Why Apple Should Not Extend AT&T’s Exclusive iPhone Service Deal



Randall Stephenson, AT&T’s CEO, has been calling on Apple to see about extending the carrier’s deal as the exclusive US service provider for the iPhone, according to a report in the Wall Street Journal. Having already received a one-year extension of its original two year deal, with its current exclusivity protection set to expire sometime in 2010, AT&T is reportedly seeking to sweeten the pot somehow to keep Apple’s revolutionary mobile device out of competitors’ hands for another year.

Well, of course. AT&T added 4.3 million iPhone subscribers in the second half of 2008 alone — about 40% of whom were new customers, according to the company. In an era when landline customers are dwindling rapidly, anything that brings in new wireless subscribers is a good thing for the phone company.

But is the AT&T exclusivity deal good for anyone other than AT&T?

From Apple’s perspective it’s likely good insofar as it keeps things simple, having only one behemoth service provider to potentially screw up the tightly controlled customer experience around which much of Apple’s mystique has been been built. And to be fair, AT&T appears to have done a reasonably good job of deploying iPhones in the field. As the Apple spokeswoman in the WSJ article was quoted, “We have a great relationship with AT&T.”

But how about the consumer? Even if technical issues cannot be overcome that prevent iPhones, as they are currently manufactured, from working with Sprint and Verizon’s CDMA-based services — and surely they could be overcome in this day and age — having a choice between AT&T and T-Mobile is better than having a choice between AT&T and not using an iPhone at all.

Many people howled furiously about AT&T being the exclusive US provider when the iPhone was introduced in the summer of 2007. Looking back, it’s now easy to see how revolutionary and wildly transformative the device was; it was likely a good strategy for Apple to reduce its integration bandwidth to a single carrier in each market where it deployed the phone because it could have turned out to be more problematic a transformation than it actually was.

But now Apple has many millions of happy iPhone users the world over and it knows how its device performs in the field. It’s time for Apple to reclaim dominion over the user experience with its mobile communication device. And the single biggest change that would add to customer happiness (other than video recording capability and Flash functionality) would be to open it up up and let customers choose whatever service provider they can stand.


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