The word on the street is Verizon will be offering the iPhone before the end of the year.
The speculation centers on the Wall Street Journal's claim, based on anonymous sources, that this September, Apple will start producing iPhones that run on CDMA networks (the wireless network technology used by Verizon and Sprint).
Obviously, this rumor may or may not be true. But the mere suggestion of a Verizon iPhone — and an end to AT&T's exclusive agreement with Apple — continues to shake up the industry. Apparently, the faintest whiff of competition
in the wireless market is enough to make AT&T take its network much more seriously.
In other words, AT&T knows that its network is underperforming, and the company is ramping up its investment in order to bring it up to speed. Why has it taken so long, when AT&T's network has sucked for years? It's because in the current market, consumers are forced to sign contracts with sub-par companies to get access to the best new devices (read: AT&T and the iPhone). But in a world without exclusive deals, where multiple companies have access to the same device, they have to compete over the quality of their service.
A Verizon iPhone threat is making AT&T realize that this scenario -- actual, real-life competition based on quality of service -- could be a reality, so the company is frantically shoring up its network to prepare for a possible exodus of existing and potential iPhone users who, rather than purchase a new AT&T iPhone, will wait until the Verizon version comes out.
As paidContent.org puts it:
AT&T is afraid that consumers, who have heard horror stories from their friends about dropped calls and connection difficulties, will hold out and wait for the Verizon Wireless version later this year. Instead, AT&T wants you to know that it is doing everything it can to improve the network experience, including tapping Apple's expertise on the phone.
As advocates for reform, we are simultaneously pleased and frustrated. We're glad AT&T is finally taking serious steps to improve the quality of its network. But there's a deeper problem here, which is the root of the frustration. If we'd had rules limiting or prohibiting exclusive deals from the start, AT&T would have avoided years of underperformance and a belated buildout by investing in its network in 2007, not in 2010. Consumers in New York, San Francisco and elsewhere wouldn't have had such major network problems, and AT&T wouldn't have had to suggest that its customers should use less data to keep the network afloat. But instead, the company rode the iPhone gravy train to three years of substantial profit margins and dissatisfied customers.
Again, it's completely possible that there's no CDMA iPhone in the works, and a year from now, AT&T will still be the exclusive seller. But the fact that this rumor is enough to scare AT&T into investing in its network is significant.
The moral of the story is clear: The end of handset exclusivity drives competition, and competition drives investment. It's time to end all the exclusivity deals, not just the iPhone's.
(Find out more about Free Press' work on this issue at freepress.net/freemyphone.)