When Apple was looking for a mobile partner for the iPhone, it originally went to Verizon. When Verizon turned down the device due to some of Apple's demands, Apple turned to AT&T, which worked out an exclusive deal with Apple to provide service for the device. Smart move. Over 17 million iPhones have been sold since the device debuted less than two year ago -- the majority of which have been in the US through AT&T.
Following the launch of the iPhone 3G last year, Apple and AT&T met again to look at their partnership. The two sides decided to extend the pact until 2010. But that apparently isn't good enough for AT&T which now wants to extend its exclusive deal into 2011, The Wall Street Journal reports.
This should be absolutely no surprise as AT&T added over 4 million subscribers in the second half of last year just for the iPhone. And some 40% of those were new AT&T customers, as WSJ points out. Clearly, the iPhone is a major catalyst for getting users to switch services, which is important for AT&T as it trails the number one wireless provider Verizon in terms of overall users.
And the iPhone isn't just important to AT&T for new users -- I know plenty of iPhone owners who are not exactly fans of AT&T's sometimes spotty service (see: Om Malik and anyone who was at SXSW). If AT&T loses its exclusive deal with the device, a lot of those users would be gone in a flash.
You'd have to think that eventually Apple is going to expand the iPhone beyond AT&T. It's several million units in the US, which is huge, but is a small sliver of the overall market. And it could grow that several times over if it was available on all the carriers just in the US alone. But that would also mean headaches for Apple, as being on multiple carriers means dealing with multiple carriers and could mean irregularities for things such as applications. Maybe some carriers won't mind certain bandwidth-heavy apps while others will, for example.
And Apple gets a sweet deal with AT&T. At first, it got a piece of each monthly contract that AT&T signed up for the device, but it switched that last year in order to subsidize the iPhone 3G (bringing it down to the key $199 price point). Now, Apple gets paid a reportedly sizable chunk of money by AT&T for each iPhone sold. This also removes the headache of worrying about users who are unlocking the device.
Another element to all of this that is pure speculation at this point, but is worth thinking about. Apple's tablet device, rumored to be coming later this year, could very well have 3G connectivity built into it. Obviously, it would need a carrier to provide that. And you can bet AT&T wants to be that carrier as well.
[photo: flickr/thor dekov buur]
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