The biggest flaw in Apple's near-perfect iPhone has always been the network it's on. So as rumors have arisen once more (based on an old story from September) of Apple developing an iPhone for Verizon Wireless, the most reliable cell-phone network in the U.S., the Internet has been going nuts. Of course Apple wants to develop an iPhone for Verizon. At this point, Apple wants to develop an iPhone for everyone. It's just got one problem: the hideous, mysterious, Faustian contract it signed with AT&T. And that one is a show-stopper.
Apple's exclusivity contract with AT&T was an attempt to rewrite the economics of the cell-phone business. It wasn't about visual voice mail or even, really, about branding. It was about money and control. In exchange for a bond of blood, AT&T would kick some of its monthly subscription fees to Apple and let Apple control retail distribution. This was radical. This was unique. This was a failure.
The iPhone sold well here, but the U.S. is a fraction of the global mobile market, and international carriers weren't too comfortable with Apple cutting into their monthlies. It turned out that mobile-phone carriers around the world are much more comfortable kicking in one-time subsidies than kicking back monthly fees. So for the international market Apple went to a much more normal system of accounting (normal for the cell-phone industry, that is), and the iPhone has sold spectacular numbers around the world.
Along the way, Apple has also learned that tying itself to one wireless carrier damages, rather than reinforces, its brand, because the quality of its product becomes too tightly coupled to the quality of that carrier. Notice that in many of Apple's "later" countries, the iPhone is available on multiple carriers. Apple's Tim Cook has clearly said the company isn't married to a one-carrier strategy.
Apple has also gotten more flexible on pricing and distribution, which were the two major stumbling blocks when Apple first tried to get Verizon interested in the first-generation iPhone, at least if you believe USA Today. Heck, the iPhone is now even available at Wal-Mart. Apple of 2009, as opposed to Apple of 2006, is much more willing to work with mobile-phone carriers and third-party retailers as partners.
Mobile-phone carriers have learned things in the past two years, too. Everyone's dabbled with visual voice mail. Phones like the T-Mobile G1 and the Palm Pre have made U.S. carriers more comfortable with phone manufacturers taking a starring role in product rollouts and software updates, though Apple takes that kind of control to a new level. Two years have also proved that the iPhone is a unique phenomenon that everybody wants in on.
So Apple will put iPhones on everyone's network, but in the U.S., it will want to put them on Verizon's first. Verizon is now the largest carrier in the country. Also, Sprint has what Apple would consider an unhealthy relationship with Palm, and T-Mobile has that Google thing going on.
If the iPhone were to go to Verizon before 2010, Apple would have to build a version for Verizon's CDMA network. That would have been a great chore back in 2007. Apple isn't actually that big a company; developing two cell phones from scratch would have been a big deal for them. But they're going on their third phone by now, and they have a few years of experience. They could do it now.
It takes a year or so to develop a new phone for Verizon (and especially to get it both through the FCC and through Verizon's own hellish network-testing process). But Apple plans ahead: It'll have that phone ready when its AT&T contract is up. Verizon will likely demand a three-month CDMA exclusivity agreement, which Apple will consent to. Sprint and T-Mobile will follow after a few months.
If the AT&T contract lasts past 2010, a Verizon launch gets even easier. The iPhone could be one of the first devices on Verizon's new LTE network, which will use a fourth-generation network technology that Verizon will share with AT&T, T-Mobile, and dozens of international carriers. An LTE iPhone would eventually be an almost universal device.
Apple's AT&T contract is still shrouded in mystery. All we know about it is that it's "multiyear." Under the most liberal interpretation, that means Apple could be out from under AT&T's thumb in July. But USA Today has said in separate stories that the contract runs through the end of 2010 or even 2012, which puts the Verizon launch firmly in the LTE zone. I'm pretty sure that whenever that clock goes "ding," a whole lot more people will get to buy iPhones
Apple's exclusivity contract with AT&T was an attempt to rewrite the economics of the cell-phone business. It wasn't about visual voice mail or even, really, about branding. It was about money and control. In exchange for a bond of blood, AT&T would kick some of its monthly subscription fees to Apple and let Apple control retail distribution. This was radical. This was unique. This was a failure.
The iPhone sold well here, but the U.S. is a fraction of the global mobile market, and international carriers weren't too comfortable with Apple cutting into their monthlies. It turned out that mobile-phone carriers around the world are much more comfortable kicking in one-time subsidies than kicking back monthly fees. So for the international market Apple went to a much more normal system of accounting (normal for the cell-phone industry, that is), and the iPhone has sold spectacular numbers around the world.
Along the way, Apple has also learned that tying itself to one wireless carrier damages, rather than reinforces, its brand, because the quality of its product becomes too tightly coupled to the quality of that carrier. Notice that in many of Apple's "later" countries, the iPhone is available on multiple carriers. Apple's Tim Cook has clearly said the company isn't married to a one-carrier strategy.
Apple has also gotten more flexible on pricing and distribution, which were the two major stumbling blocks when Apple first tried to get Verizon interested in the first-generation iPhone, at least if you believe USA Today. Heck, the iPhone is now even available at Wal-Mart. Apple of 2009, as opposed to Apple of 2006, is much more willing to work with mobile-phone carriers and third-party retailers as partners.
Mobile-phone carriers have learned things in the past two years, too. Everyone's dabbled with visual voice mail. Phones like the T-Mobile G1 and the Palm Pre have made U.S. carriers more comfortable with phone manufacturers taking a starring role in product rollouts and software updates, though Apple takes that kind of control to a new level. Two years have also proved that the iPhone is a unique phenomenon that everybody wants in on.
So Apple will put iPhones on everyone's network, but in the U.S., it will want to put them on Verizon's first. Verizon is now the largest carrier in the country. Also, Sprint has what Apple would consider an unhealthy relationship with Palm, and T-Mobile has that Google thing going on.
If the iPhone were to go to Verizon before 2010, Apple would have to build a version for Verizon's CDMA network. That would have been a great chore back in 2007. Apple isn't actually that big a company; developing two cell phones from scratch would have been a big deal for them. But they're going on their third phone by now, and they have a few years of experience. They could do it now.
It takes a year or so to develop a new phone for Verizon (and especially to get it both through the FCC and through Verizon's own hellish network-testing process). But Apple plans ahead: It'll have that phone ready when its AT&T contract is up. Verizon will likely demand a three-month CDMA exclusivity agreement, which Apple will consent to. Sprint and T-Mobile will follow after a few months.
If the AT&T contract lasts past 2010, a Verizon launch gets even easier. The iPhone could be one of the first devices on Verizon's new LTE network, which will use a fourth-generation network technology that Verizon will share with AT&T, T-Mobile, and dozens of international carriers. An LTE iPhone would eventually be an almost universal device.
Apple's AT&T contract is still shrouded in mystery. All we know about it is that it's "multiyear." Under the most liberal interpretation, that means Apple could be out from under AT&T's thumb in July. But USA Today has said in separate stories that the contract runs through the end of 2010 or even 2012, which puts the Verizon launch firmly in the LTE zone. I'm pretty sure that whenever that clock goes "ding," a whole lot more people will get to buy iPhones
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