ATandT Faces Prospect of Major iPhone User Defections
According to Verizon Wireless, the price for the Verizon iPhone will be $199.99 for a 16GB model and $299.99 for a 32GB model. These prices are for a two-year contract, and the prices for both models are all of 99 cents higher than AT&T's. However, Verizon has indicated that it plans to be aggressive in offering the iPhone to existing customers, but declined to say whether this would mean allowing existing users to terminate contracts early. There's also no word on whether Verizon Wireless plans to offer unlimited data plans.
The launch of the iPhone 4 by Verizon Wireless will have a significant impact on AT&T, which will have trouble keeping and attracting new customers with this competition. AT&T's stock had already dropped in anticipation of the announcement. While many existing customers have two-year contracts with expensive buy-outs, there are also a number of owners of existing iPhones that have no contract or only short times remaining. AT&T is certain to lose at least some of these customers due both to Verizon's network quality and if Verizon Wireless implements unlimited data, simply to save money.
In addition, there are many indications that existing Verizon Wireless customers have been waiting to buy an iPhone from Verizon and it's likely that customers from other carriers, such as T-Mobile and Sprint, will also make the change. However, now that Apple has dropped the exclusivity practices of the past, it's also likely that these two carriers may get their own version of the iPhone in the not-too-distant future.
Of course, the Verizon announcement will not end AT&T's position as an iPhone provider. The company will still offer the device and it will sell the iPhone 5 when it's announced this summer. Already, however, AT&T is emphasizing its Android announcements from CES and its new low cost of the iPhone 3GS, which Verizon doesn't have and won't be getting. AT&T is also offering refurbished iPhone 4 in the 16GB model for $100 less than the retail price.
While many have predicted a price war now that the iPhone 4 is available from two carriers, it seems unlikely that this will happen in the immediate future. Verizon Wireless clearly has enough demand to carry it through until the announcement of the next iPhone. AT&T, meanwhile, can still claim it's charging less (even if it is only 99 cents).
What's more likely to happen is a price war for data use. Verizon has nearly limitless access to 3G data when compared to AT&T. It can afford to discount data plans for some time without stressing its capacity, while AT&T really can't add to its capacity and thus do much to reduce the cost of data, until its LTE network is substantially built out. Verizon Wireless, on the other hand, already has a large LTE footprint, which will give it a head start when the iPhone 5 is introduced. Right now, it looks like AT&T has a tough row to hoe, and it remains to be seen how it will accomplish that.