Report: AT&T looks to extend iPhone pact

AT&T is reportedly negotiating to extend its contract with Apple as the exclusive carrier for the iPhone.

(Credit: CNET)

AT&T has found the golden goose in its iPhone partnership with Apple and it wants to keep it alive.

The original deal had AT&T as the exclusive carrier of the iPhone until 2008, at which time Apple would be allowed to start selling the wildly popular smartphone on other carriers. But the companies met last August and decided to extend that partnership through the end of this year.

Now, AT&T wants to extend that deal a bit further--say another two years. AT&T's chief executive is talking with Apple to keep that deal alive until 2011, according to a report Tuesday evening in The Wall Street Journal.

But that shouldn't be a big surprise to anyone. Apple has sold more than 17 million iPhones since its debut less than two years ago, and the carrier added 4.3 million iPhone subscribers in the second half of 2008--40 percent of whom were new to AT&T.

Certainly, Apple is making out pretty well with its AT&T partnership; the carrier reportedly offered Apple a $300 subsidy on each iPhone sold. But if AT&T was willing to go that far, Apple stands to clean up by negotiating contracts with other carriers.

At the same time, it seems that the Apple-AT&T arrangement is showing signs of strain on both sides. Last month, AT&T announced plans to sell iPhone 3Gs without a two-year contract for $599 and $699, a move that Apple quickly duplicated at its own stores.

Apple representatives did not immediately return calls for comment.

Will this have a fairy tale ending for AT&T? Stay tuned.

[frussel]

I"ll wait!
This is one of the only things (one carrier) holding up the price!

[Bpack9381]

This is incorrect. It is a 600 dollar phone that you get for 200 dollars. AT&T is subsidising the phone. Once the iphone goes to multuple carriers, no telecommunication company has a reason to subsidies. The iphone will go up in price.

[mc6809e]

Please NO! AT&T just doesn't have the broadband coverage that other carriers like Verizon have. Verizon has much better 3G converage. I've been using AT&T's broadband network and can't tell you how many times I've been forced to use their mediocre <200Kbps EDGE network. 3G coverage is terrible. AT&T is holding the iPhone back. That phone really loves a 3G connection. An iPhone that ran on Verizon's EVDO network would be ideal.

[FireyIce01]

The iPhone won't run on verizons network, it is a GSM phone, Verizon uses a CDMA network. TMobile is the only major GSM carrier aside from ATT in the US.

[manicsquirrel_]

Fireyice1: "The iPhone won't run on verizons network"

Not true. The very first carrier that Apple approached, in the beginning, was Verizon. However, Verizon was too xenophobic and didn't want to agree to the licensing terms. Apple did have a working CDMA model. The next carrier they went to was Cingular. They made out like a bandit.

In East Tennessee, if you look at an AT&T coverage map, it is solid orange (their colors). If you could zoom in, you would see that it was full of holes, like swiss cheese. Verizon has the strongest, most contiguous, and most reliable coverage - at least here.

I got an AT&T account for my kids just to monitor their service over the years to see if it gets any better. The short answer: no. It still sucks.

[DrtyDogg]

It is just a 1 chip that is easily changed to make a CDMA phone.

[snicka12]

1. why would Apple change their iPhone to cdma just for the small north american market. the rest of the world uses GSM.
2. verizon likes to force their own operating system on all of the handsets that they sell, Apple would not allow them to put their crappy os on their iPhone. I personally would not want to have my iPhone to run verizon's os, it honestly sucks.

[numbingpain]

AT&T has the worst customer service ever. I strongly hope that Apple will find a new carrier with lower prices, better customer service and who allows Apple the same freedom with the platform that AT&T has (only good thing about the relationship).

[niididdy]

I agree. ATT customer service sucks. I went from t-mobile in 2003 to ATT just to check them out....I quickly ran back to t-mobile after one week...one week!!! I cannot believe after all these years they haven't changed their ways.

I believe that the iPhone is to damn cool that it practically sells itself - Apple should realize this, and move on to a company better equipped in technology and customer service! Customer service alone with a company like Verizon or T-Mobile will add another 5 million subscribers to the iPhone, in my opinion.

[roccozappia]

If AT&T wants to keep the iphone they should be forced to improve the service !!

