June 27, 2007 4:00 AM PDT

Switching carriers for the iPhone

Kristy Miller will line up at the AT&T store in the Phoenix suburb of Surprise, Ariz., on Friday in an attempt to be one of the first iPhone owners, but that will mean ditching the wireless service she already has with Verizon Wireless.

"I do have trepidation about switching from Verizon to AT&T, but I figure Steve Jobs wouldn't have made the deal if he couldn't back it up," she said. "Verizon has one of the largest networks, but AT&T has the iPhone."

The 36-year-old, who owns a graphic design business with her husband, said she needs the iPhone for e-mailing, Web access, and sending and receiving files--all functions she could easily do with another device like a Treo or BlackBerry, which are already sold through Verizon Wireless. But as a Mac user for more than a decade, she admits she is drawn to anything created by Apple and Apple CEO Steve Jobs.

"I was going to have to break down and buy a BlackBerry," she said. "But when they announced the iPhone, I decided to wait."

It's customers like Miller AT&T's competitors--Verizon Wireless, Sprint Nextel, and T-Mobile USA--should worry about. According to a recent poll conducted by M:Metrics, roughly two-thirds of people interested in buying the iPhone are not currently AT&T customers, but they say they're still willing to switch carriers to obtain the phone. AT&T will be the exclusive carrier of the iPhone.

"The data we have suggests that this is going to work as a customer acquisition strategy for AT&T," said M:Metric Senior Analyst Mark Donovan. "The market has matured to the point where carriers are stealing subscribers from each other. And a cool new phone like iPhone has certainly generated a lot of interest."

News.com Poll

Calling plan
Will you buy an iPhone?

Are you kidding? I'm in line now
The next time I'm at an Apple store
After I read the reviews - maybe
When someone other than AT&T is the carrier
Not till the price is under $200
No 3G? No way!
Never



View results

The iPhone, announced in January, has been one of the most widely hyped gadgets ever to go on sale. Jobs says he expects the company to sell 10 million iPhones in the first 18 months. By contrast, Research In Motion has sold only 14.6 million BlackBerry devices since 2000. The company has ramped up sales recently as it targets the consumer market, selling 6.4 million devices during the 2007 fiscal year, which ended March 3, 2007.

Interest among consumers certainly seems piqued. AT&T CEO Randall Stephenson in March said more than a million people had inquired about how they can get their hands on the new iPhone. People in Manhattan are already lining up for the iPhone days in advance of its sale.

If the hype lives up to expectations, the iPhone could help AT&T boost subscriber growth, just like the Motorola Razr helped boost subscriber rates when Cingular Wireless (now called AT&T) had a nine-month exclusive deal to sell that phone. Motorola, which now offers the phone through every major U.S. carrier, recently said it has sold more than 100 million Razrs since the product was launched a few years ago.

But what could be a windfall for AT&T will likely mean bad news for competitors. More than 76 percent of the U.S. population already owns a cell phone. And AT&T makes up only about a quarter of those subscribers, so many of those interested in the iPhone would have to switch their service to use the phone.

Sprint Nextel vulnerable

While all three major carriers are likely to see some defections, Sprint Nextel will likely be most vulnerable to fallout from the iPhone. The company lost 220,000 post-paid monthly subscribers--customers who pay monthly--during its first quarter, the third quarter in a row it saw losses of these highly valuable customers. Most of these defections were to competitors. Sprint along with T-Mobile have also consistently had high churn rates, or rates at which people cancel their service. At the end of the first quarter of 2007, Sprint reported a churn rate of 2.7 percent. T-Mobile's churn rate was 2.6 percent.

According to M:Metrics' survey, subscribers from Sprint and T-Mobile were also the most likely to say they would switch providers to get the iPhone. About 12.5 percent of T-Mobile customers and 8.1 percent of Sprint customers surveyed expressed a high interest in the iPhone.

Sprint is also vulnerable because it has spent a great deal of money and effort marketing its advanced 3G data services to tech savvy individuals.

"Sprint tends to have the most enthusiastic data users," said Charles Golvin, an analyst with Forrester Research. "These are early adopters, and they're also the ones likely to be interested in the iPhone."

