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Archive for Tuesday, January 11, 2011

Gains for iPhone switch to Verizon ambiguous

January 11, 2011

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Verizon Wireless would seem to be a big winner after its expected announcement Tuesday that it will start selling the iPhone and break Apple Inc.’s monogamous relationship with AT&T Inc. in the U.S.

But for several reasons, the iPhone’s arrival to Verizon would be poorly timed, and Verizon’s gains won’t be as clear-cut.

There’s no doubt a Verizon iPhone would attract millions of buyers, and it would give the country’s largest wireless carrier a chance to catch up with AT&T in attracting high-paying smart-phone customers.

Since the iPhone’s debut in 2007, AT&T has been its exclusive distributor in the U.S. Many people held back because they already had service with a carrier they liked or were apprehensive about congestion on AT&T’s network, particularly in New York and San Francisco.

Rumors about a Verizon iPhone have swirled for years and have risen in recent months. The Wall Street Journal has reported that an event Verizon is holding today is to announce a deal with Apple to start selling iPhones at the end of the month.

Verizon, Apple and AT&T wouldn’t confirm that.

Analysts estimate Verizon iPhone sales this year would range from 5 million to 13 million, some coming from what AT&T would have sold. The iPhone is big business for AT&T: The carrier activated 11.1 million iPhones in the first nine months of 2010.

Many analysts say Verizon could sell more iPhones in the U.S. than AT&T this year, given pent-up demand from customers not wanting to switch to AT&T.

Yet several factors may give prospective Verizon iPhone buyers pause.

The first Verizon iPhone would likely only work on the older, “3G” network. That network has wide coverage, excellent reliability and less congestion than AT&T’s, but data speeds are slower than new “4G” networks both AT&T and Verizon are building.

Also, Apple has been launching a new iPhone model every summer, and presumably an iPhone 5 is coming. But Verizon may have to wait until next January to get it, giving AT&T a head start. That’s because Verizon may be on the same one-year upgrade cycle that AT&T has been on.

Most importantly, cell phone companies do their best to tie subscribers up with contracts. AT&T executives last year stressed to investors that most of their iPhone users are on family and employer plans — more difficult for an individual to switch from.

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