AT&T and Apple Exclusivity Contract

[spleck]

AppleInsider | AT&T may hold on to exclusive iPhone deal until 2010
AT&T: 'We're all about wireless' - USATODAY.com

Word is that Apple and AT&T's exclusivity deal was only through 2009 rather than the 5 year deal many heard. With the 3G and the changes in pricing structure (revenue sharing vs subsidy), AT&T got an extension to 2010.

This is very interesting. Barring any further extensions, we'd definitely see the iPhone on T-Mobile, and it leaves room for Apple to have a CDMA model in the works.

The networks will change in the next 2 years, but if there were a CDMA version out today, I'd take the ubiquitous but perhaps slower EVDO over sporadic UMTS/HSPA coverage.

[cellular_freak]

Originally Posted by spleck

AppleInsider | AT&T may hold on to exclusive iPhone deal until 2010
AT&T: 'We're all about wireless' - USATODAY.com

Word is that Apple and AT&T's exclusivity deal was only through 2009 rather than the 5 year deal many heard. With the 3G and the changes in pricing structure (revenue sharing vs subsidy), AT&T got an extension to 2010.

This is very interesting. Barring any further extensions, we'd definitely see the iPhone on T-Mobile, and it leaves room for Apple to have a CDMA model in the works.

The networks will change in the next 2 years, but if there were a CDMA version out today, I'd take the ubiquitous but perhaps slower EVDO over sporadic UMTS/HSPA coverage.

Well that will be good if it really does end in 2010. Because that'll be when my contract ends with AT&T. I would go back to Verizon in a heartbeat if there was a CDMA model released. Around here, GSM coverage is spotty at best and I can barely use my phone at home. With Verizon, I had coverage everywhere I went. Also, UMTS is only in like 3 places in Michigan, and that is completely useless to me. EVDO is everywhere in Michigan, so that is so much better!!!

[TNDan21]

I'd love to have an iPhone 3G but I don't want to deal with AT&T's shotty coverage, average CS, and over-priced rate plans. Hopefully when the AT&T exclusivity contract runs out a CDMA version will come out with Verizon and T-Mobile will carry their own version as well.

Now let's just hope Verizon and/or T-Mobile don't rape you in monthly charges like AT&T has with the iPhone 3G.

[Mobile Mike]

So much for the "5 year exclusive" deal that's been mentioned before. I wonder if Apple dislikes this deal with AT&T? I'm sure they'd be happy if other carriers had the phone as well. After all, it would be more money in their pockets.

[spleck]

Originally Posted by Mobile Mike

So much for the "5 year exclusive" deal that's been mentioned before. I wonder if Apple dislikes this deal with AT&T? I'm sure they'd be happy if other carriers had the phone as well. After all, it would be more money in their pockets.

I figure Apple needed the deal in order to green light the project at the beginning, but now they want to expand their market. I think AT&T paid Apple a sum of money for the exclusivity, and I think Apple underestimated how much they would change the market and make smart phones more popular. So they're probably all happy, but could be happier.

[Jay2TheRescue]

Originally Posted by cellular_freak

Well that will be good if it really does end in 2010. Because that'll be when my contract ends with AT&T. I would go back to Verizon in a heartbeat if there was a CDMA model released. Around here, GSM coverage is spotty at best and I can barely use my phone at home. With Verizon, I had coverage everywhere I went. Also, UMTS is only in like 3 places in Michigan, and that is completely useless to me. EVDO is everywhere in Michigan, so that is so much better!!!

I don't see a CDMA model... By the time the contract is over Verizon will be rolling out their LTE network. Verizon might be the frirst with the LTE model.. It just does not makee sense ffor them to go through the costs of making a CDMA model when by the time they can sell it the CDMA networks will start being phased out.

-Jay

[spleck]

Originally Posted by Jay2TheRescue

I don't see a CDMA model... By the time the contract is over Verizon will be rolling out their LTE network. Verizon might be the frirst with the LTE model.. It just does not makee sense ffor them to go through the costs of making a CDMA model when by the time they can sell it the CDMA networks will start being phased out.

The first iPhone came out with EDGE only because there were no mature UMTS chipsets and poor coverage. LTE will be in an even worse position.

The costs of developing a CDMA model are close to the costs of developing the 3G model. Most of the radio/cellular components in the iPhone are handled by separate chips--all of which were changed between iPhone and iPhone 3G.

Verizon's coverage and widespread EVDO makes the iPhone an excellent proposition. It's hard to believe the Apple would pass up ~80 million potential customers. If there's a Verizon LTE model, then you can bet it will also have CDMA support.

