The Apple iPhone and AT&T, is exclusivity a good thing? The answer to the question depends on what side of the market you fall. If you are a consumer, exclusive agreements are rarely a good thing. On the other hand, if you are a retailer or provider of services, exclusive contracts can help increase profitability and market share. Here is a discussion of both sides of this coin.
Apple entered into an agreement with AT&T so that AT&T is the official and exclusive provider of cell phone service for Apple’s highly coveted iPhone. If you happen to be Apple or AT&T this is a great thing. Apple makes money off of the sale of every iPhone and it collects royalties from AT&T for every cell phone contract sold to an iPhone user. Not a bad deal for Apple. AT&T profits because in theory every Apple iPhone sold will have to activate an AT&T cell phone agreement. Nice piece of the cell phone service pie for AT&T. As far as these two companies go, there is a lot of money to be made from this agreement. Furthermore, it saves Apple the hassle of having to make different phones or different SIM cards for all of the major cell phone service providers. From the perspective of Apple and AT&T this is a great arrangement. However, this agreement of the Apple iPhone and AT&T has opened up the door to a massive hacking movement. I am not sure that this is such a bad thing for Apple, although they claim different. Owning and using an unlocked phone is a status symbol in itself. A way of “sticking it” to corporate America. Apple may just be selling more phones because of this. It is free and effective advertising resulting in sales for Apple. I’m sure AT&T does not appreciate the hacking, as they have nothing to gain from it. This is the corporate end of the Apple iPhone and AT&T equation.
What does the exclusive agreement with the Apple iPhone and AT&T mean to the consumer? It means that there is a limited way of acquiring this phone. If you already have a relationship with a cell phone service provider other than AT&T and do not wish to change, then owning an iPhone is going to be difficult. What if you love the iPhone’s music and content features but do not want to use it as a cell phone. The Apple iPod does not offer internet access. One of the main selling points of the iPhone is internet abilities and music functionality. If you love MP3’s, videos, TV shows, and movies then the iPhone is a dream come true. However as soon as you go to open up your iTunes account and plug your phone into your computer you will be asked to sign up for AT&T’s cell phone service with your credit card. If you do not pass their credit check or if you do not want to use AT&T this limits you and actually excludes you from using the iPhone. In this scenario the Apple iPhone and AT&T agreement is bad for consumers because it limits free and open competition in the marketplace. AT&T has no incentive to offer any deals on cell phone service to iPhone customers.
However, no one likes to be excluded not even once. Stating you have an exclusive agreement is an open invitation to every hacker on earth to prove your agreement is not exclusive and they will find a work around. This is exactly what has happened and in this case the consumer may have a partial victory. There are free unlocks available for your iPhone on YouTube for versions of their firmware up to 1.1.3. There are software programs available for under $100 that will unlock your iPhone in seconds, with just a few clicks. An unlocked phone will work with T-Mobile and AT&T in the US or on any other standard GSM cell phone network. All you will need ids the correct SIM card. In addition, with the unlocks available, you do not have to use the cell phone service at all. You will still be able to download content to your phone either via your computer or via WiFi. Furthermore, you can get Skype VOIP service for your iPhone and get around the whole cell phone issue entirely. This is how the Apple iPhone and AT&T agreement has ended up. It looks like in the long run AT&T could be the loser.