iPhone Exclusivity Lite
Various publications are reporting that T-Mobile may start selling the iPhone in the UK in addition to O2. But T-Mobile would only have the 3G model, O2 would continue to have exclusivity for the 3GS.
This could solve the iPhone exclusivity conundrum everywhere, including the US. Exclusivity is great for Apple because of the big subsidy it gets from the carrier, but increasingly horrible for Apple as it starts to saturate the market of the exclusive carrier while many potential iPhone buyers still won’t switch from their existing carrier.
Exclusivity Lite gives the favored carrier exclusivity only on the latest generation of the handset, while making sure that folks who won’t switch carriers have a way into the Apple Ecosystem. Its a compromise solution that won’t please everyone, except us AAPL longs!
Despite the iPhone’s early success it’s still in its nascent phase. The exclusive agreements have been helpful for providing high subsidies and providing a certain element of quality control - if there’s an issue with service there’s one provider to contact and work with to resolve the issues.
Should Apple expand its network of providers it’s possible subsidies will come under pressure as the pricing plans between providers becomes the focus of the marketing effort rather than the unique qualities of the phone. Further, in the US one of the issues that hobbles expanding the network of providers to include Verizon is a difference in service technology. While issues can be resolved, multiple carriers will require a different approach to marketing the product to consumers. For example, what’s the incentive for a company such as AT&T to spend lavishly on iPhone advertising or other promotions absent an exclusive arrangement to attract new customers?
But alas, the days of exclusive contracts may be coming to an end and the increase in sales volume may make up for a slight to middling reduction in retail prices for the product (and thus the subsidies).
Exclusivity Lite gives the favored carrier exclusivity only on the latest generation of the handset, while making sure that folks who won?t switch carriers have a way into the Apple Ecosystem. Its a compromise solution that won?t please everyone, except us AAPL longs!
Verizon would never go for the second class iPhone while ATT offers the best phone on the planet.