[bobolito]

I can only see a EVDO iPhone coming out IF and only IF Apple decides not to continue with the AT&T exclusivity agreement beyond 2010. But even if it ends in 2010, Apple might not bother investing in an EVDO model and just wait a couple more years while Verizon develops the LTE network. By 2012, Verizon should be in a good position on LTE. It might make more sense to do it that way since an LTE iPhone can be sold worldwide. Apple has much more to gain from the HSPA iPhone than from the small number of carriers that run EVDO. So despite many Verizon user's dreams, I see it much more likely to wait for an LTE iPhone than to wait for an EVDO version. Remember, Apple is too stubborn just to please a handful of EVDO carriers.

[hf1khal]

I agree but we may never know what AT&T might have up its sleeve and what it might do by then. Another factor, in my opinion, is that by then the iphone craze would have fizzled and that there will be a lot of competing pones out there that the exclusive status will no longer pay off.

[spleck]

Originally Posted by bobolito

I can only see a EVDO iPhone coming out IF and only IF Apple decides not to continue with the AT&T exclusivity agreement beyond 2010.

Considering that AT&T is a US carrier and CDMA is predominantly in the US, isn't that pretty obvious? It wouldn't be much of an exclusivity agreement if they came out with an iPhone for somebody else.

[bobolito]

In the US CDMA/EVDO has a slight majority of customers over GSM/UMTS. The difference is probably in the area of around 15 million customers if I'm not mistaken. Nothing that I would call "predominant" anymore considering the total number of cell users.

[spleck]

Originally Posted by bobolito

In the US CDMA/EVDO has a slight majority of customers over GSM/UMTS. The difference is probably in the area of around 15 million customers if I'm not mistaken. Nothing that I would call "predominant" anymore considering the total number of cell users.

Try reading that again. "CDMA is predominantly in the US". That means its "mainly" in the US. As in, you wouldn't try to market a CDMA phone in Europe.

[Jay2TheRescue]

While there may be many CDMA customers in the US, globally Apple gets a bigger bang for their R&D buck on GSM and LTE models. Look at it from Apple's standpoint. By the time the AT&T agreement is over, those who "just had to have it" have already switched carriers. By this time Verizon has also started their LTE network. If I were Apple I wouldn't spend the billions required to design and build this model that operates on a technology that is already being phased out..

[spleck]

Originally Posted by Jay2TheRescue

While there may be many CDMA customers in the US, globally Apple gets a bigger bang for their R&D buck on GSM and LTE models. Look at it from Apple's standpoint. By the time the AT&T agreement is over, those who "just had to have it" have already switched carriers. By this time Verizon has also started their LTE network. If I were Apple I wouldn't spend the billions required to design and build this model that operates on a technology that is already being phased out..

I agree that those are all good points and that CDMA model may be a hard sell in two years. But there are other sides to all those points:

R&D costs are minimal in releasing a CDMA model. Apple's design uses radio chips that have CDMA equivalents, making development and software costs much lower. The original pitch was a CDMA model to VZW. Apple had Mac OS X running on intel processors long before they switched over from Motorola/IBM PPC. I wouldn't be surprised if they have internal builds of the iPhone software and hardware for CDMA right now.

Both AT&T and Verizon have reported that "switchers" are minimal. A large number of iPhone 3G buyers were previous iPhone owners. Verizon reported an actual boost in smartphone sales. The limited report concerning T-Mobile's churn suggested that there was not any increase in ports to AT&T. The Verizon numbers are particularly important because they suggest that many users would prefer to stay on their carrier, but want new phones.

The LTE network push only exists on WA and HoFo. Hardly anybody else knows anything about LTE. Apple released an EDGE phone when all the enthusiasts could only talk about 3G. Here we are with a 3G phone, and AT&T still has limited 3G coverage. In 2010, EVDO Rev A will be ubiquitous in the US, LTE will require immature, high power usage, expensive chips, while chips using EVDO will be almost 10 years old, highly optimized, and cheap.

Further, everyone keeps assuming that VZW's LTE will be interoperable with AT&T and T-Mobile. We don't know that 100%. VZW's almost definitely going to have CDMA/LTE hybrids--I don't think anyone knows the standards well enough to know if VZW can get away with making theirs different (ESN vs SIM, etc). The point is, if you want an LTE phone on the VZW network, you're going to want CDMA/EVDO support also.

[bobolito]

Sorry, spleck, my bad. I misquoted your statement.

Originally Posted by Jay2TheRescue

While there may be many CDMA customers in the US, globally Apple gets a bigger bang for their R&D buck on GSM and LTE models. Look at it from Apple's standpoint. By the time the AT&T agreement is over, those who "just had to have it" have already switched carriers. By this time Verizon has also started their LTE network. If I were Apple I wouldn't spend the billions required to design and build this model that operates on a technology that is already being phased out..

