AT&T scored a major coup in the smartphone market when it locked up the exclusive U.S. distributor agreement for the iPhone. Since the launch of the smartphone, the iPhone has gone on to become one of the most popular phones on the market and lures millions of new users to AT&T for the iPhone alone.
The biggest problem for consumers is that the AT&T network is often not on par with the iPhone and some consumers won’t buy the iPhone because it is tied to the AT&T network. USA Today reports that Verizon Wireless and Apple are in high-level discussions to bring the iPhone to the Verizon network according to unnamed sources.
The talks reportedly began when Steve Jobs was still at the helm of Apple managing the day-to-day operations of the electronics firm. Jobs has since went on medical leave and the talks have reportedly continued in his absence.
AT&T is known to have exclusive distribution rights to the iPhone until 2010, though the terms of the exclusive arrangement are unknown. AT&T is expected to fight for its exclusive arrangement to be renewed with Apple.
USA Today reports that AT&T is having great success with the iPhone. AT&T reported that it had signed up 1.6 million new iPhone customers during its last quarter and that 40% of those customers were new to AT&T. At the same time, revenue from data plans was up almost 40% for AT&T.
By taking the iPhone to customers on the Verizon network, Apple would have access to an additional 80 million customers that use the Verizon network. Moving the iPhone away from the exclusive arrangement and making it available on multiple networks is seen by some analysts as the way for Apple to increase the share of the market the iPhone holds.
Analyst Roger Entner from Nielsen said, "Breaking the (iPhone) exclusivity with AT&T is a huge thing. That would send shivers into AT&T's stock and senior leadership."
Consumers would be the winners if Verizon gets the iPhone according to Entner. He says, "They could pick the network they wanted to use: AT&T's or Verizon's. It would finally give consumers choice, and choice is a good thing."
At the same time the loser in the scenario would certainly be AT&T. Entner says, "It would be a reversal of fortune, because a lot of people who have been disappointed in AT&T's network but love the iPhone would probably [move to Verizon]."
The expiration of AT&T's exclusive arrangement in 2010 would also coincide with the planned roll out of the LTE network from Verizon. AT&T is also expected to begin deployment of its own LTE network in 2010 which would mean only one iPhone would be needed to operate on both networks should Apple unveil an LTE version of the iPhone, which is widely expected to happen.
If Apple allows Verizon to get access to the iPhone it would benefit significantly with many Verizon customers buying a new iPhone. Especially if Verizon allows consumers to upgrade to the iPhone even is still under a contract with their current device. Apple reported sales of the iPhone were up significantly in its recent Q2 earnings report.