Analyst sees dimming future for AT&T wireless if Verizon gets iPhone

A bottom up view of a cell tower. Credit: Locomotive8/ Flickr.

If Pali Research were to pick its favorite wireless carrier, it wouldn't be AT&T.

The market research firm believes that despite the huge success of Apple Inc's iPhone, for which AT&T is still the exclusive carrier, its monopoly on the iPhone won't last forever, and as soon as it expires, the beleaguered telco should prepare for slowed growth and even defections.

Customers will head to faster, more reliable networks, said Pali head researcher Walter Piecyk in a blog post, and that means Verizon. 

"A basic premise of our recently initiated buy rating on Verizon and sell rating on AT&T is our belief that as the iPhone exclusivity period rolls off between AT&T Wireless and Apple, a material number of AT&T customers will flock to Verizon’s superior network."

"We expect AT&T Wireless net subscriber additions to fall to less than 1 million in 2010 from more than 4 million in 2008," he noted.

Piecyk cited a recent reader survey by Wired, in which the magazine asked users to register their locations along with the speed of their 3G service.  Though unscientific, the survey did generate 12,000 responses from customers across the spectrum of major wireless providers.  Verizon won handily with an average download speed of 1,940 kilobits per second, while AT&T took fourth behind T-Mobile and Sprint, with an average speed of only 900 kbps.

A recent story in The Times raised the possibility that AT&T's 3G networking infrastructure may be lacking, and that a sparse 3G network could be contributing to substantial battery drain among many iPhone 3G and 3GS users. When towers are farther away, the phone requires more power to communicate with them.

AT&T acknowledged that the density of the network was a factor in the power drain on 3G phones, and is in the process of building thousands of new cell sites around the country to buttress its network. 

Updated, 12:01 p.m.: The expiration date of the exclusive iPhone deal between Apple and AT&T has not been officially released, but in April the Wall Street Journal cited anonymous sources saying AT&T is hoping to extend the deal into 2011.

-- David Sarno

Comments

[Scott Lacey]

I completely agree with that. and did you know AT&T is snubbing thousands of military members who just moved to Cannon AFB in Clovis, NM by canceling there service when they move, because AT&T refuses to build new towers, even though there are 1,000s of people moving here with existing AT&T service. As an aviator, the iphone is invaluable in flight planning, and apparently my contract will be canceled soon.

[Dean Peters]

I agree entirely. Considering it took AT&T one whole month to get my caller ID resolved, and that my friends and business partners overseas can tether their iPhones to their laptops and roam w/out taking out a small loan, I'd be glad to see some competition.

[anonymous]

Scott - I doubt it is a refusal to build towers as much as it is lack of spectrum license in that area. If AT&T isn't the carrier who owns licenses there, you are roaming on other networks the whole time. That is a tremendous cost to the carrier and your contract states you must spend x% of time on the home network.

[robertt smith]

For years AT&T had the good phones or had them first. The Curve. The Bold. Meanwhile Verizon waited and waited to get the Curve and tried to foist that awful Storm on its customers. And Verizon phones did not work abroad--meanng you had to buy another Blackberry--the "worldphone-if you travelled. I was planning to leave Verizon just to get a Bold.

The new Tour brings Verizon even on the phones as far as I am concerned. I now stay with verizon whihc has, I admit, superior coverage (even my kid in college says her friends notice this) and great service. I'm glad too: I like Verizon. Its about time they upgraded their phones.

[Mike]

I am a loyal Verizon customer and currently own a blackberry because they don't offer an Iphone. I would switch to Iphone as soon as verizon gets in.

[Deez]

ATT sucks. Its not even a technical problem. Try contacting customer service. The bad attitude is what drives the technical problems. Its corporate culture unfortunately. Their network is generally inferior to Verizon's. That being said I live in N. OC in a high density area, and my house is in a fairly large Verizon dead spot. My Verizon phone couldn't get or make calls from anywhere near home. I get ATT coverage here fine. Wish they weren't such jerks, and cared about customer satisfaction though. I have much personal experience with ATT's long history of dishonest, dishonorable, deliberate, and basically criminal over-billing. Its not a nice company.

[Greg M]

I'd buy an iPhone in a second if someone besides AT&T offered them.

AT&T illegally sold its phone records to the Bush Administration, then hid behind "national security" to thwart prosecution. I shudder to think what they could do with your web-browsing history.