My point exactly. Despite all the rumors, that's probably one of the main reasons they went with AT&T instead of Verizon. Much broader market means more money.

Now let's imagine this for a second: Apple and Verizon launch the iPhone, a CDMA model in the US. But also, Apple has bigger plans for the iPhone: they want to go global. So now they have to make a GSM/UMTS version of it too. Apple begins launching the iPhone GSM around the world. It will be only a matter of months before you see massive smuggling of the iPhone GSM into the US! just like it happened with the first version of the iPhone going out of the US.

Apple probably figured this scenario, plus the costs of them making two versions of the phone and figured it was much more cost effective to go GSM in the US and the world. Same hardware for everyone. If you think about it, they don't even have different frequency bands for the US version versus the European version because the same phone covers all frequency bands. So that tells me that Apple doesn't want to get involved in selling two versions of the iPhone. So if they don't even want to do that, what are the chances of them getting involved in selling iPhones with two different network technologies?

[spleck]

Originally Posted by bobolito

Apple probably figured this scenario, plus the costs of them making two versions of the phone and figured it was much more cost effective to go GSM in the US and the world. Same hardware for everyone. If you think about it, they don't even have different frequency bands for the US version versus the European version because the same phone covers all frequency bands. So that tells me that Apple doesn't want to get involved in selling two versions of the iPhone. So if they don't even want to do that, what are the chances of them getting involved in selling iPhones with two different network technologies?

They've always offered two versions with different memory capacities, and now they've expanded into two colors. Natural product development progression results in more models and selling to more markets. Memory is obviously simpler than different chipsets, but we're still seeing product expansion.

If AT&T had not gotten an exclusivity agreement, I think we would have had both a CDMA version and a GSM version already. Do you really think T-Mobile is such a large competitor to AT&T that it was worth the costs of getting an exclusive? It's more likely that AT&T wanted the exclusive to keep Verizon and Sprint out of the market.

I understand that in 2 years, IF the exclusivity agreement hasn't been renewed, the networks and market may not be appropriate for a CDMA iPhone. AT&T may be counting on that.

[Jay2TheRescue]

Originally Posted by spleck

I agree that those are all good points and that CDMA model may be a hard sell in two years. But there are other sides to all those points:

R&D costs are minimal in releasing a CDMA model. Apple's design uses radio chips that have CDMA equivalents, making development and software costs much lower. The original pitch was a CDMA model to VZW. Apple had Mac OS X running on intel processors long before they switched over from Motorola/IBM PPC. I wouldn't be surprised if they have internal builds of the iPhone software and hardware for CDMA right now.

Both AT&T and Verizon have reported that "switchers" are minimal. A large number of iPhone 3G buyers were previous iPhone owners. Verizon reported an actual boost in smartphone sales. The limited report concerning T-Mobile's churn suggested that there was not any increase in ports to AT&T. The Verizon numbers are particularly important because they suggest that many users would prefer to stay on their carrier, but want new phones.

The LTE network push only exists on WA and HoFo. Hardly anybody else knows anything about LTE. Apple released an EDGE phone when all the enthusiasts could only talk about 3G. Here we are with a 3G phone, and AT&T still has limited 3G coverage. In 2010, EVDO Rev A will be ubiquitous in the US, LTE will require immature, high power usage, expensive chips, while chips using EVDO will be almost 10 years old, highly optimized, and cheap.

Further, everyone keeps assuming that VZW's LTE will be interoperable with AT&T and T-Mobile. We don't know that 100%. VZW's almost definitely going to have CDMA/LTE hybrids--I don't think anyone knows the standards well enough to know if VZW can get away with making theirs different (ESN vs SIM, etc). The point is, if you want an LTE phone on the VZW network, you're going to want CDMA/EVDO support also.

Yes, CDMA/LTE hybrids may be out there in the future, but I see this as being very similar to Cingular when they rolled out their GSM network. There were a few phones out there that could operate on TDMA and GSM, but for the most part there was GSM phones to choose from. I never had a TDMA/GSM phone I went straight from TDMA to GSM. Although it would be nice, there is nothing to say that an LTE iPhone on Verizon has to have CDMA capability.

-Jay

[spleck]

Verizon and AT&T have not expressed any plans to deploy LTE on 850 or 1900 MHz--its all going on 700 and 1700 MHz. Even T-Mobile is moving toward UMTS and the LTE on 1700 MHz. This is a different situation than replacing TDMA with GSM. You now have national carriers with ~40,000 cell sites and ~80 million customers--too much cost in replacing sites and handsets. I think all the carriers will maintain and rely on their current GSM and CDMA networks for their base coverage and use LTE on other frequencies to augment metro areas, much the same way T-Mobile is deploying UMTS.