If you are one of the minority of people that use a Mac, you may be extremely excited about the launch of the iPhone.  If you are a devotee of the iPod, you may be looking to trade in your iPod and cancel your current cell plan paying the $100-$200 cancellation fee, in order to then pay $500 up front for a new iPhone.

The commercials look sexy, the gadget looks like a sexy gadget, its Apple and for the last 10 years(maybe a little less) Apple has been cool again.  Apple has a problem with the iPhone and it has been under reported.  People have been crazed over a product that has been hyped for almost 2 years and is only finally coming to market (while other cell makers have already rushed out devices that do the same thing and look the same but without the Apple name).

Apple’s problem is that they are working with AT&T and have given the mobile service provider an exclusive deal for 5 years.  Mobile phone models, even iPods do not last five years.  The product life cycle doesn’t last five years.  Five years for an untested mobile product with an untested mobile phone maker was a stupid deal for At&t to make, if they want to sell iPhones. 

Another possible hindrance for Apple is the nature of its agreement with AT&T, he said. AT&T gave Apple an unprecedented amount of say in how the iPhone will be sold and what the phone will feature; Motorola and other carriers, accustomed to obeying carrier dictates, would likely be envious.
But Apple has also given AT&T a five-year exclusive deal to sell the phone, analysts say. Exclusive deals rarely run more than one year. Phonemakers want to build market share by selling through multiple carriers. “AT&T gave a lot, but so did Apple,” Hazelton said.

Source: Apple’s iPhone casts big shadow on cell industry | Chicago Tribune

I’m sure they do but they win regardless of whether any iPhones sell.  If they don’t sell, then Apple will have to pay the bill when AT&T returns the product or chops the price down to something normal like $99(A $200 – $300 per phone charge that Apple will have to pay.)  At&t will win because they will be bringing foot traffic into their stores and their websites.  If people can’t afford the ridiculous price of the iPhone, At&t can convince them to pick up another product.

The thing is though that At&t is a dud.  Under the Cingular brand Bell South/ SBC did quite a bit to revamp a wireless business and then they brought in the albatross that was a mostly failing At&t. They then made the stupid decision of going with the At&t brand name because it is recognized.  That is normally smart marketing, when the brand has no positive connotations, but At&t has a long and recent history of bad service, Bad quality, Bad customer service, Bad prices, Bad billing capabilities, and more. 

Apple has a good image in most of those areas if you discount the crappy batteries and the iPod sudden death syndrome and ignore those monstrous junky Apple Box things with the jello colors from several years back (the ones that couldn’t be upgraded and got stuck in a bunch of colleges where they rapidly rotted away or became outdated).

So Apple has given an exclusive deal to a company with a brand name that is a dud in the wireless world.  What is going to happen to all those Apple devotee types that get suckered into setting up 2 year plans with At&t and end up getting bad service with their cool looking phones?

  1. Most of them will get very mad at At&t
  2. A few will get mad at Apple
  3. The ones that get mad at At&t will take their vengeance out on At&t vocally, and At&t will drop the iPhone as a stop gap measure.
  4. At&t will pass along any pain and expense back to Apple and Apple will do what it always does when it makes a mistake, they’ll fight it in court.

But none of this is going to be good for the consumer and especially not for Apple fans.  The iPhone may have the potential to fly, but its not going to fly well with an At&t albatross.