Analyst: Apple extended AT&T’s iPhone contract until 2011 in exchange for cheap iPad 3G data plan

Thu, May 6, 2010


AT&T’s exclusive contract to sell the iPhone was largely expected to expire on June 29, 2010. That being the case, many were hoping that a CDMA version of the device capable of running on Verizon, largely considered the most reliable and robust cellular network in the country, was just around the corner. Unfortunately, now comes word that customers who either refuse or are unable to migrate over to AT&T will have to wait just a little bit longer to get their hands on the iPhone – in early 2011 to be exact.

And, surprise surprise, this turnabout seems to have everything to do with the recently released iPad 3G.

When Steve Jobs first introduced the iPad, people were shocked, or at the very least disappointed, that the 3G data plan was being run through AT&T’s network. After all, despite pouring hundreds of millions of dollars into beefing up their 3G infrastructure, customer complaints about AT&T still abounded. In any event, people were somewhat relieved to find out that the data plans offered by AT&T were completely reasonable, affordable, and downright attractive. Under a pay as you go set up, users can pay AT&T $14.99/month for 250 MB a month, or $30 a month for unlimited bandwidth. Not too shabby, and in fact, that pricing is about 50% cheaper that AT&T’s normal wireless data plans.

Now it turns out that that affordable pricing scheme may have been the result of maneuvering on the part of AT&T in an effort to land the iPad and extend their exclusive right to sell the iPhone for 6 more months. According to BroadPoint AmTech analyst Brian Marshall, AT&T was negotiating hard for the iPad while Apple was naturally intent on making their new device as affordable as possible, both in terms of the base price and the data plan for the 3G model. Remember, pundits expected Apple’s mythical tablet to start anywhere from $800 to $999. Apple, though, blew away all expectations with its $499 price point for the entry wi-fi only model.

In any event, during the course of negotiations, AT&T agreed to offer Apple a deal on bandwidth rates for the iPad 3G in exchange for a 6 month extension on their expiring iPhone contract. A win for both sides, really. The iPad 3G gets a strong push out of the gate while AT&T gets to keep its coveted spot as the exclusive iPhone provider here in the US.

But is iPhone exclusivity really so important that AT&T would slash its typical wireless data rates in half? In a word, yes.

Remember, the number one priority for wireless carriers is to attract new customers, and the iPhone’s success in that regard is unparalleled. In the third quarter of 2009, for example, 64% of all new AT&T subscribers were iPhone users, attracting 1.28 million new users to Ma Bell. And just a few weeks ago, AT&T released their earnings for the Q1 of 2010 and reported that over 1/3 of their 2.7 million iPhone activations during the quarter were to customers new to AT&T.

All that said, Marshall now anticipates that the iPhone won’t hit Verizon until 2011, a sentiment echoed by other analysts as well.

Update: And in case you need more of a reason to be skeptical of so-called analysts, Marshall e-mailed Appleinsider today and said that his comments on AT&T’s iPhone contract were purely speculative. Still, Marshall’s assertion that the iPhone won’t be hitting Verizon this summer remains on point. Remember that the prototype iPhone Gizmodo purchased and plastered pictures of on the web came with a micro-sim slot. So unless Apple is quietly testing a CDMA phone somewhere, the iPhone 4G (which may hit stores as soon as early June) appears to be an AT&T exclusive.

Related: How the iPhone forced AT&T to adjust their network setup

via Computerworld


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14 Comments For This Post

  1. Josh Says:

    The iPhone was dated when it came out so once again who gives a sh*t

  2. Anonymous Says:

    First who cares? Android phones are more customizable anyway. My buddy downloaded a program that let’s his iphone work on T-Mobile so how is it exclusive to AT&T anyway?

  3. Zach Says:

    Wow, Josh, you’re so 1337 it hurts.

  4. rkant Says:

    buddy like his EDGE? L@L@L@

  5. jim Says:

    well, just because a phone has a sim card slot doesnt mean it isnt capable of using a cdma network. i havent looked into the guts of the new iphone, but if that one isnt rocking something similar to qualcoms world phone stuff, they could still easily be working on a different model that is both gsm and cdma capable.

  6. John Says:

    “$30 a month for unlimited bandwidth … is about 50% cheaper that AT&T’s normal wireless data plans.”

    $30 is the standard rate for unlimited data plan. The reason it seems cheaper is because the iPad 3G, unlike the iPhone 3GS CAN NOT make cellular phone calls.

  7. daniel Says:

    any hope of the new ipod touch having the same 3G option (as opposed to wi-fi) that the ipad has?

  8. Anonymous Says:

    “$30 is the standard rate for unlimited data plan. The reason it seems cheaper is because the iPad 3G, unlike the iPhone 3GS CAN NOT make cellular phone calls.”

    What? That doesn’t make any sense. The phone plan is separate from the data plan. So in reality the $30 data plan is exactly the same. Which, oddly enough, makes it seem exactly the same.

  9. 4Geo Says:

    The reference for the advantage pricing for a laptop/netbook type of device, with either integrated data modem, or by purchasing an “Aircard” for connectivity would yield a $60.00 monthly service with a 5Gig total monthly allotment, or the $35.00/mo for 200MBytes. THis is what Verizon charges as well.

  10. amanda Says:

    I think what they mean is that the $30.00 data package for the iPad is half the price of the $60.00/month price for the aircard.

  11. Carolyn Says:

    I wrote a blog about how crappy service was with AT&T on my iPhone. I sadly gave it up and have been a serious depression every since (well…. kinda).

    I mean, after several…. and I mean SEVERAL attempts to reach my husband and I on our iPhones while my son laid unconscious from a skateboarding accident pretty sealed the deal on kicking AT&T to a permanent curb!

    Even if they gave the iPhone away for free, I still wouldn’t sign back on with AT&T. Until they reach an “agreement” to use other carriers with the iPhone, I will just have to wait “till Hell freezes over” I guess.

  12. iPhone repair Says:

    Wow. What a serious misstep by apple If this is done. They were ready to take over the world by opening up the iPhone to other carriers. Oh well. They must have other plans we know nothing about like maybe, buying out AT&T. Hmmmmm!

  13. zen Says:

    IMO Apple’s biggest success and downfall is the iPhone.

    As for the AT&Ts contract, I doubt it will be 2011 or 2015 for that matter. The extensions will keep coming with new products. The iPhone was supposed to be for all carriers after the initial 2 years from when it was created in 2007.

  14. Scooter Says:

    Honestly i’ve never had really any problems with my att service. I believe its where you live. I live in NJ and while yes i’ve had a couple of dropped calls WHO CARES! i just it call back and pick up the conversation. Jeez if you live in Kansas then yes dont get the iphone the 3g coverage probably sucks but not really here.

    Carolyn where are you from that you have had so many problems.

    Either way Long Live the iPhone and its superiority over all other phones!!!

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