Apple’s 5-year Deal With AT&T is Annoying, Strategic



Just in case anyone still had doubts about Apple’s commitment to AT&T as the exclusive carrier of the iPhone, wonder no longer: USA Today reported that Apple will be married to AT&T for FIVE YEARS. FIVE YEARS! To put that in perspective, that’s the same amount of time between the introduction of the original iPod and the release of the clip-on model of the Shuffle.

And while this announcement is thoroughly irritating to me (I use T-Mobile…grumble, grumble), it might prove strategic for Apple. Click through to read why.

Handset exclusivity is a mixed bag in the U.S. market these days. Almost any phone, bar a tiny handful, will eventually make its way to all four of the major carriers. It’s a slow process, but it happens. The carriers play off each other, and the prices of the phones go lower and lower, harming the perceived value of the the actual handsets. Just ask Motorola how this worked with the RAZR.

So by really committing to one carrier, Apple creates tremendous value for AT&T by giving them an unbelievably premium offering that only they may carry, and they also preserve value for Apple by ensuring that the iPhone never becomes a $29 device with a commitment to a two-year plan. This can allow Apple to hold more tightly to their user interface, feature set and design in a way that working with the big four would not.

This deal is an outright declaration of war on the other mobile carriers, nothing less. If you thought Apple only had it in for Palm and RIM, you have another thing coming.

What I still can’t tell is how much this deal pertains to the exact phone Apple will roll out at the end of June. The company is prohibited from making a CDMA version of the iPhone during the five-year period, but I still don’t see details that speak about exclusivity of future models. I can only assume that AT&T thought of that and we won’t see unlocked iPhone nanos on the market in two years, but I guess we can keep hoping.

This does confirm one more thing, to my mind, however: It will be less than an hour after launch that people start selling allegedly unlocked iPhones on eBay at prices well above $1,000. Within a week, someone will have the iPhone running on T-Mobile networks.

Apple drives me nuts sometimes, and rarely so much as with this announcement. But let’s face facts: I couldn’t afford an iPhone until at least late 2008 regardless (the whole wedding thing), and I can’t leave my current carrier until then, either. It was a long shot either way.

Still, it leaves me with a quandary: I’m desperate for a good smart phone, and I absolutely can’t stand the user interfaces of Treos, BlackBerrys or Sidekicks. What’s a nerd to do? Buy a Nokia N95?


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