Apple extends contract with AT&T, forgets about you

Apple has extended its relationship with AT&T and Don Reisinger thinks that's the wrong move. Is he right?

Don Reisinger
CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
Don Reisinger
3 min read

According to USA Today, AT&T and Apple have agreed to extend their exclusivity relationship through 2009, meaning the next iPhone will be made specifically for AT&T service.

The report claims that Apple originally signed the deal with AT&T through 2008 and next year would start selling iPhones on other carrier services. But after AT&T offered a $300 subsidy on each iPhone instead of the revenue-sharing model that became such a hot issue last year, Apple decided it was in its best interests to stay on with AT&T for one more year and take the subsidy.

Undoubtedly some will say that AT&T may have made the best deal in quite some time and I tend to agree. But still others will say that Apple did the right thing in taking the money and although it's forced to sign up for another year with AT&T, it's still the right move.

Those people are dead wrong.

Apple's decision to stay in this deal with AT&T not only makes me wonder if Steve Jobs is thinking clearly, but it also solidifies my belief that Apple has a little too much faith in its product.

Apple obviously made this decision based on assumptions, so I'll need to make my case based off those assumptions.

Apple ostensibly believes that it can incur more revenue taking AT&T's subsidy and selling the iPhone only on the carrier's service over the next two years than if it decided to take its chances and start selling the iPhone on other carriers.

But how did it come to that conclusion? The way I see it, the iPhone's price point is a major reason why Apple has enjoyed such success this year, but its carrier is a major sticking point with the rest of those who aren't willing to switch.

If Apple made the iPhone available for AT&T, T-Mobile, and Verizon users, can you imagine the selling frenzy? The company would be at the center of one of the most monumental days in the history of technology. If the iPhone 3G can sell this well on one carrier, I can't imagine how well it would sell on the top three.

Which brings me to another point: just because the iPhone is currently a GSM phone, it doesn't mean that Apple won't build an iPhone 3G version that's fully capable of using CDMA. If RIM can do it, why can't Apple?

But I digress. I think this move by Apple makes the company seem like it has lost touch with its consumers. For the past year, people have been screaming for Apple to open the iPhone up to other carriers, imploring it to open it up to the vast majority of cell phone users, and yet, the company was unable to succumb to the demands. But when it was given the opportunity to do so, it decided instead to pursue a contract that sees its phone locked down for yet another year.

I realize it's easy for some to look at this development through an AT&T customer's frame of reference, but for the others, it's not that simple. Verizon, Sprint, and T-Mobile customers don't have access to the iPhone 3G and Apple is leaving a huge market out in the cold for another year.

If the company can enjoy a significant surge in sales by selling its device on AT&T, can't an even greater revenue and profit potential be realized by selling on other carriers?

Maybe Apple has an idea up its sleeve and wants to ensure that its manufacturing cycle is solidly in place before it agrees to sell the iPhone to other carriers, but I don't see the logic in maintaining its contract with AT&T.

And although Apple won't agree, this is yet another example in an increasingly long list of errors it has made with the iPhone that effectively left the vast majority of cell phone users and even its shareholders out to dry.

Check out Don's Digital Home podcast, Twitter feed, and FriendFeed!