updated 11:55 pm EDT, Fri August 6, 2010
ATT filing hints knowledge iPhone going away
AT&T in a newly published SEC filing discussing its latest results dropped strong hints that its iPhone exclusivity is nearing its end. The carrier devoted a significant section of its warnings to the risks that occur when "exclusivity arrangements end" and tried to minimize the potential effect. It didn't see the potential loss of Apple as a "material negative impact" and insisted that a non-exclusive wouldn't hurt customer turnover or the additions of regular subscribers.
Among the reasons for the public confidence were those given by wireless chief Ralph de la Vega when explaining why he didn't see massive defections from AT&T. With as much as 80 percent of customers locked into corporate or family plans, switching to another carrier would be difficult as it would involve moving the entire group, AT&T said.
While a GSM carrier that supports unlocked phones, the reality of American wireless networks would also make it impractical for some subscribers, AT&T added. Carriers such as Sprint and Verizon use CDMA and would force customers to buy new phones simply to use their networks; customers could switch to T-Mobile, but the switch from the 850MHz and 1,900MHz 3G bands to 1,700MHz and 2,100MHz would leave most phones without 3G. The increased diversity of smartphones should also soften the blow.
The SEC document is worded to avoid singling out the iPhone by name but is notable as previous quarters' filings made no mention of the effects of losing exclusivity, suggesting that AT&T is either about to lose or has already lost its sole rights to Apple's handset in the US. Apple had recently confirmed that its original deal with AT&T was to have ended in 2012, but multiple distinct rumors of a Verizon iPhone and now a T-Mobile equivalent have prompted beliefs that the deal has been shortened, either through the switch to subsidized pricing or in return for a temporary iPad exclusive.
Regardless of the term, analysts have so far disagreed with AT&T on the effect of losing the iPhone exclusive and have pointed to the steps it has taken to lock in subscribers. The company's decisions to roughly double early cancellation fees and extend iPhone 4 upgrade eligibility to all due in 2010 have been considered signs the provider is worried about losing customers. Many expect significant defections to any other US carrier if it offers the iPhone, with particularly strong shifts in the San Francisco Bay Area and other regions where AT&T 3G service is noticeably poorer than for its competitors.
The end of one-carrier sales in the US could damage Android's current supremacy, as it's unknown how many customers are choosing Android out of genuine desire for the products rather than the expense and possible quality problems associated with converting to AT&T for the iPhone.