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AT&T & iPhone
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I apologize if this has been discussed and I somehow missed it…
I was reading this article and was wondering *why* Apple would stay with AT&T? If iPhone were to be available on any wireless network, wouldn’t that completely change the playing field?
Seems like an easy decision for Apple, but I thought some forum members might have differing viewpoints they’d be willing to share.
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Steph :apple:
Id quot circumiret, circumveniat -
First of all, ATT took a HUGE gamble when they agreed to assist a totally unknown entity with a totally unknown product to come to market.
Secondly, given that the iPhone is about the ONLY gamechanger out there that has allowed ATT to grow at the expense of other commodity telco’s, this gives APPLE great leverage over them.
And ATT is furiously now installing 4G or it’s equivalent knowing that in June APPLE is rolling out version 3 of the phone.
Now without this leverage to more or less entice ONE FIRM, to totally revamp their entire EXPENSIVE network, now twice, for ONE PRODUCT, Apple would have to design the product to work on what is ALREADY out there instead of designing for the future and having a teleco, then make a nationwide system that will be ready in most places on DAY ONE, for the feature set that will be incorporated.
This is the best of both worlds for APPLE, they get a nationwide network that is optimized for their product, without the hassle, time, or capital expenditure to produce one.
Rather like APPLE outsourcing manufacturing of all it’s product to Foxconn and Quanta, they get the BENEFITS of the factory or network, without the expense or associated problems of running either one.
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“Even in the worst of times, someone turns a profit. . ” —#162 Ferengi: Rules of Acquisition
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I apologize if this has been discussed and I somehow missed it…
I was reading this article and was wondering *why* Apple would stay with AT&T? If iPhone were to be available on any wireless network, wouldn’t that completely change the playing field?
Seems like an easy decision for Apple, but I thought some forum members might have differing viewpoints they’d be willing to share.
In many folks minds, the big issue opening the iPhone to Verizon. Unfortunately Verizon uses CDMA for it’s wireless network; which forces Apple to create a different iPhone. As some on others boards have pointed out, Verizon, as well as ATT, are moving to LTE in the next couple years. At that point it would make sense to open up the iPhone to Verizon.
There is also the question of another network providing full iPhone functionality. Verizon is notorious for disabling features on cell phones.disclosure: I am a Verizon wireless customer and do not own an iPhone. I do love my Touch though.
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“Once we roared like lions for liberty; now we bleat like sheep for security! The solution for America’s problem is not in terms of big government, but it is in big men over whom nobody stands in control but God.” ?Norman Vincent Peale
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The other main reason that is often ignored, is that AT&T’s version of 3G is the same version used throughout the rest of the world. Other than making it much much simpler for Apple to manage it’s inventory, it also makes it a more uniform company with respect to it’s customers. A US user can bring his iPhone trotting worldwide, pay through the nose, but have a functioning cell-phone. This is pretty much the same reason Apple has delayed entering the Chinese market: the biggest player wants its version of 3G to be implemented in the iPhone, unlike China Unicom, which seems to be more accommodating to Apple’s obsession with customer care.
EDIT: PlayUltimate’s fingers were nimbler than mine.
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Tightwad.
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While iPhone is unique, and generates high levels of subsidy, it’s best for Apple to go with a single carrier, because that generates even higher levels of subsidy per unit and still allows Apple to evolve its direct relationship with the end user without interference.
“Inventory is evil” (Tim Cook). You must not maximise revenue as per conventional life cycle return maximisation, because it’s too risky, especially if you have a unique product. Holding back available demand is a good thing for long term control.
A final reason is that Apple may make its biggest ever product launch in the next year. That has to be delayed as long as possible, until netbooks are inflicting the greatest damage on Wintel margins. Unfulfilled Mac, iPhone and iPod underlying demand must be held back to feed the launch of a new product category. When Apple’s offering between iPhone and MacBook has established itself in the market, we may see the gloves off in the fight for both cellphone and PC volume. But we’re not there yet.
I still think the most likely of the many stories about the exclusive relationship is that it was originally signed with a five year span, but with annual break clauses after the first two years, possibly requiring some sort of failure of the business model to be claimed. In other words, it may be not so much negotiating an extension as making sure the other party doesn’t terminate.
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ATT is behind the Slingbox app being denied access to the App Store, but they are apparently coming out with their own version of streaming TV.
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Best thing to hope for, in my humble opinion, is that Apple can pressure ATT into some more choices on the pricing, such as a limited data plan for $50 per month, or a no-data plan for $30-ish per month. (That would basically be a Touch with a phone and a calling plan, which works for me, and is a very salable product.) That would help me justify an iPhone to She Who Must Be Obeyed. I can talked her into a $199 phone, and even into abandoning Verizon, but I can’t talk her into the current monthly ATT plan, and frankly she’s right.
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My iPhone data plan is unlimited for $30 a month, so maybe there should be some investigation as to the variable pricing scheme that AT&T seems to already be spreading around. Is it geographical? By population density? Heck, my entire bill phone, data, and SMS is only $83 a month total (including tax and fees). $39 for the phone, 30 for the data, and 5 for the SMS.