[Matthew]

Verizon's superiority is an understatement! We have been AT&T customers for 12 years.....way back to the first "go phone". On a recent vaction through California with a friend I was horrified at how often we had absolutely no signal or signal weak enough that neither my wife nor I could use our I-phones. However, our traveling companion on thier blackberry with verizon...never an issue. Infact at Disnelyand I needed to call my wife (from inside space mountain) At&T noting, verizon..full signal. I cant wait ti defect! I pay a ton of money for something i am handicapped in using because of poor network!

[Mark Moshlak]

I almost switched to Verizon. I got my Bold for free essentially because of all the screw ups and errors that were caused by crappy customer service after being with them through prior incarnations for 10 years. I haven't had signal issue problems, but then again I live in Los Angeles. It would be the kiss of death for AT&T to produce a flawed network here. I'm more business than fun which is why I went with the Bold however, if Verizon came up with a fantastic offer I'd be open to moving. The problem is that Verizon was second to phones and service. Now it's just phones. I bet though that's going to change fast and in two years or less, AT&T will be sweating bullets.

[Sara]

I hate AT&T but love my Iphone. I would switch back to Verizon in a heartbeat if I could have my iphone there- Verizon is better all the way around, from coverage area to customer service. I hope it's true that AT&T will not have the exclusive Iphone contract for ever! I can't wait to leave AT&T.

[Mike]

I live up north in SF. It's common knowledge here that Verizon's network trounces AT&T. My friends with iPhones commonly get voicemail notifications more often than actual phone calls. The calls never ring through, straight to voicemail. The ONLY thing keeping customers in AT&T's clutches is the iPhone. People want them badly enough. It will be interesting to see how well the Pre does, and what happens when Verizon gets their hands on it after Sprint's exclusive expires in less than six months. I don't think it will immediately impact AT&T/iPhone sales but I'm guessing it will put a dent in them anyway. By that time hopefully Palm will have addressed the Pre's hardware issues that have come to the surface since launch. I'm a Verizon customer with a free acct through work, so I'm waiting on baited breath for the Pre.

[Jim Townes]

Cell phones are 1 unusual case where more companies are worse. They each build there own infrastructure. It is often redundant and a huge cost - if they shared the same infrastructure service would be better and most likely cheaper. The other thing is that as we all know technology is always moving so by the time they finally roll out the 3G - its outdated and Japan is on something like 5G

[3y]

I will not leave Verizon because of the service and the "always" signal. During Wilma (hurricane), neighbors were flocking to use my Verizon phone because their AT&T was useless. But, Come On Apple....give us the iPhone. I'm waiting very impatiently for the word.

[Christopher W.]

The biggest problem with Verizon is their unfailing propensity to cripple phones by forcing the manufacturers to load custom firmware images that either disable, or restrict, the usage of certain features in order to drive sales of their "optional" services.

For example, on Windows Mobile devices equipped with GPS receivers, the Verizon versions restrict access to the receiver interface to its VZ Navigator application, whereas subscribers of other carriers with equivalent devices can simply install any number of navigation apps like Garmin, Tomt Tom, iNav, et al. and have a full-featured navigation system that doesn't have to have an active, cellular data connection to function.

Just imagine what they'll try to do to the Apple App Store...

[Joe Black]

I'm always amazed that people who have some degree of iPhone envy don't do what I've done: Buy a Blackberry and an iPod Touch. iPhone envy gone! Plus ATT AND Verizon are significantly more expensive than Sprint (my carrier). $99 a month gets me EVERYTHING. ATT and Verizon - $160 and $150 per month respectively. Think about that. Over the course of my contract, with my savings from Sprint I can buy an iPod Touch and a 40inch 1080p flat screen HDTV. Sprint has a great network and good customer service. Get with it boys and girls! And no, I don't work for Sprint :D

[Chad L]

Has anyone considered that Verizon operates a CDMA network? Even if the exclusivity expires the handset is simply incompatible with the network. The only way that it's going to happen if Apple creates another phone that runs only on CDMA, which, considering its limited use outside of the Americas means that it would be a bit of a dead end to develop another iPhone for just that market alone

[John]

AT&T would continually beat me up with charges and then again when I would call about problems. Dropouts, Dropped calls, Over charging. Funny last time I called they were really nice. This time I had a problem and it wasn't theirs. I called and they took care of it. Simply. I think they are starting to get it.

