AT&T & The iPhone Paradox

  • Posted: 27 July 2009 01:16 PM #16

    If Verizon is to subsidise this device, then it will demand full control over it, and it will want it in its stable of Verizon mobile devices. If this is going to be a device that an user would buy from Apple, then walk into Verizon store, get a USB dongle and attach it to the device, then there’s nothing that could prevent that user from going into Sprint (or T-Mobile, or AT&T) store and buy the same purpose USB device from there.

    It seems that most assumptions here are that the device is supposed to have a built-in wireless chipset, and it will be already set for activation on Verizon, and it will in fact be subsidised by Verizon. If these are the expectations, then it would imply some (possibly exclusive) agreement between Apple and Verizon. As I said above, this is not going to happen with the Verizon of today.

         
  • Posted: 27 July 2009 01:34 PM #17

    I’m sure it won’t be a Verizon exclusive, but it may well earn a Verizon subsidy, so that Verizon is able to resell it alongside a data contract. Verizon is surely desperate for something to say when customers want iPhone. I’m not sure the tablet should be cellular capable - that’s a confusing message from Apple. It wouldn’t surprise me if cellular access is via tethering only, so Verizon can sell whatever (non-i) phone they like alongside it, provided the customer takes a tethering contract. AT&T can subsidize a tablet instead of a new iPhone for customers happy with their existing (i)Phone come renewal time.

         
  • Posted: 27 July 2009 01:40 PM #18

    The only way a carrier can subsidise a mobile device is if it has the wireless chipset that works on that carrier, so that it put the subsidy lock on it. If Verizon is to subsidise this device, it will have to conform with Verizon’s corporate policy about all mobile devices (Branding, features, functionality, etc).

    There is only one way this type of device (or any other type) from Apple would ever be able to exist on Verizon’s network: if it were tethered to a regular Verizon mobile phone (via USB, WiFi or Bluetooth). Obviously, such condition would not limit the device to Verizon; tethering could be done on any carrier, as long as the carrier allows tethering with their existing mobile devices (same as it’s done today with notebooks).

    It will take a lot more of financial hurting for Verizon before they make an about turn on their policies regarding branding and features.

         
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    Posted: 27 July 2009 01:44 PM #19

    How about a non-exclusive tablet with wifi/USB/bluetooth.  VZ subsidizes the cost with the purchase of a USB dongle with data plan. ATT sells it, for those with an iPhone,  with a minimal subsidy with a 2-yr tethering contract.  Or follows VZ’s lead and sells it, for those without an iPhone, with a full subsidy with dongle purchase and data plan. ATT might offer an interesting package deal with iPhone & Tablet for new customers.

    edit: the one challenge would be tying the dongles to the tablet and “preventing” it from being used on a regular computer. The companies may not care too much though if it generates additional revenue via data plan sales.

    [ Edited: 27 July 2009 01:59 PM by Play Ultimate ]

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  • Posted: 27 July 2009 01:50 PM #20

    Yes. Makes sense and and you didn’t have to call anyone a worthless…..

    Do like the new color. Distracting though.

         
  • Posted: 27 July 2009 01:55 PM #21

    All carriers offer USB dongles today. Some also have USB/Bluetooth, and some WiFi as well. These dongles are fully subsidised and can be had for free with a two-year data-only contract (usually, at $50 per month for unlimited access).

    I don’t see what would Apple gain from allowing carriers to simply Apple’s device in their own stores at full retail price, just so that they can sell their data dongle and plan? In such an arrangement, this device would be no different than any notebook (or netbook) out there—you can easily connect any of them via these data dongles that carriers now offer. In fact, a few recent offers emerged, where carriers are bundling special, subsidised netbooks with two-year data contract. It is most likely these that have sparked the rumour about Apple doing the same offering with Verizon, which simply isn’t going to happen, for the reasons stated above (notice how none of these special bundling netbook agreements are with Verizon?).

         
  • Posted: 27 July 2009 01:57 PM #22

    So, if it is tethering only, then the talk of a Verizon tablet is simply the buzz about a marketing agreement between Apple and Verizon.  Verizon agrees to market the tablet and sell the tablet in its stores.  That makes sense.

    And it would make sense that Verizon could still subsidize even if the Tablet is tethering only based upon entering into a two year contract for the data tethering plan, which I believe is $50/month on top of your current cellphone plan or you buy a USB dongle.  If you break the contract before the two years you owe Verizon the prorated subsidy they provided on the iTablet.  I don’t think a built-in chipset is necessary for a subsidy when you have contract termination fees.

    sleepy,

    your tethering only scenario does feel right, especially your point about customer confusion if the tablet is cellular capable.

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  • Posted: 27 July 2009 02:02 PM #23

    This would be possible with all other carriers, but NOT Verizon. They simply don’t allow ANY device that is clearly not branded with Verizon logos everywhere. This kind of an arrangement would certainly be a first for Verizon, and would totally go against their DNA. I just don’t see it.

         
  • Posted: 27 July 2009 02:03 PM #24

    danthemason - 27 July 2009 04:50 PM

    Yes. Makes sense and and you didn’t have to call anyone a worthless…..

    Do like the new color. Distracting though.

    what new color? smile

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  • Posted: 27 July 2009 02:04 PM #25

    vasic - 27 July 2009 04:40 PM

    The only way a carrier can subsidise a mobile device is if it has the wireless chipset that works on that carrier, so that it put the subsidy lock on it.

    Not true, for example carriers sometimes give a “free” netbook with a new contract. Sell it on ebay if you want. It’s the high value enforceable contract that enables the “subsidy”.  Or think of it as selling the product on a lease.