Indeed, the most valuable piece of Sprint's business is its 3G EV-DO network. In the first quarter, it generated $1.2 billion from wireless data services, up 44 percent from the previous year. Data contributed about $9.25 or 16 percent of Sprint's total average revenue per user for the quarter, which was about $59.

CONTINUED: The need for speed…
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32 comments

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Other carriers
Is Apple tied to AT&T for all cellphone products it may introduce
during the next two years? Or has it left itself a bit of wiggle room
to introduce products with other carriers?
Posted by billmosby (536 comments )
Reply Link Flag
Backend of visual email is steep for carrier
I'd like to see iPhone on other carriers too, but Jobs played up the work that AT&T has had to do on the backend to enable randomaccess voicemail. (Is that style or usability? in my book, Apple is unique because it doesn't ask what the difference is, making it insanely great includes the aesthetic I like.) Because I believed that that was high barrier for the Carriers (Verizon balked when approached by Apple, for that reason among Apple's notorious secrecy and demand for control) I am surprised not to see that issue mentioned in articles like this one about the prospect of switching. Readers ask, Should I wait for the iPhone to come to my carrier? It's not just the exclusive agreement that stands in the way, its also the high cost of entry for carriers (cf the difficulty in finding a carrier in Canada and Europe.)
Posted by quandmeme (2 comments )
Link Flag
Cool phone/Apple fans
AT&T's competitors are in big trouble if they've convinced
themselves that the iPhone phenomenon is merely the result of
style or Apple fans. Style is nice, and some people will buy
whatever Apple sells, but most people are interested in the
iPhone because it delivers where all of its competition fails:
usability.

Anyone that wants to compete with the iPhone had better be
focusing on quality software, starting with the user interface.
Unfortunately, none of the iPhone's competitors have any
experience building a quality user experience.
Posted by Macsaresafer (802 comments )
Reply Link Flag
Absolutely - user interface is the key
My HTC "Apache" (Sprint PPC-6700) is, on paper, a truly capable
little machine. EVDO, WiFi, BlueTooth, flip out keyboard,
speakerphone, SD card expansion, etc. It works great with
Exchange, and it's easy to add software. The big problem is
that the UI is atrocious. I've owned over a dozen Macs and two
Newtons. The Newton MessagePad in 1992 had a better
interface than this thing. The best software for it is open source
stuff (like gsplayer, though it has UI issues). And Sprint loaded it
with crapware (but Google for how to eliminate this stuff).

It's really a good thing for the mobile ecosystem that Apple's
getting in the business. It's going to force a lot of change,
either through imitation, innovation or Chapter 11 (or whatever
Korean or Chinese tax code calls it).

Charles
Posted by chassoto--2008 (71 comments )
Link Flag
No experience makes you an expert?
You have zero experience with the Apple iPhone and yet you seem to have enough expertise with this device to be able to speak for every other cell phone available?

Perhaps you may want to wait until the product is actually out before making claims you can't back up.

It will really help with your credibility which is in serious question with comments like these.
Posted by Vegaman_Dan (6683 comments )
Link Flag
Don't Want to Use ATT
I love all things Apple, but I won't touch the iPhone as long as ATT is the only choice for the carrier. I'm not about to drop my current provider and get nailed with an early termination fee, pony up $500 for a phone and have to deal with a company I loathe. I know a number of people who feel the same way and nobody seems to acknowledge that Apple may be shooting themselves in the foot by only having the one choice in carriers. It doesn't matter to me how cool the iPhone, I just don't want to deal with ATT.
Posted by abqdude (3 comments )
Reply Link Flag
Good for you
No one is forcing you to use AT&T. If you don't want to switch then don't but because you don't want to doesn't mean tens of thousands won't. I have had AT&T cell service since 1998 and have gone through the CDMA/GSM switch etc and truely haven't had a lot of issues. It is an imperfect technology, so deal with it...
Posted by grossph (172 comments )
Link Flag
I agree - ATT is teh suck!
Their coverage is even worse than Sprint here! Plus, ATT long
ago (ok a different ATT than today, but they chose the name, so
they get the rep) tried to screw me over for $3/mo. because I
never made long distance calls (mobile is free). So, I dropped
them as my land line LD carrier. That was fine, except they KEPT
ADDING THEMSELVES BACK. This took way too much of my time
to correct, and ultimately I got a bill about a year later for $40+
for all these $3 charges I never needed. I wrote them a letter
telling them they would never get a penny from me. So, I guess
no iPhone for me, until they're on Sprint (whose customer
service has been impeccable - really eerily surprising) or Verizon
(great coverage in this town).

