Okay. Here are the numbers. In the latest quarter, 40% of new ATT mobile warriors are picked the iPhone their mobile device. In the quarter when the iPhone 3G was introduced, 2.4 million iPhones were activated, taking in an ARPU (average revenue per user) of $95, 60% higher than ATT's overall ARPU (Telephony Online). And things have not slowed.
Recently, it isn't about attracting new customers from rivals as far as ATT is concerned. Not any more. Now, it is about playing defense. The thought of the iPhone working on a rival network is a scenario that has kept ATT executives up at nights. If these executives are doing the job they're hired to do, ATT should prepare for the day when it is no longer the exclusive iPhone carrier in the United States.
There is no way to underscore the importance of how important the iPhone is to ATT and it has to do all it can to extent its exclusivity. And things got worse for Ma Bell at WWDC 2009 when it became apparent that ATT was silently singled out for its inability to keep up with Apple and the iPhone. During the keynote, boos at ATT were audible for not being ready to bring MMS and tethering features to the iPhone users. To be fair, ATT’s competitors are quite choosy about which device they allow for tethering but no MMS in this day and age? ATT being left out of the keynote in any way shape or form was deafening. Virtually everyone in the audience, folks following the live blogs, and journalists noticed it.
On Tuesday, it was unavoidable to read blog after blog for not being able to step up to the mobile game.
Still don't think ATT is playing defense? Let also look the pricing and upgrade fees speak for itself for the new iPhone 3G and iPhone 3G S. The $99 for the iPhone 3G is more Apple’s idea than ATT. With the opportunity for Apple to knock out a player or two in the mobile market and really hurt the remaining players a bit (Storm 2 and G2 on deck in the coming months – WM 7 after that), why not? Components and memory chip prices continue to fall in the recession, going from $199 to $99 with yesterday’s technology is not going to hurt Apple’s margin. And until WWDC, the iPhone 3G is still the mobile device its competitors are trying to catch up to. The fact that ATT benefits from its competitors' losses is secondary.
On the other hand, ATT will still need to pay Apple for every iPhone 3G it sells, not to mention the new and already popular iPhone 3G S. It wasn’t cheap last year and it’s definitely isn’t going to be cheap this year for ATT. Meanwhile, ATT’s near-term bottom line is still being affected and this will continue to be situation as it tries to convince Apple it is the network for the iPhone.
Of course, Apple is balking at the once golden relationship it has with ATT and is likely looking at what options it has in the United States.
So now, ATT is left with playing defense: keeping the iPhone off the hands of its competitors. No one outside of Apple and ATT knows what the terms of their deal is. But one would think that Apple would have extracted guarantees from ATT to keep up with the demands of its iPhone users.
ATT can eventually learn to live without the iPhone if the issued is forced. But this is Apple and the iPhone. Not just another smartphone.
Could it be too late for ATT? It would not be a stretch to assume that there are escape clauses that can be activated should one of the parties not deliver as promised?
First, Apple capitulated to ATT, to the chagrin of its users, by keeping apps like Skype and Slingplayer only work on the Wi-Fi. ATT “KNEW” its network would not be able to handle the load. (Some speculated that ATT wanted to offer its own video services via its own app. Well, WWDC came and went and not a word about it. No mention on its website either.) As bad as it was, Apple delivered.
Now, let's look at ATT. By not offering even basic services like MMS, is it possible ATT has violated its contract with Apple? And if that is the case, is Apple free to bring even the basic iPhone 3G quickly to, say, T-Mobile (because it’s the only other major GSM network in the United States) as a punishment? Even at $149 or $199, there certainly would be a lot takers. And you can bet many of them could be ATT users.
Unless there is a triple of efforts by ATT to beef up its network and in convincing fashions show Apple its committed to build the best network in the US, Apple has the upper hand when it comes to deciding whether it has to look for a new home for the iPhone platform.
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