         
  • Posted: 27 July 2009 02:22 PM #26

    vasic - 27 July 2009 05:02 PM

    This would be possible with all other carriers, but NOT Verizon. They simply don’t allow ANY device that is clearly not branded with Verizon logos everywhere. This kind of an arrangement would certainly be a first for Verizon, and would totally go against their DNA. I just don’t see it.

    Agree with the bold part, but Verizon must know that they won’t get an iPhone and it is only a matter of time before high value customers give up waiting and move to AT&T.  And this includes corporate accounts as the iPhone grows share in that market.

    I speak with Verizon folks, mostly engineers and they are acutely aware of the iPhone’s pull.  They are also working hard on the LTE rollout, as are the ClearWire/Sprint folks.  I would imagine Verizon is looking for any advantage in that battle, which as I mentioned also involves offering home broadband services.  My thinking is the iTablet is marketed alongside, and gets a subsidy if customers sign, an LTE service contract, even though that wouldn’t be technically necessary with a tethering arrangement. 

    I’ll try to ask what device and service arrangements Verizon is planning for LTE.

    [ Edited: 27 July 2009 02:24 PM by alcatholic ]

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  • Posted: 27 July 2009 03:31 PM #27

    Remember, too, that Verizon is as famously indifferent to their customers’ “experience” as Apple is famously concerned about it.  I am a Verizon customer, and nothing has happened in the 4 years I’ve been with them to make me WANT to be a Verizon customer.  Once my current contract expires (I’m half-way thru) I’ll *never* do business with Verizon again.

    Apple would do well to avoid deals with Verizon, under any circumstances.

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  • Posted: 27 July 2009 04:07 PM #28

    Pashtun Wally - 27 July 2009 06:31 PM

    Remember, too, that Verizon is as famously indifferent to their customers’ “experience” as Apple is famously concerned about it.  I am a Verizon customer, and nothing has happened in the 4 years I’ve been with them to make me WANT to be a Verizon customer.  Once my current contract expires (I’m half-way thru) I’ll *never* do business with Verizon again.

    Apple would do well to avoid deals with Verizon, under any circumstances.

    Apparently Verizon doesn’t need the iPhone.

    NEW YORK (Dow Jones)—It looks like Verizon Wireless doesn’t need an iPhone-killer.

    The carrier did just fine without a true marquee device in the second quarter, withstanding the launch of a new Apple Inc. (AAPL) iPhone to pull nearly even in the crucial metric of new contract subscribers.

    AT&T Inc. (T) was greatly helped by the iPhone 3GS this period, but what happens when interest fades from its current lofty levels? Verizon Wireless lacks a single flashy device, instead employing a shotgunlike blast of multiple products while touting the reliability of its network to drive growth. It’s a move that could pay off in the second half as iPhone interest fades from its high levels.

    “It appears the network message, while not as sexy, continues to resonate with customers despite the cool factor of the AT&T iPhone,” said Maribel Lopez, an analyst at Lopez Research. “Once the iPhone glamour fades, Verizon Wireless is primed to take the lead in the second half.”

    Verizon Wireless, jointly owned by Verizon Communications Inc. (VZ) and Vodafone Group PLC (VOD), has a respectable, if not exciting, line-up of devices, including the second-generation touchscreen BlackBerry Storm and a number of devices using Google Inc.‘s (GOOG) Android software. Next year, it plans to offer the Palm Inc. (PALM) Pre.

    “We believe we’re well-suited with having multiple devices,” Chief Financial Officer John Killian told Dow Jones Newswires. “Not every customer is alike.”

    The thinking comes after years of trying to pull out an iPhone-killer, from the clunky LG Electronics Inc. (066570.SE) Voyager to last year’s Research In Motion Ltd. (RIMM) BlackBerry Storm. While the phones were successful - thanks largely to marketing blitzes by the carrier - they failed to match iPhone’s drawing power.

    For the second quarter, AT&T at first glance won the subscriber gain, adding 1.4 million net new customers to Verizon Wireless’s 1.1 million. But looking closer, nearly all of Verizon Wireless’s 1.1 million new customers signed a long-term contract directly with the carrier, which compares more favorably to AT&T’s 1.15 million contract customers - roughly two-thirds of which were a result of the iPhone. The rest of AT&T’s new customers were from resale partners, and many just pay in advance for minutes they use.

    That AT&T was at near parity with Verizon Wireless despite the iPhone boost should be a concern for the Dallas carrier, which reported results Thursday.

    “Verizon is obviously doing something right on customer care to keep growing the way it does,” said Rick Franklin, an analyst at Edward Jones.

    Longer term, warns Pali Capital analyst Walter Piecyk, that doesn’t bode well if AT&T ever loses its exclusivity agreement with Apple.

    Verizon Communications shares recently fell 2.2% to $30.82, and Vodafone’s American depositary shares were down 10 cents at $19.83. AT&T added 10 cents to $25.55.


    -By Roger Cheng, Dow Jones Newswires; 212-416-2153; .(JavaScript must be enabled to view this email address)

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  • Posted: 27 July 2009 04:18 PM #29

    Perhaps they don’t need it - but that article sweetly misses a couple of very salient points:  a drop in profits of 21% - and a layoff of 8000 employees.

    Trust me, they need SOMETHING.

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  • Posted: 27 July 2009 04:21 PM #30

    Pashtun Wally - 27 July 2009 07:18 PM

    Perhaps they don’t need it - but that article sweetly misses a couple of very salient points:  a drop in profits of 21% - and a layoff of 8000 employees.

    Trust me, they need SOMETHING.

    I wasn’t agreeing with the article. I was just posting their spin.

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