[nixermac]

I would not say that Apple and AT&T should not continue with their partnership. What suits them best is good for them. However the relationship is also hurting Apple with so many users leaving and unlocking the phone etc. The iPhone is a misnomer. It is more than a phone. It is a whole new computing platform. treating it as a mere communication device is limiting the capabilities.

Apple must look at longer term perspectives and choose to be open with regards to carriers choice and make the iPhone an open option to all who are ready to pay a premium price. Actually a lot will. People who want to be in a contract and purchase the iPhone at a reduced rate could very well be able to go to AT&T or any other carrier that Apple partners with.

Another factor that we all must understand - the global traveler. We must realize that the iPhone is too important not to use when you are abroad. The ridiculous roaming charges are forte of rich folks and upper management people. Common people who travel to other parts of the world due to business or service needs also use iPhone (I for one). I would prefer to use my iPhone when I am in Singapore or India or in Europe. I would prefer to have a legally unlocked iPhone. I do not mind a contract with AT&T and keep my iPhone open to use with other carriers when I am in an area where AT&T does not have a direct billing.

It is a huge paradox that while we love the iPhone, the ownership of one also proves to be a big heartburn.

While Apple products are built with style and are considered a premium, I like them for the same very reason, it is time Apple made their wonderful technology easier to adapt without being under a cloud of being tied with chains.

[XiroMisho]

It's a whole new communication device...? ...Holy crap it's a Smart Phone with a touch screen. There is little to no difference between an apple iPhone and a blackberry, sans the App store - which is the only revolutionary part. The App store is what mattered, the iPhone itself is just a smart phone. I am glad it exists however, because without it there would be no Blackberry storm - AKA: My awesome phone. Take every bit of communication in the universe and slide it into once Device... yes. E-mail, IM, phone, txt... everything. I can also Multi-Task... running Aim in the background at all times along with Google Talk, my e-mail, and while checking out price lists in my mobile Excel....

The clincher is of course the REMOVABLE/UPGRADABLE memory and the REMOVABLE/UPGRADABLE battery. I have an 8gb card now, I can upgrade that to a 16GB card later, or larger when they make those... and it won't require the purchase of a new phone!!! but Apple doesn't care how many phones you buy. Once that battery goes the phone is useless and you need a new one. When my battery dies - I replace the battery... OMG!

[rfelgueiras]

@ XiroMisho
You know there are many ways to change the battery on an iPhone. Why would it be useless or need a new one?

http://www.tuaw.com/2007/07/31/replacement-iphone-battery-kit/

The only thing the Storm does that the iPhone doesn't is the multitasking, which I'll give you... it very nice. The click screen is BEYOND annoying though. To each his own I guess.

[ralfthedog]

Replaceable batteries and memory card slots increase the size of the device. Apple's #1 goal with the iPhone was to have a minimalistic form factor. The idea was not to add new ports and buttons, the idea was to just keep taking things away while keeping the same functionality. It's called good design.

PS. If your iPhone battery dies, just go to the Apple store. It takes about 60 seconds to swap it out.

[El_Segfaulto]

@ XiroMisho

Agree completely. I have the G1 and some of its capabilities have even made a few of my iPhone friends second guess themselves. Apple takes the walled garden approach which is great for the vast majority of folks. I am a nerd and a tinkerer and refuse to buy a product that limits that. Plus being able to switch out the sim card makes international traveling a lot easier without paying T-Mobiles exorbitant international rates.

[Sockel23]

This gives me a little bit of hope that some other partnerships may end soon, too. As a German customer, I had to get a T-Mobile contract. And while I love my iPhone more than any other gadget I ever bought, I do not love it enough to get another 2-year contract with T-Mobile.

Apple really should consider whether the subsidies from the carriers compensate for the lost and disgruntled customers they create by forcing you into a contract with a monopolist.

[cagerattler]

Apple knows their market far better than the wireless providers (or we do). Any deal that Apple does will reflect that.

I'm on board with Apple. I wanted an iPhone, but was wary of ATT. My desire for an Apple device overrode my concerns about ATT. Yet ATT came through. (go figure?)

Apple is in the drivers seat.

[Grumpypaul]

I know that I am far from the minority when I say that I am holding out for AT&T to be cut loose in favor of an across the board release. I am a Verizon user and in spite of what some may claim to the contrary, I am a HAPPY Verizon user. I have absolutely no interest in supporting AT&T, nor switching to their "coverage". If Apple chooses to keep the exclusive with them, then I will not be among the iPhone junkies in the foreseeable future.

