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What’s Really behind Apple’s AT&T Strategy?

by Sachin Balagopalan on July 3, 2007 · 3 comments

iphone2.jpg

June 29th came and went and the blogosphere and the internets are abuzz with opinions and reviews, as the first wave of iPhone owners put the device through it’s paces over the past few days. For the most part the feedback seems to be on the positive side so far. However there are a lot of complaints about the AT&T network i.e it takes forever to get the device activated to how pokey the EDGE network is compared to other faster networks from Verizon and Sprint.

So why did Steve Jobs and Apple limit the device to only At&T and BTW not even their 3G network but the slow EDGE network nevertheless? A device that’s touted as being revolutionary and is supposedly going to change the way we communicate surely deserves the best network and by all accounts Verizon and Sprint have the fastest throughput today.

The clue perhaps lies in the fact that the iPhone is one of the very few smart phones that is Wi-Fi enabled and that quite frankly means if the user wants to surf the internet they don’t have to use the provider network as long as they are in a Wi-Fi hot spot which today are a dime a dozen. In my opinion I don’t think the fact that Verizon or Sprint did not join the iPhone band wagon is due to lack of trying by Jobs & Co. I think it all comes down to usage and minutes and more importantly “going over your minutes”. When you surf the internet or shop for ring tones or download music you typically get charged for using the providers network. In some cases you can purchase a data plan for a pre-determined monthly fee allowing you a certain number of minutes and if you exceed that you get charged. With a wi-fi enabled device the user all of a sudden has a choice - find a hot spot if you want to download a tune or surf the web on your cell phone and save your minutes. In my opinion Verizon and the others probably did not want to give up that control.

Verizon is probably banking on the fact that loyal users who are genuinely concerned about throughput will not abandon ship and move over to AT&T just so they can buy the iPhone. A pretty risky gamble if you ask me. See my post, It’s The Interface Stupid!, where I discuss the user dynamics in detail. Apple on the other hand is hoping there will be defectors and it almost seems quite deliberate that Apple chose AT&T despite the slow EDGE network. AT&T obviously wants to stay completive with Verizon and others and what better way than to bait customers from other carriers with the hottest device on the planet right now. Slate talks about this in detail.

The ultimate goal for Apple is perhaps to make sure the device works with any carrier and the customer will choose the device over the carrier - a totally new concept if you live in the U.S. BTW. If the “defection” strategy works then Verizon and the others will have no choice but to acquiesce and offer the IPhone to it’s customers. They may lose control and perhaps revenue over the data usage but will at least be able to retain most of their existing users due to their faster networks.

As the Slate article suggests I think Apple is really looking to breakthrough and wrestle control from the carriers and shift it to the device and in the end that might be what comes out of this iPhone phenomenon. The way it should be I might add.

[digg=http://digg.com/apple/What_s_Really_Behind_Apples_AT_T_Strategy/blog]


{ 3 comments… read them below or add one }

Eric Cosner 07.11.07 at 11:07 pm

Cool. Down with CDMA (Verizon’s Proprietary Network) and up with GSM (Global System for Mobile..aka AT&T’s Network as well as the rest of the world!)

I’ve always been more fond of the global approach to cellular. Plus, back when i had Verizon I couldn’t get an unlocked phone. I couldn’t even set my own ring tone to a wave file or MP3. Currently I’m using an unlocked HP Ipaq GSM phone with Cellular One GSM. I hope that Apple helps turn the tides on this issue even though I’m not the largest Apple supporter. The interface looks great. I just wish they had a Virtual Windows Mobile so you could run apps on it. ;] Web 2.0 requires web servers. Native Apps don’t. I’d like to see someone write a Web 2.0 app that uses a bluetooth GPS.. yeah right.. Perhaps the iPhone 2.0 will support native apps.

ben 07.12.07 at 8:06 pm

Jul 3rd, 2007 by Sachin Balagopalan

July 29th came and went

^^^ :D

Sachin Balagopalan 07.12.07 at 8:17 pm

:) - I stand corrected

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