The one big issue: my Windows Mobile 5 phone is also teh suck!
Posted by chassoto--2008 (71 comments )
Link Flag
Use wifi
ATT network sucks and I hope a bunch of the iPhone fanboys start
hassling ATT to upgrade their network.

But if you are in a wifi area. You have another option. Also, I
wonder how long it will be before skype gets on to the iPhone?
Posted by weegg (849 comments )
Link Flag
Bravo!
Right on the money! Your decision is one that I am sure many will make.

I think it absurd that there is a perception that Americans have that much disposable income, that the ~million inquiries spoken of in the article will morph into one for one purchases. Those calling are most likely not committed Apple fan(atic)s who are already committed. When the reality of a ~$700 migration cost sets in... $500 up front and anywhere from $150 to $250 to break contract... The reality will be far removed from AT&T?s dreams and aspirations.
Posted by mgee99 (36 comments )
Link Flag
It's simple - then don't
Hey, wake up - it ain't about you. It's about thousands who WILL spend big buck for the iPhone and sign up with ATT. I don't think Apple is worrying about shooting themselves in the foot. They're not that stupid - as is the case with all the whiners crying about ATT
Posted by oxtail01 (308 comments )
Link Flag
LOL AND actually go thru LIFE with AT&T AGAIN?
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHHAHAHAHAHAHAH CNET YOU CRACK ME UP!!!!!! CELL PHONE SERVICE FROM AT&T! HA! Good one!!!
Posted by JCPaynye1 (6 comments )
Reply Link Flag
Anyone see the Chinese knock off yet? GOTO YOUTUBE.COM
and lookup the "tPhone".... It's the Chinese knock off of the iPhone. And for way less.
Posted by JCPaynye1 (6 comments )
Reply Link Flag
inverted everything
inverted Apple logo, the letter 't' can be an inverted 'i', even an inverted OS. It runs some form of Windows
Posted by ackmondual (199 comments )
Link Flag
If Sprint really cared... They should open up Nextel to more
Cell phone companies... Motorola keeps making the same phones that (when flipped open) the insides all look the same....
Posted by JCPaynye1 (6 comments )
Reply Link Flag
AT&T SUCKs
I still remember what At&T did with my phone when they got eaten up by Cingular. Trying to force me to Cingular or my phone would not work. Now Cingular is the new at&T? what kind of stupid marketing is that? At&t could have a phone that scratches my ass and I would not switch carriers. You screw people over they don't forget. I won't.
Posted by inlasvegas1 (5 comments )
Reply Link Flag
OH, and....
did I mention At&T Sucks?
Posted by inlasvegas1 (5 comments )
Link Flag
goh you poor thing
take your stupid crying and wimper away. Your so-called stupid marketing just got off to a great start and they're going to make a bundle over the next few months. Jeez - don't be so pathetic!
Posted by oxtail01 (308 comments )
Link Flag
Possible Intangibles
Probability would say that a/the significant percentage of people who are considering these phones are already users of data centric devices with tons of contacts and files (files, photos and movies). What the unfortunate truth may reveal is that most of the data will not migrate.

Monitor the after sale returns. AT&T is such a horribly unreliable network that the real impact of success or failure may come when within the first 14 days, when those who find themselves unhappy with the quality and reliability of the network, seek to recover their losses, and return to what they know to be a dependable carrier.

Lastly, but possibly most importantly is the culture of sales representatives in AT&T stores that I have frequented. I feel, based on personal experience and the way I was treated by AT&T in multiple regions in multiple stores (and never will again)... that this one element, may be a turning point for some users who have become comfortable with being treated like a person instead of like a credit card.

