10 Reasons Why ATandT Should Fear a Verizon iPhone

By Don Reisinger  |  Posted 2010-05-20

10 Reasons Why ATandT Should Fear a Verizon iPhone

In statements made at a recent JP Morgan investors conference, AT&T CEO Ralph de la Vega said that his company isn't concerned over the possibility of Apple bringing the iPhone to Verizon Wireless. He said that in his experience in the industry, most consumers are loath to switch from one carrier to another because of how difficult it is to do so.

Furthermore, he said that because 70 percent of subscribers are on family plans, he doubts that his company would witness a mass exodus to Verizon Wireless for the same phone they can have on AT&T's network.

To some extent, his comments make sense. After all, if Apple releases the iPhone 4G on Verizon's network, chances are it will also be available on AT&T's network at the same time. And in other countries where the iPhone is available on multiple carriers, they both are seemingly doing well enough to continue selling the device on their networks.

But that doesn't mean there aren't risks involved. AT&T isn't the most beloved company in the world, and it's competing in a market where consumers are naturally suspect of providers. If Apple decides to give those consumers a choice, it could spell trouble for AT&T. And it's time that de la Vega realizes that. Here's why:

1. Verizon is the other big player 

AT&T is undoubtedly a major player in the mobile phone market. But Verizon Wireless is the company's biggest and most successful competitor. And the phone they're fighting over is the most coveted device in the space. By offering the iPhone to the millions of Verizon Wireless subscribers, Apple will expand its market dramatically. For AT&T, the upside just isn't there. Now, it will be forced to compete with a much stronger competitor that is already doing a fine job competing. That's troublesome.

2. The iPhone can get people to switch

AT&T has been quick to point out that consumers are typically unwilling to switch from one carrier or another. And in most cases, that's true. But when it comes to the iPhone, all bets are off. Apple's smartphone has shattered all preconceived notions about the way the mobile industry works. Millions of folks from around the world switched to other carriers just to get their hands on Apple's smartphone. And although the allure of the iPhone has worn off somewhat, having the ability to go to another carrier with the device might reignite that excitement. Watch out, AT&T. More folks might switch than you think.

3. AT&T isn't the most beloved company

Although AT&T has done better in the last few years appealing to customer desire, the company still has an uphill battle ahead of it when it comes to customer satisfaction. Of course, that's the same with any wireless provider in the market. It seems that when it comes to mobile phones or the cable industry, consumers just aren't as satisfied as they could be. But that could come back to haunt AT&T. Disgruntled customers who are tired of its policies might choose to go to Verizon Wireless and use the iPhone. Right now, they have nowhere to go. But if they are given an option, more customers might leave than AT&T thinks.

4. Apple's preference will matter

By making the iPhone available on multiple carriers, Apple will have the ability to decide if it wants to give one company a head start over the competition. Maybe Apple will like to work with Verizon Wireless more and offer the company an earlier release. Maybe it will offer a few extra features in a Verizon phone that it won't include in an AT&T device. At this point, there's no telling what Apple would do with its two carriers, but AT&T should be concerned.

ATandT Can't Whistle in the Dark Forever

5. Options are never good for a company

AT&T might be able to keep a stiff upper lip when it discusses the iPhone, but privately, it knows that a Verizon iPhone isn't good at all. The best thing that can happen to any company, let alone a mobile carrier, is to have exclusive control over the device that everyone wants. But as soon as consumers are given the option to have that product in several places, it spells trouble. Price wars erupt. Marketing costs go up. And all the while, the only company that's benefiting is the device's vendor. Neither AT&T nor Verizon Wireless would be happy about that. 

6. It will cost more in the end 

Having the iPhone on multiple carriers might be best for Apple, but it will be a costly decision for AT&T. As mentioned, the company would need to invest more in marketing and potentially find ways to reduce plan costs to entice consumers. But it goes beyond that. A new battle would erupt over which carrier offers the best coverage and access to 3G networks. If Verizon offered better coverage, AT&T would need to invest in towers to increase its coverage and 3G availability. And that costs significant amounts of cash. Right now, it can do that on its own time. With a Verizon iPhone on the market, the pressure would be on.

7.  Where's the benefit?

AT&T needs to say that there isn't any problem with a Verizon iPhone and it's not concerned by it. But where does it see the benefit of such a device hitting store shelves? It might not feel (publicly) that a Verizon Wireless iPhone could hurt AT&T, but it knows that the sooner Verizon gets the iPhone, the sooner it will need to do whatever it takes to stay atop the iPhone market. In other words, a Verizon iPhone isn't good for AT&T in any way. And it needs to stop saying that it's fine with it. It isn't.

8. A more powerful Apple is a dangerous Apple

The last thing AT&T wants right now is a more powerful Apple. Although it publicly says that Apple is a partner and that it wants to see the company succeed, it really doesn't. The only thing AT&T wants to see succeed is the iPhone that's available exclusively on its service. It makes sense. With Apple offering its iPhone on multiple carriers, it will have more leverage in the mobile business. And with more leverage, it's able to wrest more control from the carrier. AT&T doesn't need that. It wants to be able to control Apple's ability to offer phones to customers. If it loses that, it loses its only advantage.

9. It loses all leverage with consumers

By offering the iPhone to Verizon Wireless customers, Apple will benefit. And all the while, AT&T will lose its grip on consumers. Think about it: Right now, the only way for consumers to have the iPhone is by being an AT&T subscriber. That means that AT&T can use whatever policies it wants to ensure it's profiting nicely off those customers. That's not necessarily a bad thing-in fact, it's good business-but it will lose that if Apple brings the iPhone to Verizon's customers. At that point, AT&T would have to play especially nice with customers to ensure they don't jump ship. Worst of all, it will need to adjust pricing to attract new business. The carrier won't like that. 

10. The enterprise has a choice

One of the best things about having the iPhone available exclusively on your own service is that it attracts enterprise customers to your business. Although consumers are nice to have, the enterprise can do wonders for a carrier. Unlike consumers, which enter into two-year contracts that, upon paying a fee, can be broken, companies are locked in. The average company will enter into an agreement with a carrier and be stuck with it for several years, regardless of when it would like to get out. And although the iPhone was originally a consumer-oriented product, it's quickly gaining ground in the enterprise. AT&T would like to capitalize on all that business. It certainly won't want to share it with Verizon Wireless.

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