Wednesday, April 15, 2009

Apple and AT&T wrestle over the iPhone

Every time I see an iPhone, I'm more amazed at what it can do. More specifically, I guess, is that I'm amazed at the creativity and practicality of the various applications that are now available for these devices. My personal favorites are the "lighter" and the level. The level is truly remarkable, using the built-in accelerometers to detect how plumb the device is, and the display is a stunning, lifelike representation of a bubble level.

Unfortunately, I cannot get one.

That's because Verizon Wireless has, by far, the best coverage where I live. And, as compelling a product as the iPhone is, coverage is more important to me than features. So, AT&T's monopoly on the iPhone is a barrier for me. Not for everyone, of course, but it is for me.

But AT&T's exclusivity agreement with Apple expires in 2010. AT&T wants to extend that agreement, but Apple has little incentive to do so.

To me, this means that the iPhone will be less profitable for AT&T over the next 18 months. That's because I believe that AT&T will find a way to get the deal done. But it's not going to be pretty. Of course, AT&T gets a lot of ancillary benefits to being the exclusive iPhone carrier. Things like additional store traffic, non-iPhone users that come in on the coattails of iPhone users (family members, mostly), and the positive brand association that comes out of the relationship. Expect an announcement over the summer, just when the Pre is coming out and when the 2-year contracts for the first crop of iPhone buyers comes up. It'll be a way to generate new buzz for the product.

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