“Add Morgan Stanley’s Kathryn Huberty to the list of analysts calling for Apple to broaden the iPhone’s distribution by ending carrier exclusivity deals. In a research note issued this morning, Huberty — noting that the iPhone’s market share grew 136 percent in France when Apple switched to multicarrier agreements there — said iPhone sales could more than double if the company took a similar tack in other countries,” John Paczkowski reports for AllThingsD.
“Huberty claims as well that if Apple were to end its exclusivity deal with AT&T and add Verizon as a second carrier, its share of U.S. market would more than double, rising to 12.2 percent from 4.9 percent today,” Paczkowski reports.
Full article here.
MacDailyNews Take: Unfortunately, Huberty has proven to be a horrid Apple analyst, so whatever she spouts about AAPL, positive or negative, should be taken with a truckload of salt. And, oh, by the way, minor point: Apple’s iPhone doesn’t even work on Verizon’s network. Apple would first have to create another iPhone (CDMA) version specifically for Verizon in order for Huberty’s claims to even have a chance of coming true. We won’t even get into how much the iPhone would cost upfront with lower per unit AT&T subsidies that would surely come about without exclusivity.
Funny how these “analysts” always seem to overlook the significant impact the whole CDMA thing has on this debate.
Analyst: Isn’t it just a switch on the iPhone to make work on any network.
Apple’s strategy is clear and its smarty. The issue is price protection, and to demonstrate the desirability of the iPhone, desirability that will drive switchers.
Apple wants more carriers, but not at the expense of the iPhone’s price. Until carriers see the damaging effect of not having the iPhone has on their subscriber numbers Apple isn’t going to expand carriers.
Apple’s hand was forced in France by the French government. That will not be the case in other countries, especially the US.
I don’t care what it takes for Apple to do it, but I want an iPhone on Verizon – and I want it NOW.
Out here in the Heartland there are million of potential customers who have ZERO bars from AT&T;.
Even if AT&T;can get me a microcell for my business (and right now, they can’t), I’d have to keep a Verizon cell phone if I needed to call AAA for a flat tire when I am more than 5 miles away from an Interstate.
AT&T;is totally non-responsive to the needs of users outside a handful of big cities. Verizon is everywhere.
Get rid of the exclusive AT&T;deal and my iPhone order will be in within 5 minutes!!!!!!
Yeah, I like how these “analysts” leave out critical details like the amount of Apple’s subsidies (far higher than without exclusivity) and the increased costs Apple would have supporting multiple carriers and multiple handsets (in the case of Verizon).
I’m sure Apple’s running the numbers constantly and right now the costs are in favor of exclusivity. When that changes, Apple will add more carriers, but right now it would hurt profits.
The British Vodaphone will buy the German T-Mobile and create a powerful carrier in the US that will carry the iPhone and crush Verizon.
Forget Apple creating a non-GSM phone. Steve is into less chips, not more – CDMA will kills Verizon and Sprint over time, they just don’t know it yet…
“the iPhone would cost upfront with lower per unit AT&T;subsidies that would surely come about without exclusivity.”
Is that what happened in countries that don’t have exclusivity?
What would also happen without exclusivity is more competitive carrier rates.
————————————
“iPhone market share would double without exclusivity”
. . . and water is wet.
You know, the iPhone on Verizon would not be an iPhone. Don’t you people get it? It would be the iCrippled.
@HolyMac, you do realize that Vodaphone is a major shareholder in Verizon, right?
And what about the issue of not being able to support simultaneous voice conversations and any application that sends/receives data on CDMA networks? Such as web browsing, email, MMS?
As I understand it, this means that any iPhone that could work with Verizon’s current network would provide a noticeably inferior level of functionality to the AT&T;iPhones. Of course, for folks in Verizon territory where there is no AT&T;signal, this would be a better iPhone experience that none at all. But for those using their phones where both networks have coverage, Verizon would have to have some other major advantage (significantly lower price?) to overcome this problem.
And I expect that if lots of iPhone users switched to Verizon, they’d have similar problems caused by floods of data as those users now experience on AT&T;.
Finally, would Verizon really allow Apple control over apps via the app store? Everything I’ve seen indicates no. Hard to call this one.
