Marco.org

(via andrewfox)

I don’t buy it. I’ll make this relatively quick, but first, it’s important that you understand that almost every phone on the market is sold at a carrier-subsidized price. That $49 Razr actually costs something like $300, but Verizon or AT&T (or whoever) will make enough profit over the 2 years of your contract that they can lose money initially on the phone. This is why:

• they charge you $175 to break a contract, since that generally makes up the difference, and
• you need to pay that full $300-ish price if you drop your phone in the toilet and need a replacement.

Sorry if you already knew all of that. Many people still don’t.

This article’s premise is that with the first iPhone, AT&T and Apple had a revenue-sharing deal: the phone was sold at its full retail price, without a carrier subsidy, and AT&T gave Apple approximately $20 of each month’s subscription price. This agreement terminates with the release of the iPhone 3G.

The new iPhone 3G isn’t really a $200 phone: it’s the same $400 phone, but with a carrier subsidy. This is why they’re requiring that the iPhone 3G be “activated” (bound to a 2-year AT&T contract) in-store, right when the phone is purchased: so you can’t just buy a subsidized iPhone for $200 and sell it on eBay (or unlock it) without paying for an AT&T contract, therefore causing Apple to have only charged you $200 for a product that really costs $400.

This article then hypothesizes that the revenue-sharing deal with AT&T was somehow tied to the 5-year exclusive-US-carrier deal, and since the revenue-sharing ended, the exclusive has probably ended as well.

I don’t buy that for a second. AT&T is a big phone company, and big phone companies tend to behave pretty stupidly. But I don’t think AT&T is that stupid.

Moreover, I don’t see Apple needing to break the exclusivity deal. They’re already free to do whatever they want in other countries, and they have. But in the US, there’s only one real carrier alternative that anyone cares about: Verizon Wireless. When people say they want the iPhone on “other carriers”, what they’re really saying the majority of the time is that they want a Verizon version. (Sprint and T-Mobile are both so small, unsuccessful, and undesirable that it wouldn’t make sense to waste time chasing their few customers.)

A Verizon iPhone won’t happen for the foreseeable future, and it’s only partly because of the AT&T exclusive:

• Verizon is a CDMA network. The iPhone is a GSM device. Making an iPhone that’s even physically compatible with Verizon would require a significant internal-hardware redesign.
• Verizon culturally requires much more control over the design, branding, and software on their phones than Apple is willing to yield.
• Verizon would need to implement Visual Voicemail’s custom data-transfer support at the carrier level. This is a significant investment to deploy nationally, and with Verizon’s general contempt for the quality of their devices and the usability of their software and services, I can’t see them justifying it.

I’m sure Apple would be willing to solve the first problem to get a shot at Verizon’s huge customer base, but the latter two are held back by deep-rooted Verizon culture: we’re the best, we don’t need to do anything special to please you, hardware makers are our bitches, the network is so good that we can ignore the quality of the devices, software doesn’t matter, interfaces don’t matter, and the devices are just vending machines to upsell you on additional charges.

I used Verizon Wireless for 3.5 years. That philosophy never changed — in fact, it only got more extreme and entrenched.

Now that I’ve used AT&T for almost 1 year, I’ve realized that my fears about their network’s quality were mostly unfounded — a result of Verizon’s successful marketing that they have the best network and everyone else covers nowhere and drops calls constantly. In fact, in many areas of Manhattan, Verizon’s towers get so overloaded that they drop calls and black out (i.e. you can’t place or receive calls at all, inexplicably, but the phone still has reception). In the same areas, AT&T does not suffer from these problems.

I don’t think I’d switch back to Verizon now, even if they magically offered the iPhone: an equivalent plan would be $10/month more, I dislike their corporate culture (remember the abortion censorship?), and their network in Manhattan (where I place 90% of my phone calls) is actually worse than AT&T’s.

And that’s just as well, since the chances of seeing a Verizon iPhone in the foreseeable future are close to zero.