Back in 2007 when the iPhone first launched on AT&T Wireless, it was not unique for a new mobile phone to be exclusively sold by one carrier for a period of time. What has been unique about the Apple and AT&T partnership is the length of time of that exclusivity, which provides Apple with unprecedented control over the iPhone and how it was sold. Users have benefited from that deal through Apple’s ability to directly push software updates to the phone (see exhibit A the Verizon/Droid fiasco), keep “crapware” off the phone, and sell the phone directly in both their online and retail stores.The deal has also hurt users by restricting them to a carrier who’s network does not provide the best service, causing people to suffer with frequently dropped calls or no data network availability.
For the last two years there has been great anticipation of Apple selling a version of the iPhone that will run on other U.S. carrier’s networks, with most people expecting the second provider to be Verizon. As recently as March 30, 2010 there was a new report in the Wall Street Journal of a CDMA iPhone becoming available in the fall of 2010. The Wall Street Journal notes how dependant AT&T is on the iPhone, who has 43% of all U.S. smartphone users on their network.
The common assumption is that a Verizon version of the iPhone would be a huge blow to AT&T. However, there may be a few reasons why the exodus from AT&T may not be so severe. One is that Apple might launch a new version of the iPhone on AT&T at the beginning of the summer, as they have done in the past. If it is compelling enough, people may decide to re-up their AT&T contracts (no doubt AT&T would subsidize the new iPhone for another 2 year committment) or sign new contracts, just to have the new phone. Another thing that could happen is that AT&T could significantly lower their prices. For example, what if AT&T offered a significantly lower monthly price for unlimited data for the iPhone? Finally, keep in mind that AT&T has been improving their network, and those people who get good service from AT&T would not have a compelling reason to jump over to Verizon.
Another interesting question about a possible move of the iPhone from AT&T to Verizon is, what will be the impact on Android? Mobility Digest suggests that Android could lose the gains they have been making in smartphone marketshare. The majority of Android sales have been for the Motorola Droid on Verizon, and Mobility Digest points out that since the Droid is the most compelling touchscreen smartphone on Verizon’s network, people who want to use a touchscreen smartphone on Verizon almost have no choice but to get a Droid. A Verizon iPhone means that now people who want a smartphone on Verizon can chose one that is not running Android. If this line of thinking is true, it will be interesting to see how well the Google Nexus One does on Verizon.
Of course, the iPhone and Android are not the only two smartphones on the market. While Blackberries have lost some marketshare, they remain the best smartphones with physical keyboards and many people find they must have a keyboard. Microsoft’s Windows Phone 7 is a bit of a wild card because while it has received favorable reviews, the reviews are in the context of the current incarnation of the iPhone. What happens if iPhone OS 4.0 changes the game again? I expect that AT&T will be one of the first big sellers of Windows Phone 7 devices in hopes of filling the void of losing iPhone sales. By the fall we could see the defacto top two smartphone platforms, iPhone and Android, going head to head on the same wireless network. What that means is that any questions about which is better will be determined by consumers rather than pundits.