“‘The $199 price point is where demand leaps,’ AT&T CEO Randall Stephenson says [of Apple iPhone’s base model subsidized price]. ‘This is going to bring in a whole new demographic,'” Leslie Cauley reports for USA Today.
“That ‘demographic’ isn’t actually a demographic; it’s mainstream America. So long as the iPhone had a hefty price tag, Stephenson says, he and Jobs feared it would never become a mass-market item. With a price of less than $200, however, they thought the iPhone could finally jump into the mainstream. ‘It seemed like an opportunity to change the game,’ he says,” Cauley reports.
“AT&T also gets some serious lift. As with the original iPhone, 3G customers must sign a two-year wireless contract. Existing AT&T customers have to re-up for two years,” Cauley reports. “Those who want to surf the mobile Web — and why else buy an iPhone? — also must buy a data plan. Total cost: around $100 a month. That’s almost double the $55 generated by the average AT&T wireless customer. ‘You just don’t find many opportunities like that,’ Stephenson says.”
“The U.S. cellphone market is rapidly approaching ‘saturation’ — meaning everybody who wants a cellphone already has one. To add subscribers, Charles Golvin, a senior wireless analyst at Forrester, says carriers basically have to steal them from each other. That’s where the iPhone could come in handy, he says,” Cauley reports.
“In exchange for its payout, AT&T got a year extension, into 2010, on its exclusive distribution deal with Apple, people familiar with the matter say. Sources asked to not be named because the terms are confidential,” Cauley reports.
Full article here.
[Thanks to MacDailyNews Readers “MacVicta” and “GizmoDan” for the heads up.]
MacDailyNews Note: AT&T stated in a July 1, 2008 press release, “In the future, AT&T will offer a no-contract-required option for $599 (8GB) or $699 (16GB).”
Reports say that the contracts with AT&T;will end in December 2008.
So this is all wrong.
Aw, fercryinoutloud. ATT, Verizon, T-Mobile, Sprint… Look, they all suck. They just suck in different places. If it works at your home and office, then ATT is no suckier than any of the other crappy cellcos.
Cell service is a commodity. After a month or two, you learn what parts of town drop calls with that particular provider, and you just stop making calls there. iPhone being tied to ATT is not the end of the world.
iPhone is the greatest cel phone ever produced married to the worst cel phone service in the Phoenix area (5th largest city in the USA). I have never met another iPhone user who disagreed with me. AT&T;may have picked up a lot of new subscribers due to iPhone, but once the other carriers are able to sell iPhone, AT&T;will lose many of them again due to suck ass service. I drop more calls now than I did when cel phones first became main stream.
I thought AT&T;had a 5 year deal already. (1997-2012).
How can it now be ‘extended’ all the way to 2010?
Huh?
That’s exactly my thoughts. Must be Steve’s reality distortion field: ATT happily signed exclusivity extension agreement: from 2012 to 2010…
2010 = Typo?
@ Susans
I’m guessing 1997 is supposed to be 2007. The exact terms of the contract were never disclosed. “Experts” guessed it was between a 2-5 year contract. No one knows for certain what the terms are.
Gee! End of 2010, concurrence of AT&T;will do anything to get the iPhone distribution!!
that “5 year agreement” was never confirmed
What I find concerning is that the article says so when AT&T;says that their per-customer revenues roughly double (from $55 to $100 per month). But hey – this is technology: its supposed to get CHEAPER over time…and that includes services.
Case in point: using the Consumer Price Index, $20 for Dial-up in 1988 is equal to $35/month in today’s dollars, which easily pays for DSL.
If AT&T;really starts to make some in-roads, the way that Verizon (et al) will need to fight back (because what other choice to they have?) is through better value … ie, lower service prices.
Time will tell.
-hh
There is not necessarily a contradiction. It is possible that there was a 2 year exclusive contract but that AT&T;could carry the phone for a total of 5 years. Now the exclusive portion has been extended to 3 years.
What this suggests is that if/when other carriers are allowed to carry the iPhone a significant number of iPhone users may still be locked into AT&T;2 year contracts.
It will be interesting to see how many carriers pick up the iPhone when the exclusive contract with AT&T;expires. And at what terms. It will also be interesting to see how the availability (or not) of new carriers will effect the cost of AT&T;data plans.
