Wednesday, October 15, 2008

Verizon iPhones on the Horizon?

AT&T Exclusivity
Apple's decision to be exclusive to AT&T is not based on the revenue from AT&T alone.  We know this because of the bleedingly obvious fact that they would have significantly more revenue selling to a larger market with lower subsidy fees than to a smaller market with higher subsidy fees.  Apple is currently made the iPhone available to significantly less than half of the US handset market.

So was this a strategic decision by Apple to NOT manufacture a CDMA phone (Verizon) to control development costs? 
Given the hiccups over the last year with Apple product launches you could see why they might have wanted to focus on a single product. That said if the 3g is safely being sold in 70ish countries and being manufactured at volume is it possible that a CDMA Verizon iPhone be coming soon? 
It is not entirely clear what AT&T is paying to Apple for each iPhone added to its network.   The rumors put it between two and three hundred dollars per unit, about double what is reportedly the current standard subsidy for non iPhone smartphones.  The Exclusivity agreement reportedly extends for 5 years (2011). 
What raised the issue for me is the outstanding G1 Pre-sale of 1.5 million units.  Significant evidence of demand for an "iPhone like product" available on a network other than AT&T.  There is no way to know for sure but I strongly suspect that 1 million of those G1s are potential iPhone sales that were unwilling to accept AT&T as their lord and savior.  T-Mobile is only 10% of the market but credible competition is coming so why lose out on profit AND give the competition a leg up in by providing an iPhone free zone within which to sell?

As stunning as iPhone sales have been in the US they have been limited for a number of reasons.  Tethering to AT&T reduces the possible US market by more than  half and limited outlets (Sales by only Apple and AT&T about 2200 stores all in) further constrain availability.  Now iPhones are widely available at 850 Best-Buy locations and 4200 Wal-Marts around the country.  Look RIMM will sell phones HTC will sell some phones but everyone knows who the competition is.  The Coolest Gizmo Ever (CGE)
One wonders...How much would ATT have to pay to limit sales of a product to less than half the available marketplace and by doing so give a leg up to the competition?
So what is the point?  There is no denying gravity.  There is immense support for the existence of a Verizon CDMA iPhone at some point in the not too distant future.  Will it happen?  Not a clue.
Writer is long Apple and is a customer of AT&T.  He does not hate his carrier.  You may hate your carrier but don't be a hater.  Don't hate on Me or Apple or AT&T  because of anything this lunkhead says either.


Brian Levine said...

I think it's much more likely that 1 million people don't want to accept Apple as their lord and savior.

Anonymous said...

more like 10 million.

Anonymous said...

As a longtime Apple guy i bought the 1st and 2nd gen iPhones. I very reluctantly gave up on the iPhone and switched to Verizon because AT&T service quality is so bad.