they sell the appliance (iPhone) and generate recurring revenue with content - in this case applications. The games are going to be locked to the device, and people will download tons of gadgets, filling Apple's coffers with 30% of the application revenue. Moreover, they will sign up millions of users for the mobilME service. MobileMe is interesting because it creates a relationship with Apple, not the carrier. If a user would use AT&T's services, it becomes difficult to switch. But if a users uses for Laptops, Desktops and iPhones MobileMe, the carrier becomes merely a bandwidth provider. After the two years of loch up are over, users could hop from carrier to carrier, based on best network and bandwidth cost.
Too bad that the best network in the US is CDMA based. CDMA would require different antennas, and given that iPhone already has 8, I can't imagine they can fit those in. Unless, of course, Verizon would pay some money. How knows?
To Mobile could be the "T-Phone" Verizon the "V-Phone" Sprint the "S-Phone" etc.
Why would AT&T be dumb enough to have the agreement be exclusive to the iPhone rather than all wireless cellphone distributed in the US? Simply put no matter what Apple calls it...they cannot release a different phone for any of AT&T's competitors in the use.
As to the comment about Sprint or Verizon not being capable of Visual Voicemail...Visual Voicemail has been available for years before Apple "invented" it. If you have a data plan and want to pay VV service there are several companies providing it. Not to mention HTC releasing a VV capable phone on Sprint's network in the next 6 months to 1 year.
There's supposedly a difference between reputable reporting and blogging. The more I visit this site, the more convinced I am that CNet has forgotten this.
- by emblemex June 10, 2008 2:37 PM PDT
- AT&T has a very slow network in West Michigan. Little good a 3G phone will do us! I hope Apple gets out of AT&T exclusive. Both Sprint & Verizon have broadband here. Speed on Apple!
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