Apple Could Be Looking for New iPhone Partners in 2010

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Apple Insider reports this morning that Piper Jaffray analyst Gene Munster is predicting that Apple will end its exclusive agreement with AT&T by next summer. This rumor has been out there for some time (as I wrote back in June in Is Apple Getting Ready to Dump AT&T?). The exclusivity agreement never really made sense to me, but as the market matures, it makes even less.

Look at RIM

If you want an example of a handset maker that has thrived with a multiple carrier strategy, look no further than RIM. Today, in the US, you can buy multiple flavors of the Blackberry including the Storm, the Flip, the Bold, The Curve or the Tour. Each carrier has its own particular flavors. For instance, AT&T has the Blackberry Curve 8320, while Verizon has the Curve 8330. They are essentially the same phone, tuned for each carrier's network? Could Apple do something similar?

The Multiple Carrier Strategy Works

Munster points out that Apple has already experimented with a multiple carrier approach in France and found it worked to increase their market share. I've found carrier choice is based mostly on how good the coverage is in your area. In my home, for instance, I've found that I can't get a good Verizon signal, so I'm inclined to stick with AT&T.

I have friends who pine for an iPhone, but are tied to another carrier because of a family plan with different contract expiration dates (or for reasons like mine), but if the iPhone were offered by multiple carries, these folks have reported they would definitely take the plunge. This would likely mean an increase in market share since these folks are essentially tied to a particular carrier that's not AT&T.

Not All Wine and Roses for AT&T

As I wrote in AT&T's Love-Hate Relationship with Apple, it turns out that AT&T takes a big hit for subsidizing the iPhones, at least up front, but they most definitely make it back: As I wrote:

As Renee Ritchie reports in the iPhone Blog, [monthly iPhone] data fees added up to hefty $3.4b in data revenues for the quarter. Yet even with that and selling and activating 2.4 million iPhones in the quarter, AT&T still managed to record a 15 percent year over year loss because they had to eat a bunch of money on those iPhone sales. Tough to swallow? Perhaps in the short-term, but in the big picture, AT&T knows that very soon the money spigot will be wide open and they will make that money back and then some.

In fact, the iPhone has been very, very good to AT&T, so much so Apple Insider says that AT&T is lobbying for one more year of exclusivity.

I'm with Munster on this one though. I'm betting they don't get it. As George Harrison once wrote, "all things must pass," and while the exclusive deal might have worked for the initial launch, the time has come for Apple to diversify across multiple carriers.

Dani AI

Generated

As noted, the idea that Apple would broaden iPhone distribution made sense then — and it did happen, but on a different timetable than the 2010 rumors. Apple and Verizon publicly announced the CDMA iPhone 4 for Verizon in January 2011, with general availability beginning February 10, 2011. (apple.com)

After that first non‑AT&T launch Apple moved toward a multi‑carrier U.S. market: the iPhone 4S was sold through AT&T, Verizon and Sprint when it shipped in October 2011, and T‑Mobile did not start selling iPhones nationwide until 2013 (iPhone 5 availability on April 12, 2013). (apple.com)

The delay between the 2009 predictions and the 2011+ rollouts had practical roots. Early iPhone models required different radio/baseband hardware for GSM and CDMA networks (the Verizon iPhone used a Qualcomm MDM6600 baseband and notable RF changes), which meant separate engineering, certification and QA for each carrier variant — not just a simple rebranding. Those hardware and testing differences added real time and cost. (anandtech.com)

There were also business tradeoffs: carriers heavily subsidized handset pricing and negotiated terms to protect margins and network capacity, so adding new partners required new commercial deals and network planning. That subsidy-and‑capacity dynamic explains why exclusivity looked sensible to some carriers at the time and why Apple paced its rollouts until radio designs, supply and carrier negotiations aligned. (money.cnn.com)

Takeaway: the 2009 expectation that Apple would not keep a lifetime exclusivity arrangement was reasonable, but the technical and commercial realities pushed the practical shift into 2011–2013 rather than 2010.

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