Apple Tests AT&T business model

Apple Tests AT&T business model

As Verizon rolls out its own version of the iPhone, the AT&T business model is being tested.  AT&T’s market share growth was largely dependent upon exclusive availability of the iPhone.  iPhones went from 0% market share in late 2007 to 25% of all U.S. handsets in 2010.  With Verizon now offering inexpensive iPhones on a better network, is the AT&T business model in trouble?   A survey by Chitika claims that Verizon has already captured 12.7% of the U.S. iPhone market just weeks into its availability at Verizon.  In addition, two-thirds of those switching to Verizon’s iPhone model are paying a termination fee to AT&T for the privilege.

Even with the enormous clout of the iPhone, AT&T has only been able to hold their market share constant at around 27% while Verizon has grown market share from 26% in pre-iPhone 2007 to 31% in 2010.

Mobile Carrier Marketshare
2007 2008 2009 2010
AT&T 26% 28% 29% 27%
Verizon 26% 27% 32% 31%
Sprint 23% 19% 18% 12%
T-Mobile 11% 12% 12% 12%
Others 14% 14% 9% 18%


It appears that “The Network” business model trumps the iPhone business model.  Pre-iPhone, AT&T enjoyed 26% of the market.  This percentage peaked at 29% in 2009 when network availability issues plagued iPhone users.


Loss of iPhone exclusivity raises several questions:


For business owners, the AT&T/iPhone experiment created several lessons.  We can improve our own business models by paying attention to these lessons.

1st: Verizon may have a better network, but a cool phone trumps a better network

2nd: Customer service is over-rated.  Scratch that – customer service is over-rated if you are the only one who can sell the cool phone.  AT&T infuriated customers over dropped iPhone calls and sporadic network issues.  However, virtually no one switched to the reliable Verizon network.

3rd: Partial exclusivity isn’t the same as total exclusivity.  Customers are severely damaging AT&T’s business model by defecting to Verizon despite older iPhone technology.

4th: Apple proved that the phone matters more than the carrier.  The mobile carriers spend billions building a network and the buying decision comes down to a $200 phone.  It will be interesting to see if other headset manufacturers follow Apple’s lead and flex more muscle towards the carriers?


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