However ALL services are too expensive. None can compete with overseas providers. We suck in this country. And we kinda deserve it. We don't complain. We take the crap they give us. Just look at what Canadians did when Rogers tried to charge an outrageous rate for monthly service. People spoke up and they dropped their rates. I have friends from Japan, China, Germany, England and they all say the same thing. Service is great. Bandwidth plentiful. I have a friend who traveled Europe. When he got there he just bought a sim card and put it in his phone. He said service was much better there than in the states.

Sad that we have dropped to last place in a technology where we should be leading the way.

[Bob van der Valk]

I received a call from Justin K., Office of the President, yesterday afternoon responding to my complaint in the email I sent earlier that day to Randall Stephenson, the AT & T CEO, which reads:

"Mr. Stephenson:

I am contacting you direct since I have been unable to obtain satisfactory answers to my question about the lack of service in the area to which I recently moved.

It seems like my wife and I, both of us own iPhones, have entered Dark Territory insofar AT & T is concerned. We purchased our cell phone in Issaquah, Washington back in August and Septermber 2008 after receiving satisfactory service from your company in Las Vegas, Portland - OR, and Seattle since November 2006. We especially liked the fact that you offer roll-over minutes on your program. Verizon had been our carrier for twenty years prior and did not respond to my inquiry as to why did not offer a similar rate program for their cell service.

My complaint with your company is that your customer service is more interested in telling me chapter and verse according to AT & T policy rather than dealing with me as a valued customer. Both customer representatives, whom I am copying with this email, kept apologizing profusely for not being able to help me keep AT & T as my carrier in Montana. The policy and the contract I signed was explained to me in every detail, something your sales people at the your store neglected to do, and offered to set up an account for us with Verizon Wireless. I objected to that only because it will make my iPhone useless other than as a mini-laptop with no access to email etc.

My real complaint is that your marketing strategy has become very obvious to me. You are only interested in providing service in areas where you are a direct carrier. The hardware used towards that purpose has become secondary and as your exclusive with Apple is expiring soon will not be your main driving force to obtain profit for your stockholders.

Thanks for listening to me and would appreciate a response (hopefully positive) back from you as soon as possible.

Bob van der Valk"

Justin said that he would look into my complaint and get back with me today. I will post his response to this comment section as soon as it received.

[I Aviles]

I can't wait for that day to happen. I've got thirty days left on my contract and will stay on as long as AT&T has the Iphone.
All my friends and family are on Verizon.

The Iphone is the best, AT&T is not.

Waiting for the monopoly to end....

[JM]

My entire family uses Verizon, and we're all drooling at the prospect of getting iPhones. But every one of us will wait, because there's no way we'd ever switch to another provider.

[John Poe]

I'm a new Verizon customer due to the fact that they bought Alltel - who I've been with for over a decade. I desperately want an iPhone, but refuse to have anything to do with at&t. I have an iPod Touch and love it. I hate that I have to carry it AND a cell phone. I will buy an iPhone IMMEDIATELY as soon as they are available through Verizon - and I know there are THOUSANDS (millions?) more just like me. Come on Apple!!! DO IT already! at&t has had their chance.

[buttface]

I would.

[RayDeluxx]

Why all the negativity? I love my AT&T service. AT&T is constantly upgrading their network. In addition, many of my friends use AT&T therefore we get to call each other for free. My wife used to have Sprint and she hated the service. She is satisfied with AT&T. Verizon is known to disable some of its phones built -in features. But, to be fair I did hear Verizon has a very reliable network. If you are in an AT&T service area, your Verizon phone is using AT&Ts Infastructure to route your call and vice versa. I guess the level of service you receive depends on what city you're in. I live in Los Angeles.

[Taylor]

There is the potential problem of Verizon "ruining" the iPhone. Most people who have Verizon know that they like to "customize" their phones with own interface.

[Just Want Good Service]

I had AT&T wireless when I lived in MD and I always had to call with billing problems. I even had a equipment problem that was treated poorly. It should not take four hours to receive a new phone when the third replacement phone (a refurbished one) just stop working for know reason while on vacation. Verizon was great in MD but I moved and I had to drop service plans to because of a poor signal. The merger of Verizon and Alltel will help with signal strength but I am looking at PDAs for my upgrade and just want good service. Because Verizon makes you purchase a mobile plan with a PDA/Smartphone, which I don't understand. In all, I just want good services whoever provides it.