In summary, I don’t expect Apple to create a Verizon-compatible iPhone until enough of the Verizon network has converted to LTE. AT&T;will be moving to LTE eventually also. At some point Apple will produce LTE capable phones that can work on both networks. Then we might see exclusivity end – but remember, it takes two to tango. Verizon has to be willing to give up a lot of control to make a deal. Some time in the next couple of years I suspect that Verizon’s shareholders, if not their stubborn heads-stuck-in-the-sand managers, will see the financial damage caused by missing out on all the existing and potential new customers who end up with AT&T;. They might exert pressure to either get current management to change or replace them altogether.
As to whether competing carriers would be willing to subsidize the iPhone as generously as AT&T;, I have no clue. In general, though, I would welcome iPhones working with multiple carriers. Good to have competition on price and quality of service.
It’s the network, dummy, and it ain’t CDMA.
So her firm is sitting on a bunch of apple stock, bought recently, and wants an argument to unload it on her clients. Her firm will say ” huge upside if apple goes to more than one carrier”, then sell it to them. I believe long-term in apple, just not for that reAson. It’s the way it works. When analysing wall street just be as cynical as you can and your probably right.
I can see that there may be political problems (getting Verizon to cede some control) and technical drawbacks (CDMA and simultaneous voice and data), but the issue of making a version of a GSM phone that works on a CDMA network seems like a solved problem. They can just buy the right chips or IC-macros for the design, and I would bet that some of the cell-phone software engineers they’ve hired have experience making phones work on both standards.
@JROY
I don’t see the damage to Verizon you are talking about. They are signing up new subscribers at a rate darn close to AT&T;and still enjoy fairly low churn rates. Now, I agree, the cream of the crop is going to AT&T;, but AT&T;hasn’t financially been rewarded yet because they have the heavy iPhone subsidy up front and heavy investment in their network. Where AT&T;gets juiced, is from subscribers like me, on the original iPhone on a new contract now. That’s why AT&T;is investing like crazy trying to hold on to as many original iPhones as possible. The 2G is still a heck of a phone/pocket computer.
@Anonymous
Thank you – I read Verizon’s bio on W’pedia before commenting and totally missed that bit! I still don’t see a CDMA iPhone unless you can get dual-band chips and not kill the battery life.
Morgan Stanley: One of the lending institutions that has screwed up the US economy. Their thoughts are worth nothing except a government bailout.
And anyways, thanks for making an obvious statement.
…”What would also happen without exclusivity is more competitive carrier rates.”
Not true. Rates for ALL cellphones are pretty much same on ALL carriers. Differences are minor and in some cases even regional (within the same carrier). You cannot compare the US to other countries, as the legal systems over there place much more restrictions (and requirements) on availability, rates, etc. US is the wild west of wireless, and carriers apparently have a good thing going.
Currently, we can only compare the iPhone (in the US) to the Blackberry, since BB is the only relatively popular smartphone available on multiple networks. So what does it tell us? The rate plans are SAME across carriers, as are the device prices. The subsidy for those devices never exceeds $200 (compared to over $400 for the iPhone).
The longer these two (Apple and AT&T) stay married to each other on the iPhone, the more difficult for both will it be to divorce.
As for Huberty and her double the market share crock, a recent study showed that the number of people who don’t have an iPhone and would only get one if it were on a different carrier is negligible, somewhere around 4% of the current market share. So, in order for Apple to capture those 4% of customers, they’d have to jack up the up-front price of the iPhone to $400. They’d possibly gain some of those 4%, but lose significantly more (who would no longer be able to afford the device).
Verizon’s network coverage is roughly the same as AT&T’s. The non-overlapping parts of the land are populated by some of the loudest complainers on the planet, though. This is probably good for them (i.e. nothing gets properly done until someone complains), but in this case, it won’t work.
Doubtful that we’ll ever see a CDMA2000 (EVDO) iPhone, so non-exclusivity in the US mainly means T-Mobile.
Iphone is CDMA in China, same phone should be usable on Verizon
“Iphone is CDMA in China, same phone should be usable on Verizon”
No it is not CMDA. It is GSM only.
http://www.apple.com/iphone/specs.html
@chaz, @ Predrag
Thanks for the info. I certainly sympathize with those who live where there is no AT&T;wireless service and want an iPhone. Barring the end of iPhones being tied to AT&T;in the next few years, their best hope may be moving to New York City…
Seriously, the best hope would be for AT&T;to expand its coverage area to include them. I have to wonder, though, if AT&T;has postponed any expansion plans, which are going to cost a lot of money, to instead spend that money building up the infrastructure where iPhone usage is already hammering them. That’s where I’d be spending my money – to get customers in my existing territories happy before expanding geographically.
