Europe Shows Why Verizon iPhone May Help AT&T Fortunes


Verizon iPhone 4With Verizon finally confirming the news that it is going to start selling the iPhone, there are plenty of eyes watching AT&T (s T) to see what happens. Will hordes of exasperated subscribers cancel their contracts and switch? Given some of the criticism of AT&T’s network, it’s not hard to imagine an exodus.

That pessimistic view of AT&T’s chances is given a big push by this survey by ChangeWave, which must count as one of the most drastic predictions of the impact Verizon (s vz) selling the iPhone (s aapl) will have on the market. According to the numbers, a full 16 per cent of AT&T users intend to switch to Verizon as soon as it starts selling the iPhone.

(It’s worth noting, too, that this question was asked before the February launch was confirmed, so it would be reasonable to suggest the numbers could be even higher now.)

So what does that mean for AT&T? Panic stations? Perhaps not.

In fact, prior experience suggests that the Verizon iPhone will almost certainly going to have a smaller impact on AT&T’s sales figures than ChangeWave’s research suggests.

Why? Well, for a start, there’s the significant difference between somebody saying they’ll switch providers and those actually doing it.

Then there are the mitigating factors that also make a difference: coverage, contract expiration dates, termination fees and other obstacles. With all that taken into account, Kevin’s smart analysis of the impact, suggests there may as many as one or two million switchers out there.

But there’s another important factor worth remembering too: This isn’t a zero-sum game.

To find out what I mean, it’s worth taking a look across the Atlantic to see what happened when the iPhone lost its exclusivity in the UK.

When the iPhone first launched in Britain, it was — just like in the U.S. — subject to an exclusive deal with one company. The O2 network had played a hard and expensive game to land the deal, and it kept hold of the exclusivity for two years, despite criticisms that O2’s network wasn’t good enough and that coverage was spotty (sound familiar?).

Then, through late 2009 and early 2010, with pressure increasing from European competition regulators, the lock was lifted, and the rest of the country’s voracious mobile operators got an in. Suddenly the iPhone was everywhere: Orange shifted a record number of handsets in a single day. Vodafone, a short while later, had to contend with “phenomenal” demand and managed 100,000 sales in a week. The story was similar on other networks.

People had expected an exodus from O2, but it didn’t seem to happen that way. In fact, the company that had most to lose seemed to benefit: iPhone sales seemed to accelerate. In February 2010, just after its rivals first started selling the handset, the company announced that it had passed 2 million iPhone sales. By July that year, just four months later, it had racked up another million.

Rather than sinking after losing exclusivity, a broader market for the iPhone seemed to become a rising tide that lifted all boats.

There are qualifiers, of course: perhaps O2’s sales would have been higher if it still had exclusivity, and perhaps competition means it’s making less money on each sale. But what’s clear is that a wider, competitive market has helped the iPhone in Britain. Rather than having to cope with a smaller and smaller slice of the market, the pie just kept getting bigger.

There will be switchers, of course. If you live in an area where Verizon can provide service and AT&T struggles, it’s a no-brainer. If you can get a good deal and your contract is up, it will be enticing. But rather than being a battle where one must lose in order for the other to win, it’s just possible that both AT&T and Verizon could benefit from the competition.

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It helps to understand that AT&T is a much bigger company that just AT&T Wireless, although Wireless contributes a large part of the market cap. Of the AT&T Wireless customers, not all are iPhone customers so the 16% number is misleading. It is made to sound like AT&T will lose 16% of its customers. Even if it loses 16% of its iPhone customers, the overall impact is far from a 16% loss of overall subscribers.


I’ve worked with every single SBC and AT&T business unit under the sun and they all suck! You have a problem with your MPLS network and you are shot over to a guy who barely speaks English in the Czech Republic who can barely spell Cisco. They notoriously make infrastructure changes at their whim devastating the communications of their customers networks. Service is abhorrent from any side of the house. AT&T Uverse is horrible too. The only thing AT&T has going for it in it’s portfolio of services is that it had the iPhone! Let’s not forget AT&T was so crappy in the wireless realm that they dropped out of it. And only got back in when SBC pulled them out of insolvency and rebranded Cingular back to the AT&T. AT&T will never die because they are the default company when you have no other option.

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