[XiroMisho]

When ATT first signed the contract my initial reaction was: "Apple has a new device, capable of browsing the net wirelessly... and of all the carries the US has... they picked ATT? ...SPRINT has a more complete 3G network."

[Universal_Indie_Records]

They went with ATT because the other carriers wouldn't give them the terms they wanted. ATT was the only carrier at the time willing to "think different". Yes they gave up some control but they made off like bandits because of it.

Where I'm at Sprint is the worst with Verizon and ATT having the best coverage. Well actually T-Mobile is the worst where I'm at... but Sprint is a close second.

[georgiarat]

Actually it was not AT&T it was Cingular with whom the contract was signed. When AT&T acquired Cingular they had to honor the contract they had signed. My understanding is AT&T tried to get out of the contract but Apple would not agree because otherwise there would not have been an iPhone launch. If Verizon had vision they would even further dominate the wireless communication market since they had the best network and they would have had the best smartphone.

[ralfthedog]

No other carrier was willing to redesign the back end software that handles voice messaging. On most systems, you listen to messages in the order they arrived (FILO). On an iPhone, you get a list of people who called you, you tap the message you want to hear, and you hear it. Don't want to listen to a message, just delete it.

[abcd9009]

I consider AT&T like Microsoft in cell phone industry. Even though it's a crappy carrier, they have the best Sales and marketing people who can negotiate on the deals with cell phone manufacturers. If you notice AT&T is ALWAYS the FIRST to launch any "Hip" phone, going back to the Razr all the way to the iPhone.

It doesn't matter how inferior the iPhone is compared to Storm, it's the marketing and branding that will always make people choose the iPhone when given a choice between the two even if it's on the worst network - granted there will always be exceptions to this just like anything else but I am speaking for the majority of people who consider iPhone more "cool" than any other phone currently available and are willing to switch carriers (or stay with AT&T) just to get the iPhone.

This is the same as iPod being the #1 selling MP3 device even though its no different than any other MP3 player plus the iPod doesn't have FM transmitter than you can get with competitors but again it's the "iPod" which is linked with iTunes and it's from Apple which is more than enough for it to be popular.

It would be interesting to know how the iPod sales would be affected if iTunes would have sold DRM-free music from the very beginning. Now it's just too late, iPod and iTunes are already way ahead of its competitors.

[ralfthedog]

abcd9009 :
"It doesn't matter how inferior the iPhone is compared to Storm, it's the marketing and branding that will always make people choose the iPhone when given a choice between the two even if it's on the worst network"

Initial consumer satisfaction study.

Very satisfied:

Storm, 33%
iPhone 3g, 77%

Somewhat satisfied:

Storm, 46%
iPhone 3g, 15%

Unsatisfied:

Storm, 14%
iPhone 3g, 5%

Don't Know (What is a phone, I thought this was a coaster. ):

Storm, 7%
iPhone 2%.

People who buy and use the phones like the iPhone better. This and sales are the only standards that count.

[seven7dust]

storm sux

[gt1948]

First of all the iphone is NOT a smart phone but a computer. The only such device out there, period. Second I have been a ATT/Cingular customer for many years and have no complaints about quality of the network or customer service. In the two years I have had the iPhone there have been few dropped calls and the quality has been excellent.
I realize that ATT coverage may not be this good everywhere, but here in the West Tennessee/Arkansas area it is excellent.
Apple has done very well with ATT and I would hope they stay with one carrier and also continue to sell unlocked phones.

Looking forward to buying the third Gen iPhone in June and continuing with ATT

[monkeyfun14]

The iPhone is not a computer in any sense their are phones out there that feature more functionality then a iPhone.

Palm Pre for example has Apple quivering.

[Synthmeister]

"Palm Pre for example has Apple quivering."

Not in the way you think.

[seven7dust]

@monkeyfun14
Palm pre ? where can I get one ?

[FellowConspirator]

I hope the exclusivity ends. The biggest reason I don't go for a phone like the iPhone is AT&T's exorbitant data service charges. One might hope that if they had more competition, the price might come down.

[OS11]

fyi... it's considered a smart phone, so all cell providers have roughly the same prices on data plans. you are thinking of a regular cell phone most likely.