I strongly disagree with the knee-jerk MDN response on this one. Huberty is probably close in her prediction here, and MDN has no data whatsoever to contradict hers. Numbers aside, everyone knows Apple would SIGNIFICANTLY increase its iPhone sales & profits if all GSM mobile carriers were allowed to bid for a chance to distribute Apple’s iPhone. In the USA, that would make T-Mobile customers VERY happy. It would probably also make AT&T;happy too, because they already got the most profitable wave of first-adopters and can’t keep up with service demand anymore.
@ Brian Allen – never that simple, but likely no hardware changes would be needed whatsoever. In-phone CDMA-GSM conversion is possible if absolutely necessary, seamless to the average consumer (think Rosetta).
@ Grerr Thurman – Apple’s exclusive distributor strategy was their only choice to launch a new cell phone, because no other carrier was willing to take the risk. But today the iPhone is not a new product, and exclusivity is actually hurting Apple big time. Apple would lose no price control by allowing new carriers to fight for a chance to sell it. The French government, as usual, is protecting the interests of its citizens first and foremost. Interestingly, though, their wireless policies are vastly better — and not appreciably less profitable for manufacturers. It just requires service providers to be much more competitive and responsive to their customers than in the USA. US carriers rely on overpriced subscriptions to hinder consumer choice. In short, smart regulation doesn’t hinder freedom — it creates bigger, flatter playing fields. The FCC, for all practical purposes owned & controlled by corporate interests, have no desire to give customers choices on level playing field.
@ zmarc – who said Apple would have to change anything? hacked iPhones are working on “unsupported” GSM networks now. Apple can only benefit by having more that one service provider for GSM hardware. If Verizon and Sprint want in on the game, they’d have to upgrade their networks to the global standard or provide CDMA-GSM conversion software.
@ HolyMackerel – Let’s hope T-Mobile remains independent. They are the best company from a customer standpoint. As Anonymous© points out, Vodaphone already cast their lot with Verizon, heaven only knows why.
@ JRoy – the key term is “current network”. While Verizon is currently largest US wireless carrier by process of aquisition, one of these days Verizon will have to switch to GSM, otherwise it will die like Sprint is.
@ Predrag – your logic is lacking. rates for cell phones are “pretty much the same” because that’s one of the first things that will cause a customer to move from one carrier to another. It has little or nothing to do with the actual cost of service consumed by the individual subscriber. In the USA, for some inexplicable reason, no carrier is willing to offer a “pay as you go” plan based on actual network usage. Your idea of increased Verizon iPhone cost is ridiculous. Apple has no need to jack up the price of anything. With economies of scale, production costs per unit actually decrease with increased manufacturing volumes. Verizon, on the other hand, would have to offer some incentive (reduced up-front handset cost or lower cost service plans, or both) to entice customers away from AT&T;. That might decrease the obcenely fat profit margins for both Verizon and AT&T;, but it would ensure Verizon’s long-term survival against superior global competitors.
>Barring the end of iPhones being tied to AT&T;in the next few >years, their best hope may be moving to New York City…
Damn City Slickers……
OK – not everyone lives in 10024, or 60611, or even 90210 …
But, I am 7 miles from the center of a Big Ten Campus – and I have ZERO bars from AT&T;. That sucks! Verizon is everywhere here .. and I want an iPhone. Is that too difficult to understand ???
Put yourself in your BMW 7 series and plan a road trip from Chicago to Denver – and you will find that 75% of your trip is not on the AT&T;coverage map. If you have a flat tire …. run out and buy a Verizon cell phone to call for help.
It’s time to break the monopoly …..
I think Apple could provide a CDMA phone for Verizon right now, if that was desired. The crippled no-WiFi iPhones for China are CDMA, I believe, and it probably costs more to intentionally disable the WiFi.
However, I don’t think Apple and Verizon will ever reach an agreement about apps and media. Verizon will want to control distribution of iPhone apps and songs/videos. Apple will NEVER give that up to Verizon. Therefore, no iPhone on Verizon.
Maybe on Sprint; that would be a big boost for Sprint, and provide an alternative to ATT. Sprint would probably bend over backwards to become the second U.S. wireless carrier with iPhone.