Apple and AT&T are reportedly butting heads when it comes to various aspects of future distribution of the iPhone. The recent addition of nearly 4,000 distribution centers through big box retailer Walmart has seemingly opened the floodgates internally.
Sources at AT&T explain that the addition of Walmart was more of an AT&T initiative than that of Apple. Additionally, future iPhone rate plans will be tailored to Apple’s liking as the iPhone family grows in diversity.
“We want the iPhone sold everywhere. Every single time another retailer gets mentioned, it just adds fuel to the fire,” a source at AT&T explained. When asked directly about Costco, Sam’s Club, Sears, Radioshack and Target as future iPhone retailers, they answered “The only place that hasn’t been mentioned lately is Radio Shack. Aside from that, most retailers are seen as opportunities.” Does this mean that Costco Sam’s Club and Target will begin selling the iPhone soon? Not likely, but it does confirm that AT&T has most of them on its radar.
As soon as the iPhone was released back in 2007, many people anticipated that Radioshack would begin selling the device and that it could potentially save the company. However, nearly 18 months later Radioshack still isn’t carrying the iPhone even though AT&T is setup through a high number of Rasioshack’s physical outlets. Conflicting interests between carriers, retailers and actual geographic locations of storefronts play into AT&T’s decisions with the iPhone’s distribution. It just hasn’t yet worked out with Radioshack.
The addition of Walmart as a distribution point for Apple’s iPhone is seen as a great move by most analysts. Apple is gaining nearly 4,000 physical locations that will sell the iPhone, and AT&T of course benefits greatly from every iPhone sold. Piper Jaffray analyst Gene Munster estimates that Apple could sell nearly 4.5 million iPhones in 2009 only through Walmart.
As Apple expands its global position with the iPhone 3G, AT&T is not going to lie dormant. Because of subsidization and long-term revenue, AT&T of course wants the iPhone sold at as many possible places nationwide. Adding as many distribution centers as possible is a high priority for the cell carrier. Where it gets sticky is when AT&T and Apple’s intentions conflict.
The prepaid iPhone that AT&T promised consumers this past summer is a prime example of this. The cell carrier promised a $599 8GB iPhone, or a $699 16GB iPhone without the need for a long term contract. A few reasons as to why we haven’t seen this from AT&T make some sense, but some information is not being mentioned. Even though Apple does make money long-term based on every iPhone subscriber that joins AT&T’s network, they also make direct revenue based on actual hardware sales. It’s believed that Apple has been pushing for the prepaid contract-free iPhone, while AT&T has remained firm on delaying the release in order to force people into two year contracts. Expect this to change either early next year, or possibly with a late holiday blitz put on by AT&T in a brute attempt to sway potential customers into iPhone purchases.
The relationship between Apple and AT&T has evolved into much more of a communicative partnership than Apple is generally known for. The intense legal pressure that both companies have been put under since launching the iPhone 3G has made them work together and share more information. This does not mean that Apple informs AT&T of all of its future plans. But it does mean that any future plans that may affect AT&T’s network, such as distribution, AT&T is more than aware of. Most likely, at this point in the partnership they are involved in those final decisions.
Additionally, we expect AT&T to focus extensively on iPhone packages and data rates in the near future. As Apple expands and diversifies its iPhone line, AT&T will be on board to cater its network as Apple needs. Expect small price drops in monthly rate plans and more flexibility in terms of customers picking their needed usage amounts. AT&T’s exclusivity with the iPhone is expected to last into 2012, however we believe it could be quietly extended even longer than initially expected.
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