Apple iPhone and AT&T: Is exclusivity a good thing? The answer to this question depends on which side of the market you fall on. For consumers, exclusive agreements are rarely beneficial. However, for retailers or service providers, exclusive contracts can help increase profitability and market share. Here is a discussion of both sides of this issue.
Apple entered into an agreement with AT&T, making AT&T the official and exclusive provider of cell phone service for Apple's highly sought-after iPhone. This is a great deal for Apple and AT&T. Apple makes money from every iPhone sale and collects royalties from AT&T for every cell phone contract sold to an iPhone user. AT&T profits because every Apple iPhone sold will have to activate an AT&T cell phone agreement. This agreement saves Apple the hassle of creating different phones or SIM cards for all major cell phone service providers. From the perspective of Apple and AT&T, this is a great arrangement. However, this agreement has also led to a massive hacking movement. While Apple claims this is a bad thing, owning and using an unlocked phone has become a status symbol and a way to rebel against corporate America. This may actually be driving more sales for Apple. AT&T, on the other hand, does not appreciate the hacking as it has nothing to gain from it.
What does this exclusive agreement mean for consumers? It means that there is a limited way to acquire the iPhone. If you already have a relationship with a cell phone service provider other than AT&T and do not want to switch, owning an iPhone will be difficult. Additionally, if you love the iPhone's music and content features but do not want to use it as a cell phone, the Apple iPod does not offer internet access. One of the main selling points of the iPhone is its internet capabilities and music functionality. However, when you try to open your iTunes account and connect your phone to your computer, you will be prompted to sign up for AT&T's cell phone service with your credit card. If you do not pass their credit check or do not want to use AT&T, you will be excluded from using the iPhone. In this scenario, the Apple iPhone and AT&T agreement is detrimental to consumers because it limits free and open competition in the marketplace. AT&T has no incentive to offer any deals on cell phone service to iPhone customers.
However, no one likes to be excluded, not even once. Stating that you have an exclusive agreement is an open invitation for hackers to prove that your agreement is not exclusive. This is exactly what has happened, and in this case, the consumer may have a partial victory. There are free unlocks available for your iPhone on YouTube for firmware versions up to 1.1.3. There are also software programs available for under $100 that can unlock your iPhone in seconds with just a few clicks. An unlocked phone will work with T-Mobile and AT&T in the US, or on any other standard GSM cell phone network, as long as you have the correct SIM card. Additionally, with these unlocks, you do not have to use the cell phone service at all. You can still download content to your phone either through your computer or via WiFi. Furthermore, you can use Skype VOIP service for your iPhone and bypass the entire cell phone issue. This is how the Apple iPhone and AT&T agreement has played out. In the long run, it seems that AT&T could be the loser.
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