Apple screws U.S. iPhone customers, extends AT&T exclusivity agreement
By Triston McIntyre
As if U.S. customers haven’t been frustrated by Apple’s exclusivity agreement to distribute the iPhone only on the AT&T wireless network, Apple has officially stuck a hot poker deep into the wound by extending its exclusivity agreement for yet another year.
Venture Beat’s MG Seigler wrote today that Apple has effectively sold its soul to the devil for an additional year’s exclusivity with AT&T in exchange for subsidies on every iPhone sold. Instead of raking in a percentage of contracts, Apple will collect somewhere around $300 per every iPhone sold.
Obviously the deal is sweet for Apple, and probably had a lot to do with the AT&T being able to sell the iPhone for $199. iPhones don’t build and pay for themselves, after all. But the cost of signing exclusivity with AT&T for another year is far greater than the money collected on the subsidies.
Apple had the opportunity to completely dominate the smart phone market when it created the iPhone; though distributing the phone on a single network was necessary to build hype and make the phone seem elite, even the initial exclusivity agreement was far too long. A lot can happen in three years, now turned four, and it is evidenced in other handset manufacturers releasing quite impressive competitors of their own.
Now Apple is locked into AT&T, a network many iPhone 3G customers are dropping due to bad service. Competing handsets like the Samsung Instinct are collecting large followings, and every network is getting its own flagship touchscreen phone. Though the iPhone might still be the coolest, there won’t be many folks jumping ship to join a lackluster cellular carrier when the carriers they prefer have competitively priced handsets that act just like the iPhone.
If I were an investor in Apple, I would start seriously questioning the decision-making ability of Steve Jobs. His illness, coupled with decisions like this that seem obviously to not be in the best interests of the company, might finally be the turning point at which Apple needs to seek out a new head man.
I will say this. At one point I was considering holding out for the iPhone to become open to other networks, but now I’m quite sure I will happily go about other smart phones with no remorse. I don’t need no stinkin’ AT&T-ridden iPhone.
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August 2nd, 2008
Exactly. If you google “ATT sucks”, you will find over a million entries. This is not a coincidence. ATT (Southwestern Bell, really..they just took the name in a corporate grab), has been operating on a monopoly philosophy, as opposed to an excellence philosophy for quite a while now. Their landline business is disappearing rapidly due to high costs, incredibly bad (offshore) customer service, and a general “we don’t have to care” approach that is evident in every decision they make.
So they bought themselves a monopoly on iPhones. Besides the 300$ they pay, and the percentage of usage, and whatever one time fee they paid apple….they have also bought an unending stream of bad PR from customers who are stunned at the costs that ATT builds into the service plans, and are also stunned at the holes in ATT coverage, and the frequency of the drops in ATT networks.
But this is how monopolies operate. But ATT is really dumb, IMHO, and Jobs is (still) brilliant.
As noted, other carriers are coming out with iPhone clones which are cheaper. Android is coming out this fall, and iPhones are still just iPhones (with annoyingly non-tactile keyboards which won’t even go to landscape).
iPhone is already peaked, so another year is not big deal.
By winter, iPhones will look like overpriced pieces of junk, and Apple will be releasing some other piece of rocking hardware in the near future.
Keep the iPhones ATT, and keep screwing your customers and non-customers alike. They’ll remember.
Remember the Sprint “You can hear a pin drop” commercials, which *just* preceded Sprints complete overselling of its network, massive FCC complaints about its service and its fraudulent billing and cancellation practices? Well, the market remembers. People still hate Sprint.
ATT, welcome to your future.