Will Verizon finally decide to play ball with Apple once AT&Ts exclusive contract expires? This would really boost iPhone sales. Hopefully they will pull their head out of their arse and make the smart choice.
So now I have to wait yet another year for an unlocked iPhone? I guess I’m just never going to own one, but that’s OK by me.
I’m fairly certain Verizon will never carry the iPhone. They use a different type of network than the rest of the world, so a different iPhone would have to be manufactured just for them. I don’t see this being high on Apple’s priority list.
Also, Verizon are control freaks. And not in a good way like Apple… the stuff Verizon forces on their customers (especially software) is crap. Seeing the phones they’re coming out with now (Voyager & Dare), they clearly don’t get it.
I’m a Verizon customer, by the way, so I would love to have an iPhone with them because they really do have the best coverage. It’s just not going to happen.
@ Susans and @Susans,
There were conflicting reports about whether the initial deal was for 3 years or 5 years. I thought that I remembered someone from Apple, at the time the iPhone was announced, saying it was a 5 year deal with AT&T;. Anyway, moot point now.
The thing is, if you read enough comments, you quickly realize something about mobile service providers in the U.S.—THEY ALL SUCK.
So what is the point of all this bitching and moaning? What would all the complainers out there propose? I know—Apple should start their own mobile telephone company. Yeah, right.
I propose voip over a public wi-fi spectrum, you know, like we all dreamed. Didn’t our masters hand out spectrum to all sorts for next to nothing? And yet, this time next year my television signal will be worthless, as in, my area has ass for digital signal.
Public airwaves – make it happen.
Tony,
Verizon was also approached by Apple to handle the iPhone. Making one for CDMA is not a problem. If Apple had signed Verizon exclusively first, then they would have planned on eventually going with AT&T also, and would have had to make a GSM model too. It’s not that big a deal making two models; look at all of the iPod versions.
Verizon would have to allow Apple to control the iPhone just like it is now. I can’t see Steve Jobs letting them screw things up as they are known to do.
I’m sure Apple’s goal is to have ALL the carriers selling the iPhone. That’s just common sense. I think if sales of the iPhone continue to escalate and take business away from the other manufactures, then Verizon will concede. I hope so.
I say, make all of the carriers go to one standard (GSM would be logical) and then make them all share their cell towers.
None of this roaming crap. They all get paid a monthly fee and we get to call from or to anywhere in the country with no extra charge.
If they won’t agree, then nationalize the industry and put all of their CEOs and other executives in front of a firing squad.
@alansky
Right on! Cell technology needs to die a quick death (like gasoline driven cars). A ubiquitous WiFi network using VOIP for voice comm is obviously the future we need now. I believe Apple is grooming the Touch for this purpose and is using the iPhone and 3G to get their foot in the voice communications door so to speak. These current hot products are just a means to an end and Apple will render the cell co’s into niche players when the time is right.
Any real extension of AT&T;’s exclusive contract would be a mistake. I would hope that Apple is listening to the throngs rightly complaining about AT&T;’s terrible service. Apple needs to open this to the other cell companies as soon as they can.
Throngs that are rightly complaining about AT&T represent rather insignificant percentage of AT&’s customers. Apple is listening to its customers, I’m sure and it will do what’s necessary to force AT&T to improve service for that small percentage of users (this mainly means coverage).
Personally, I have no beef with AT&T. When my phones broke down, they replaced them on the spot, no questions asked. Same with a charger and earphones. When I asked them for instructions for unlocking my Sony-Ericsson, they e-mailed them to me right away (did this with 6 different phones in 3 years so far). I can’t think of a reason to complain about them.
It is most likely that in the next few months, AT&T will begin to allow, and provide instructions for, unlocking of iPhones. There is no difference now between the iPhone distribution model and that for any other cellphone.
This exclusive deal makes no difference for people like me.
The beef I have with AT&T;and Verizon is that they are the two companies that have an arrangement with the government that protects them from litigation for turning over and letting the government eavesdrop on your conversations without a warrant. KInda like the home mortgage bailout that demands that all credit card transaction be turned over to the IRS. What happened to my privacy? Thanks democrats and republicans and Bush. You were all in it together from the beginning.