As it looks more and more likely that Verizon will sell the iPhone next year, the obvious conclusion is that it’s going to come at AT&T’s expense.
AT&T has been the iPhone’s exclusive U.S. carrier since it launched in 2007.
Losing exclusivity will certainly hurt AT&T, but it won’t crush it.
- The majority of iPhone users were already on AT&T. According to a report from Piper Jaffray in October, only 35% of AT&T’s iPhone sales were from new customers. In the past, AT&T has said that around 40% of iPhone buyers were new subscribers. (That’s likely higher than any other phone, but it’s not insane.) Some of those people could defect for Verizon, but if they were already there, they’ll probably stick around.
- AT&T isn’t terrible everywhere. Coverage in New York, Chicago, and San Francisco is pretty lousy. Those places are generally where reporters and analysts — with loud megaphones — reside. As a result, it seems like AT&T is worse than it really is. Elsewhere, it’s not so bad.
- It’s not a slam dunk that Verizon will be better than AT&T — especially at scale. The iPhone is a massive data hog. Who knows what effects that will have on Verizon. We doubt AT&T thought it would be overwhelmed by the iPhone. Verizon has had more time to prepare, but if the phone starts sucking up bandwidth, Verizon could hit similar snags.
AT&T obviously doesn’t come out unscathed. In Piper’s report, analyst Chris Larsen estimated the carrier’s sales of the iPhone would drop 30% or more. AT&T has grown to dominate postpaid subscriptions as customers sign up for two-year contracts for smartphones like the iPhone. That will wane.
If AT&T became worried about a stampede of subscribers to Verizon, it could take drastic action like tweaking the subsidy on the iPhone. It could cut the price of a new iPhone 3GS by $100 to lock in some customers for another two years, or it could move up subscribers’ upgrade dates. But that could cost tens or hundreds of millions of dollars, and might not be worth the expense.