And you know, just like anyone/everyone else, I could be way off base. It all remains to be seen and just as always, AT&T may continue to succeed (with the iPhone product) in spite of themselves.
Posted by mgee99 (36 comments )
Reply Link Flag
Cell Phone Co-Ops
I would like to see a Cell Phone Co-op! What happened to the co-ops? In the 80's there were many co-ops that were companies formed by the customers. The customer owned the company. The problem with Titans is their allegiance it so the shareholders, not to the customer. If they can slaughter the customer and sell the pelt to make an extra nickel they must do it, or the shareholders will
Sue! They have no choice as they are sworn to profits by the charter of a corporation. That would be a bold platform for an Independent party to run and encourage co-ops, to play the role of curbing corporate rape and pillage. The government cannot control the volition of greed in the corporation. It is part of the animal by nature. Co-ops could regulate the corporate animal to play fair to catch it's prey. I have a Treo 650 which is a year old. It has been like pulling teeth for me to get a company that rhymes with horizon to upgrade me when I've been a customer for 12 years. I waste so much time with them fighting for equipment that is dated. I want the iPhone now. I'm not going to sign a (2) year agreement with antique equipment. Bring back customer owned companies!
Posted by mattbytez (6 comments )
Reply Link Flag
AT&T Market Analysis
It makes me wonder did SBC do a market survey as to whether the name AT&T actually helped them or hurt them? I see so many businesses open and close where a market survey could have dictated whether that's what the people wanted. It seems everybody has been burned by the name AT&T. They should have let that name rot in the grave. Do business do research anymore or is everything a craps shoot with VC money?
Posted by mattbytez (6 comments )
Reply Link Flag
All this AT&T Vitriol
Anyone think the same complaining would occur if the iPhone was
locked into another carrier?
Posted by tjhunt (3 comments )
Reply Link Flag
Nope!
Seriously doubt it.
Posted by mgee99 (36 comments )
Link Flag
who knows the consequences
Every action has consequences, intended and unintended. One
thing analysts have not considered is how spending millions of
dollars to promote the iPhone will alter AT&T's relationships with
other vendors (and even altering their voice mail API system
wide but only telling Apple how to use the new API). If I were an
executive at RIM or Motorola, I would be much more demanding
of sales and technical support from AT&T than I have been in the
past. If that support does not come, I would be prone to ship my
best products to Verizon first. This could leave AT&T with a
shortage of the devices business users demand which could
result in a loss of business customers to other carriers. There
are always unintended consequences.

Now I love music as much as the next guy, maybe more. While
the iPhone may be a great iPod, the iPod is a true audiophile's
nightmare of bad compression and cheap d/a converters, really
a good dolby C cassette sounds better and when I see people
hook their iPods up to $2000 stereo systems I just have to
laugh, so I am not about to drop everything great about my
phone to get an iPod (like my phone takes great pictures of
moving children, if I don't want to type on my little keyboard I
can make a video message and mail it off on a high speed
network, google maps knows where I am, a home button that
always takes me to the homepage, and I have a second battery
that I can pop in if my extended battery dies-- never happened
yet). I would have to give up a lot to get a pretty lousy audio
experience and a bad case of shutter lag-- and that is no way to
listen to Keith Jarrett at the Blue Note or the last recording John
Hicks made before he died or to take pictures of your toddler's
first time on the big kid's swing.
Posted by wylbur (110 comments )
Reply Link Flag
inverted everything
inverted Apple logo, the letter 't' can be an inverted 'i', even an inverted OS. It runs some form of Windows
Posted by ackmondual (199 comments )
Reply Link Flag
Ridiculous
The iPhone was not that serious to begin with, and then to add the $200 termination fee to the price of the iPhone? Ridiculous.
Posted by nichts925 (51 comments )
Reply Link Flag
Boo--hoo-hoo
To all you cry babies knocking ATT. GET OVER IT. They and Apple are going to make a killing over the next few months and if you want to get in on the nice new toy, well you ain't got no choice but accept ATT. So, either accept it or go and buy something else and cry in the corner. This ain't about you, it's about how Apple and ATT teamed up to make a killer product (even though I won't be buying one any time soon) for all the wanna-bes that can't do without the newest and the greatest (poor souls like you). Cry, cry cry - blahh, blahh, blahh - your pathetic whining is sickening.
Posted by oxtail01 (308 comments )
Reply Link Flag
I would never go to ATT so i guess i will just have to settle for my Ipod touch Apple really should have thought about what they were doing before they only had one carrier.
Posted by zer0punkd (1 comment )
Reply Link Flag
 

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