TELECOM Digest OnLine - Sorted: Is the iPhone an AT&T Time Bomb Against Cell Users?

Is the iPhone an AT&T Time Bomb Against Cell Users?

C. Benz (
Fri, 29 Jun 2007 14:32:16 -0000

Telcom industry writer, Drew Clark, and
Microsoft Exchange expert, Jim McBee, are both blogging on an article
on the controversy regarding AT&T's required two-year contract for the
unsubsidized iPhone. From Jim McBee's Mostly Exchange Web Log ... "[iCarrot]
makes a very good point about the hype surrounding the iPhone and the
"deal" that you have to sign up for from AT&T. That this may be the
end of the subsidized celluar phone, but certainly not (for) the
restrictive and costly contract."

From "iPhone or iCarrot? "... Since the early days of the cellular
industry, the justification for multi-year contracts has been handset
subsidies. Since the cellular carriers subsidize the cost of the
handsets, the argument goes, they need lock-in contracts to guarantee
sufficient time to recover the up-front equipment costs. Holes in that
story now appear with the iPhone. ... What AT&T may be trying to do
is to redefine the business model for the entire American cellular
industry. They may want to set a precedent for getting rid of handset
subsidies altogether. And the reason for the two-year contract with
the unsubsidized iPhone is to establish that lock-in contracts remain
a part of the deal. ... That doesn't have to happen. If consumers say
"no" to this Friday's launch of the unsubsidized, two-year-contract-
required iPhone, then AT&T will realize that its new business model
will not succeed in the American marketplace. They will have to modify
the terms of the iPhone plan. If consumers instead say "yes" and buy
the iPhone with the two-year contract, then it will only be a matter
of time before all handset subsidies disappear and all cell phone
users have to pay both the full cost of their handsets and still be
locked into multiple-year contacts. Those who purchase iPhones under
the current arrangement may very well be sealing that fate for all
cell phone users.

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