AT&T Exclusivity is iPhone's Weak Spot

AT&T Exclusivity is iPhone's Weak Spot
Apple's exclusive iPhone partnership with AT&T is under fire again as a class action lawsuit, claiming the two have a monopoly, moves forward. A California federal judge has consolidated several related lawsuits and granted them class action status, giving legal merit to the monopoly claim.

The iPhone exclusivity contract with AT&T has angered both consumers and the mobile industry. For the last three years, the iPhone has been sold only on AT&T's network here in the U.S. That exclusive partnership is said to continue for another two years. However there have been continuing unconfirmed reports that the iPhone will soon be available on the Verizon Wireless network.

The latest lawsuit, filed on July 8, argues that iPhone customers who signed a two-year agreement with AT&T were in effect locked into a five-year contract with AT&T, due to the exclusivity contract between the two companies.

Basically, even if you bought an iPhone 3G in 2008, and your two-year contract expired, you are still confined to AT&T's network, as the phone comes network-locked. Apple's tight regulation over app approval in its App Store, and selling devices locked on AT&T's network have hurt competition, the lawsuit claims.

The lawsuit is available to anyone who purchased an iPhone in the U.S. since June 2007 with a two-year contract. This covers the original iPhone model, the iPhone 3G, the iPhone 3GS, and potentially the iPhone 4 (if the terms of the secret exclusivity deal prove to last longer than five years).

iPhone Users' Woes With AT&T

Last June I gave four reasons why iPhone users hate AT&T, and an overwhelming amount of readers agreed. When the iPhone 3GS was launched in 2009, AT&T's network was slow, MMS and tethering were unavailable, and you had to pay a surcharge to upgrade your iPhone early.

One year on, AT&T boosted 3G network speeds (where there is no faulty equipment), enabled tethering, and gave early adopters a chance to upgrade without having to pay additional fees. However, AT&T is still iPhone's weak spot.

Faced with data gluttons, the AT&T introduced metered data plans, which limit the amount of data you can download, albeit lowering the price for those who do not use it a lot. Tethering also comes as an extra ($20 per month), though no additional data is included.

AT&T's network will also literally take a dip, as Apple claims the antenna issues on the iPhone 4 are actually due to the fact that all iPhones are falsely displaying more reception bars on AT&T's network -- an issue which will be corrected with a software update soon.

The Case Of A Non AT&T-Exclusive iPhone

For almost two years, speculation of a Verizon-bound iPhone proved to be only rumors - so far. Verizon mocked in adverts AT&T's 3G network, and gained quite a following for its competing Google Android-based handsets.

An iPhone on Verzion means Apple would have to develop different hardware for the device. The feasibility of a Verizon iPhone has been scrutinized as well, as a CDMA smartphone from Apple would not work on international GSM networks, and would be confined to the U.S. shores.

Many AT&T iPhone contracts are also nowhere near expiration, so even if a Verizon iPhone will eventually show up, the first wave of adopters would consist of those who were holding up for such a device for the last three years (and probably bought a Droid meanwhile - with yet another two-year Verizon contract).

International markets where the iPhone is sold on multiple carriers, such as the U.K., have shown that the original exclusive carrier (O2 in this case) will not lose a considerable amount of customers to rival networks, as it has millions of early iPhone adopters locked on its network.

The network in case, O2, also gave priority to iPhone 4 sales to existing customers only (apparently due to shortages), thus keeping a grip on iPhone sales in the country. Vodafone and Orange approached similar strategies, while Apple sold iPhone 4s from its store carrier-unlocked.

Follow PCWorld ( @pcworld ) and Daniel ( @danielionescu ) on Twitter.

For comprehensive coverage of the Android ecosystem, visit Greenbot.com.

Subscribe to the Best of PCWorld Newsletter

Comments