Why are people paying more, unless it’s for the unlimited SMS.
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I want the exclusive contract with AT&T to end, for purely selfish reasons. My cell phone contract expires this August and I’d love the chance to get an iPhone. However, I don’t want to change my service provider. So, yes, Apple, open up the iPhone to other providers. You’ve only got customers to gain!
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You’ve only got customers to gain!
Remember the name of game is not necessarily to maximize customers but to maximize profit.
Apple has always played by a different set of rules and has not believed in trying to cater to every potential customer.Signature
“Once we roared like lions for liberty; now we bleat like sheep for security! The solution for America’s problem is not in terms of big government, but it is in big men over whom nobody stands in control but God.” ?Norman Vincent Peale
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Sorry, to clarify; ATT would charge me the same as you, Tiger: about $40 for calling and $30 for data, plus SMS and taxes so its about $80. Which would work out to about $135 a month that I would actually have to pay, what with the kids, wife, SMS, etc. also on my plan already. That is about $30-35 more a month more than I pay now. But I don’t NEED a data plan, or at least I don’t NEED an unlimited data plan. WiFi alone would do me fine for that most of the time. Get that monthly price down by $25-30 and you’d sell a whole lotta iPhones, I think.
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If it makes sense to control the “whole widget” in the computer space then the same should be true of the telephony space. If they are going to optimize the user experience they either have to build their own network or partner with a single provider. An example that’s a bit counter intuitive is Jeff Macke ranting about the iPhone and how crappy it was on Fast Money the other day. You know and I know that he should have been blaming ATT but he didn’t. Most of the complaints I’ve heard about the iPhone go directly to the quality of the network and not the phone itself. If Apple is to have the leverage required and the justification for prodding the carrier it needs to stay put. They may sacrifice a few units in the short term but we’ll all end up with a better over-all experience down the road.
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I don’t mind being wrong…,I just hate being wrong so FAST!
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if you only need Wi-Fi, which I can’t imagine because even in our city it’s still sporadic, the Touch is your answer then. With Skype, you can use it as an iPhone over WiFi. Pardon the use of the term, it’s not meant as derogatory, but Apple’s not going to dumb-down the iPhone and take away something that is revenue generating when another solution already exists. I’m actually paying LESS for my iPhone than I was for a 2 year old Samsung slide phone with data. And it’s a lot more functional. I just passed it on to a friend who had a grayscale Nokia Brick Phone. We both got upgrades in one shot.
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Best thing to hope for, in my humble opinion, is that Apple can pressure ATT into some more choices on the pricing, such as a limited data plan for $50 per month, or a no-data plan for $30-ish per month. (That would basically be a Touch with a phone and a calling plan, which works for me, and is a very salable product.) That would help me justify an iPhone to She Who Must Be Obeyed. I can talked her into a $199 phone, and even into abandoning Verizon, but I can’t talk her into the current monthly ATT plan, and frankly she’s right.
The problem is that the iPhone does not cost $199. The true cost is closer to $600. Now, if you were to buy an unlocked $600 iPhone, you could have a cell plan without data and just use wi-fi.
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“Once we roared like lions for liberty; now we bleat like sheep for security! The solution for America’s problem is not in terms of big government, but it is in big men over whom nobody stands in control but God.” ?Norman Vincent Peale
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I think opening the playing field would be best for Apple, but I can also see this deal being extended. I agree with Sleepytooth, the big draw could be AT&T playing a big part in the initial rollout of the coming iTablet/MacTablet device. A rich subsidy and a close partnership to help get this game changer launched would be a big lure for Apple. Price point will be a key factor to building a strong base with this product, and it may require a rich subsidy to get there.
I also think the lever of exclusivity gives Apple a position of greater influence in general. I think it’s highly likely we’ll see more flexible data plans coming soon and this is an example of this influence. The more flexible data plans work for AT&T in the longer term as well. It will bring more new cell clients over just for the iPhone with the no data plan option. I would bet that a decent percentage of them will soon be adding 3G data as they get hooked on the internet connectivity via wifi and eventually would be willing to pay for this via the 3G network for the true anywhere access.
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DawnTreader
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Please remember at the time of the original iPhone’s roll out 3G coverage was nearly non-existent outside of major metropolitan areas. The guaranteed revenue from exclusivity provided T with the assurances needed to invest heavily in the development of service coverage.
Also, please remember T is taking huge near-term hits to earnings that are noteworthy for a company of its size due to the early losses on heavily subsidized phones. T would not have agreed to such rich subsidies absent an exclusive carrier relationship.
Roll back time a couple of years and Apple was originally receiving monthly revenue on each iPhone contract. The original terms mandated an exclusive deal.
As the five-year contracts rolls closer to expiry, it might be time to revisit the market for the iPhone. But the exclusive deal made sense at the time.
There’s one more benefit from the deal. It’s virtually one-stop shopping in terms of resolving issues. Apple was new to the handset game two years ago and the T deal made it much easier for Apple to control the user experience early in the game.