[seven7dust]

AT&T is holding the iPhone back in so many ways
it's weird that Apple keeps helping them !

[Perry_Clease]

Elaborate on that statement, use facts than can be verified.

[monkeyfun14]

@Perry

AT&T's network sucks.

[seven7dust]

if the iPhone is available on all networks
then Apple will see more sales
simple logic no need for facts and proof

[skipperpma]

I hope it falls through and other providers get the iPhone. I got the iPhone when it first came out, and had to returned it 10 days later. The phone was the best, most satisfying purchase I had ever made, the quality of the network was horrible. So I had to return my iPhone and walk back to Verizon with my tail tucked firmly between my legs. As I entered the store I raised a finger and pointed to the sign on the wall and admitted in defeat, "it really is the network..."

[eltoro2827]

who care....att has crappy service.

[Perry_Clease]

Where do you live?

[ralfthedog]

The service gets better by the day. When I got my first 3G, I could get 3G service everywhere but my house. Now I get consistent 3G service. Unfortunately in 3G mode my standby time goes from 5 days to 1. The next iPhone is reported to have much better battery life.

[fondy]

One more vote here against renewing ATT's exclusive agreement. Apple has worked hard to improve its products with each new version. It's obvious that ATT doesn't have that same commitment. And since the phone's only as good as the network...

[scurrlin1]

The point is to sustain product growth for the long term. If Apple keeps ATT as the exclusive provider they can keep Verizon users like myself on the hook for another two years hoping they open it to other carriers. I will not switch to ATT, and as a previous customer of theirs the coverage was not great. So we wait some more....in the mean time I might be convinced to go with a BB storm. On the other hand, the longer they keep this exclusive the more time other device makers will have to catch up.

In the end it's all about corporate earnings and as currently packaged, the iphone will provide sustainable earnings growth for both companies for at least another two years. When they do open it to verizon and others it will add another 4 - 8 years of sustainable growth earnings.

[BogusBasin]

I absolutely love my iPhone. I moved to ATT for the iPhone. I would love to move back to Verizon if I am given the choice. If they open up competition, maybe we can get lower service prices. Right now, it is way too high. Did I mention I love my iPhone? Absolutely, hands down, the best mobile device I have ever had. Amen

[SeenYoko]

Yeah, AT&T in California from Ventura to San Luis Obispo, sucks, dropped calls make it unusable as a business phone. We need a Verizon/iPhone. I tried it the other day. Driving from Lancaster CA through Thousand Oaks and up to San Luis Obispo my son on Verizon with his girlfriend, never dropped the call, me on my iphone with AT&T dropped the call 8 times on the same journey.

[sam99999999]

Agreed. If you think that's bad, try I-5 from Los Banos to till you're way over the Grapevine. Forget 3G; it's not even Edge most of the way. Same dead spots they've had for years.

[codynews]

yeah, I love my iphone too. I had tmobile which I loved but i switched to AT&T (which I hate) for the iphone. The service doesn't "suck" but its NOT as good as tmobile or Verizon (don't kid yourself)

AT&T or Cingular was VERY smart to drop their pants to get the iphone because it caused a LOT of people, such as myself, to switch to their service that would have otherwise never thought about doing so.

[monkeyfun14]

At what cost though?

[OS11]

I think there is a lot of ignorance about "service" with ATT, they are no different than anyone else, but with any carrier, you ONLY hear from "fringe" users... not people that are within range. ATT has the largest, fastest network, nobody disputes that, but yes in rural areas Verizon will have slightly more coverage. Customer service is the same no matter where you go, so please people stop the *****'n.

My angle is Apple should build a Microcell (femtocell) device for $99 and sell it with iPhones that are out of range of normal cell towers... for those who don't understand that... it's basically a mini Cell tower for your home or business that works through the regular internet... not using the ancient cell network.

ATT has announced plans for these, google: 3G MicroCell AT&T --- and you'll see the details. But if Apple did it, it would become popular, not some esoteric device nobody understands.

Anyway, again... if you haven't used ATT in awhile, you are incorrect in the negative customer support comments, they are fine, just like verizon... i've had both.

[monkeyfun14]

Sprint has a much faster network then AT&T in my area and they are moving up to 4g.

[OS11]

then get a microcell and don't worry about it...