Lots of rumors in the blogosphere about Apple and Verizon Wireless discussing a CDMA version of the iPhone. AT&T is said to be trying hard to extend its exclusive deal that is scheduled to expire in 2010. While the details of the AT&T current deal have not been made public, it is certain that AT&T won big-time with the iPhone exclusivity. Here are my personal thoughts on how this may play out:
- Apple lets its exclusivity with AT&T expire – Apple has certainly done well with the exclusivity on AT&T. I am sure that part of any deal involved a large exclusivity payment and lots of committed co-marketing dollars for the iPhone. (If someone told me that AT*T has paid for all of Apple’s marketing expenses in the US, I would not be surprised.) They have also managed to steal over 25% of market share in PDA’s in less than two years. This compares with RIM’s 44% market share. However, this is only on one carrier. If Apple expects to really break RIM’s stranglehold on the corporate environment, having a phone that works on Verizon will be critical.
- Apple works around the AT&T exclusivity agreement – There has been a lot of talk about creating a new phone model that isn’t exactly what is mentioned in the exclusivity deal with AT&T. Something akin to the iPhone Nano or maybe an iPhone Lite that could be sold by other carriers without violating the existing exclusivity agreement with AT&T. I think that if Apple did this, it would be something completely different from the iPhone and it is not above them to develop a new form factor to rock the industry that we really haven’t thought about before. There are many other large market segments whose needs are not met by the iPhone. It could be a flip phone such as the Pearl Flip (has anyone bought that?), or a traditional form factor that only focuses on placing calls and playing music. While I think there is a market for such a device, I’m not sure any carrier will pay a large exclusivity payment for it because it would eliminate the need for a data package that all of the carriers seem to be courting now. I see the iPhone Nano on the horizon, but just not in the multi-year exclusivity realm…
- AT&T pays big to extend its exclusivity – I am sure that AT&T would pay a lot to extend its exclusivity. I haven’t seen exact numbers, but anecdotally there is a lot of evidence of subscribers shifting to AT&T from other carriers to get the iPhone. However, Apple has to be aware that the largest complaint from new AT&T iPhone customers is on the quality of the network. While AT&T has made great strides in improving network quality over the last few years, no carrier has perfect coverage everywhere so you would expect this from consumers who selected their wireless carrier based on the phone type vs. the coverage where they use their phone the most. Apple also needs to keep the eye on the prize of dominating the smart-phone market and you just can’t do that by only opening yourself to less than 40% of the market to begin with.
Predictions:
Given these three options – I think that Apple will sign and limited exclusivity agreement with AT&T. Perhaps a special AT&T model that takes advantage of the increased speeds that AT&T is rolling out on its network. The agreement, however, will pave the way for a CDMA version of the iPhone.
There will be an iPhone Nano, but it will be available on all of the networks. Carriers will not be excited by this because it will likely not have big data contracts associated with it and will cannibalize their own attempts to sell music.
Wireless consumers will be the big winners. Consumers will have choice and it will continue to push the industry to open the doors for innovative application development.