February 10th is the day!!!
Where does AT&T go when the iPhone exclusivity ends?
By Galen M. Gruman
Created 2011-01-11 03:00AM
Wannabe iPhone users like me are rejoicing at the imminent iPhone availability in the United States from a carrier other than AT&T. (Verizon Wireless today announced that it will begin selling iPhones on
February 10, with existing customers able to pre-order one on February 3.) AT&T's poor network in many areas has frustrated iPhone users and prevented many more potential customers from getting an iPhone. And losing the iPhone exclusivity could really hurt AT&T, for which the iPhone represented about 65 pecent of its smartphone sales in the last quarter.
But don't pity poor AT&T. The carrier has been preparing for the day when rivals get the iPhone, and many users may find themselves sticking with or even switching to AT&T.
First, let's be clear on AT&T's problem: Its network coverage and capacity are poor in several large cities, including San Francisco, Washington, D.C., and New York, where many technophiles live. Thus, iPhone users in those cities tend to suffer -- loudly. My own experience with AT&T 3G on my iPad bears that out; I usually get better 3G service in places like Boston, Palm Springs, Bakersfield, and Phoenix than I do in my hometown of San Francisco and its surrounding Bay Area suburbs. Where you live and work is a major factor as to whether the AT&T network is a problem or not. The tech press -- which is concentrated in cities that have poor AT&T networks -- sometimes forget that our experience is not everyone's.
Also, AT&T has about twice as many smartphone users on its network than Verion does, according to my calculations: 53.0 million versus 21.4 million. So AT&T's network has a lot more load to handle. And although AT&T loves to claim its network is faster, the truth is its speed advantage is a theoretical one that AT&T rarely delivers on in practice.
Still, whatever the technical realities, surveys show regularly that AT&T's customers rate its service poorly [6] (it usually comes in dead last), and those respondents come from all over the country. So, AT&T can expect to see its iPhone growth level off or even shrink as Verizon and perhaps other carriers get the iPhone.
To combat that, AT&T is making a few changes.
For several years, AT&T has gotten exclusive rights to the more business-oriented smartphones, cementing a professional user base. In addition to the phenomenally popular iPhone, it had the popular BlackBerry Bold [7] as an exclusive for six months and now has a similar exclusive for the well-regarded BlackBerry Torch [8]. It also will have an exclusive deal for the forthcoming Motorola Atrix [9], the innovative "post-PC" smartphone [10] that can dock to a monitor and keyboard.
AT&T has focused on having the best, most innovative smartphones, and it will redouble its efforts now. Ironically, it'll rely more on the iPhone's main rival to do so: the Android OS. Verizon Wireless has been the biggest champion of Android devices in the United States, with hits such as the Motorola Droid, but AT&T is moving fast to ride the Android horse [11] as well. If Windows Phone 7 [12] or WebOS [13] ever become viable, you can bet AT&T will cherry-pick devices on those platforms as well.
AT&T is also investing in its network, bolstering backbone capacity and adding faster radio technologies such as HSPA+ and LTE to its cell towers. Of course, so is everyone else; AT&T gets no relative advantage here. But the 4G race is on, and AT&T seems committed to keeping up with the rest of the pack. Its network may not be the best, but it appears it will not get worse relative to the competition. As always in cellular technology, the actual performance varies from location to location and minute to minute, so it's impossible to know who's really better -- other than to see what customers say in aggregate.
Finally, I think AT&T is being smarter about its data pricing [14] than the competition is, which affects both the pocketbook and the network quality. It charges $15 for 250MB and $25 for 2GB of data access -- and lets users switch between the two plans monthly without penalty. For most people, 250MB of data usage on a smartphone is enough (assuming they use Wi-Fi where available, such as at home and at the office). By contrast, to date Verizon has charged $15 for 150MB of data and $30 for unlimited data; that essentially forces people to spend $30 per month even though most will never exceed 1GB of data usage. The $15 difference is meaningful for a lot of people.
This unlimited usage policy also encourages the wasteful users to keep on wasting, which will tend to attract the data hogs to Verizon's network. So far, it seems as this has not been a problem for Verizon's many Android users -- but I'm betting it will be as Android adoption continues to soar and a few million iPhone users and later iPad users join the Verizon network this year. For the short term, though, the siren song of unlimited data usage (which of course is never really unlimited) is a smart marketing move for Verizon.
AT&T also has inertia working in its favor. Verizon uses a different network technology (CDMA) than AT&T's GSM-based network, so AT&T iPhone users can't just switch to Verizon when their contracts expire -- they'll need to buy a new iPhone as well.
Then there's the issue of Apple's typical iPhone schedule, in which it announces a new model each June or July. Verizon will offer 16GB and 32GB versions of the iPhone 4 that are the same as AT&T's except for the cellular network they use. So many users will wait until later this year to see what the next iPhone is, in the hopes that Verizon will get that new model at the same time as AT&T.
This is not certain: The United States is the only market that has two cellular technologies in equal footing, so there is no history of Apple dealing with competing radio technologies that gives us a clue of how it will handle that market reality. Given Apple's focus on having simple product lines, I'm betting on parity.
Don't get me wrong: I'm not suggesting AT&T won't feel the hit from the end of the iPhone exclusivity, nor do I believe that Verizon is cellular nirvana. Its network has issues in some parts of the country, and Verizon's reputation for contract gotchas and fees is not a good one if you're a customer. But AT&T will continue to have the goods that attract technophiles and businesses alike. It's still a two-company market.
I will definitely be waiting until June/July to see what the next iPhone will be, but I am assuredly getting an iPhone thereafter on Verizon's network!
VR