9/25/2009

Being a yellow and black guy myself, I have to hand it to Apple for their bar none marketing of the IPhone.  It’s a good device on a crappy network, but it’s sold as a god send to mankind.  Apple, I have to admit, is the quintessential example of branding and how people are willing to pay for a social phenomena.

Going forward, my theory is that ATT will lose it’s exclusivity for the IPhone.  It just doesn’t make sense for Apple to continue with them without entertaining other carriers to carry the unit.  The market is starting to get saturated and ATT is only 1/3 of the wireless market in the USA.  All the people who are going to buy an Iphone in the USA with ATT have mostly already have decided to get them.  Given the #1 complaint about the IPhone is ATT, it’s clear Apple will need to address this with its customers.  So, with just a basic numerical and service arguments, to continue it’s huge market capitalization, Apple must pursue the other 2/3 of the market place in the USA.  Sorry, social phenomena needs more than ATT customer base.

Verizon is the logical choice, provided they have a great network and great service and charge higher prices overall.  However, Verizon may not appreciate Apple’s high profit model at their expense.  I’m willing to put a good wager that Verizon will launch with the IPhone next year, ending the monopoly.  Sprint may ride the coat tails of this offer as the development of a CDMA version will suite both carriers easily.

This presents a real problem for ATT, as the IPhone is essentially the core of ATTs growth.  Strip out the IPhone and you have tepid wireless growth and a declining wireless business.  ATT stock over the last 2 years can tell this tale.

As all the carriers are considering LTE, yet nothing is in the ground and running (unlike Sprint’s 4G Wi-Max service), Apple may be waiting to launch the new phone under this standard, but that is about 2-3 years away at the earliest (despite ever aggressive LTE claims by Verizon).  Verizon has been a giant flip flop of launching this year with LTE, to many cities in 2010, now the entire country at end of 2010…please call me when you have at least 1 city up and running properly with paying customers and hardware.  So, Apple can’t wait 2-3 years here, the gargantuan market capitalization needs to be fed now…sure global growth can take it far but the USA is still a big and very rich market for wireless.

Lastly, there’s this Google company.  Since Schmidt resigned from Apple’s board, it’s clear that the company’s are now facing each other in the market place as competitors.  The “Google” phones are now coming out on Sprint, T-Mobile, and Verizon and these have a brand cache as well and a real threat to providing very “cool” products with very deep pockets.  HTC HERO by Sprint has definitely improved the cool design.  Competition for other carrier mind share is disappearing the longer Apple stays with ATT.  The Hero has a 5.0MP camera!!!! OMG.

So, that’s my theory of why Apple will end the happy monogamy and be a polygamist.  I don’t think it can afford to maintain it’s corporate growth and profits without more coals in the fire and this is an obvious and easy one.  It will create more management headache to deal with other carriers, but the pay-off will be much more handsome.

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