T-Mobile USA To Get iPhone Before Verizon?

Well, some analyst was reported by Thestreet.com that Apple is likely to go with T-Mobile in 2010.  Okay, if you know me, I don't have much use for self-serving analysts but, once in a while, one will come across with an interesting analysis.  And this one, I happen to think is workable for all parties involved.  And trust me.  For me to link to thestreet.com, well, this'll be the last time that happens.  Back to the meat of the matter.

Back in July, I began speculation about possibility of T-Mobile getting the iPhone some time in 2010.  Here's the low-down on why I had thought this was a possible, if somewhat improbable, scenario.  3G and GSM.

In the United States, if you want access to a GSM network, you've got one of two major choices.  ATT and T-Mobile.  As you know, T-Mobile is the smaller of the two.  It's in the 4th place as far as the major networks are concerned, behind Sprint.  As Apple as repeatedly said that there will be no CDMA version of the iPhone.  Conventional wisdom is that Apple will wait until LTE, the next generation wireless network, has sufficient coverage before the iPhone becomes available to Verizon's customers (both ATT and Verizon Wireless will migrate to LTE as their next generation wireless broadband network).

So why T-Mobile?  GSM.  Here and now, by going with T-Mobile, Apple will have access to another 40 million customers in the immediate future.  Plus the 80 million from ATT, that's 120 million native GSM users.  And for folks who for one reason or another want the iPhone but are unwilling to go with ATT, T-Mobile offers a viable alternative.

Just ask the tens of thousands (if not hundreds of thousands) of T-Mobile customers who are currently using unlocked iPhones on T-Mobile's EDGE network.  These folks would rather use their iPhones on T-Mobile's older slower network than put up with ATT's shortcomings.

Not only is this about access to millions of more potential customers like myself but it also means additional pressure will be put on Verizon should there be any future negotiations between it and Apple.  For Apple, it holds all the cards and when it comes time to use them, Steve Jobs knows how to play his hand.

But you ask "what about this hybrid iPhone that everyone's talking about using Qualcomm's chips? The one that allows Apple to sell a version of the iPhone that works on GSM and CDMA networks while also upgradable to LTE access?"  It can happen but insiders don't think the chip will be ready until 2011.  Plus, Qualcomm's public statements seem indicate that it was still knocking at Apple's store and formal talk has yet to commence.

There are still a lot of questions about any deal between Apple and T-Mobile in the US.  One is the weak 3G network.  It was a bit more than a year ago when T-Mobile basically launched part of its 3G network with the release of Android-based G1.  As a G1 user, I can attest to the reliability of the 3G network in CA.  There are dead spots but what network doesn't?

Then there is also the question about Verizon's 80-plus million users.  I'm certain Cupertino would like access to them.  And eventually, that'll happen.  However, today, there is an ongoing public battle between Verizon and ATT over network coverage.  We won't go into that here but last week Apple joined the battle with its own commercial.  The basics of it was that Verizon's CDMA network won't allow users to make a call while surf the Web at the same time.  Ouch.

ATT's 3G network lets folks access the Internet and talk about the same time.  And T-Mobile's 3G network lets users do just that as well.

What about T-Mobile's trip down Google's Android lane?  Well, there was the G1 more than a year ago.  The myTouch earlier this year and, the latest, the Motorola Cliq.  Well, as much as I love my G1, the iPhone is a far superior device than any Android device on the market at this time.  And having Android devices has not turned around T-Mobile's fortune in the US.

Plus, it seems that Google has found a new frenemy:  Verizon.  With Morotorla, Verizon launched the Droid, the newest Android device.  And it appears that Google will continue to work with Verizon to counter the gains that Apple has made in the marketplace.

So, where does that leave T-Mobile?  It doesn't have the Pre like Sprint does and everyone has Blackberries to offer customers.  T-Mobile's place as the Android-first did not matter much.  For all the devices T-Mobile or anyone else offers their customers, they're not iPhones.

So, do T-Mobile really want the iPhone?  Does it want the headache of network congestions?  Have its iPhone users hog up the wireless bandwidth?  You betcha.  And I'm sure if there is going to be any deal, T-Mobile USA's German parent company is also in on it.  There are likely pledges by T-Mobile to spend hundreds of millions of dollars to build and upgrade its existing network.

When Verizon's LTE network is up and running, I'm sure Apple will be happen to bring the iPhone over and gain additional market of an additional 80 million users.  But for now, it's more likely that T-Mobile customers will see the iPhone in 2010 than Verizon's customers.

I've never had a Verizon phone so I can't say first-hand how good its network is and whether it truly offers better coverage than ATT.  I think they're about the same.  Had Apple and Verizon worked out a deal to offer the iPhone on Verizon's CDMA network, I'm sure all the blogs and tech articles will be about how Verizon Wireless' network was being weighed down by the millions of iPhone users while ATT subscribers enjoy an open sky of wireless broadband.

Apple is patient.  It does what it wants when it feels the time is right.  Until Verizon's 4th generation wireless network is up and running efficiently, don't expect the iPhone to be running on Verizon.  And by adding T-Mobile in 2010, it puts added pressure on the rest of the wireless network (just about every mobile platform are on existing networks) and it'll be Apple's to gain.  And in the short run, Apple will have access to T-Mobile's 4th place network of tens of millions of subscribers.

ATT Is Forced To Play Defense With the iPhone

The numbers do not lie.  The iPhone has been the main mobile device for Ma Bell.  Want the numbers?


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.