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Verizon is about to deliver a blow to AT&T when it ends the network’s exclusive hold on the iPhone, but it definitely won’t be the end of the world for the second largest carrier in the U.S.
Earlier this week, Verizon announced a press event next Tuesday in New York City. All signs indicate that Verizon will introduce the iPhone on its network and launch it in the next few weeks. At this point, nobody should be surprised: it’s Apple’s worst-kept secret.
Since the news broke about Verizon’s event, there has been noshortage of media reports about the potential negative impact of the Verizon iPhone on AT&T. Some of it has devolved into (justifiable) AT&T bashing, and some predict that it’ll be a major or even mortal blow to the nation’s second largest network.
Let’s take a step back and keep some objective perspective, though. While the Verizon iPhone will have a negative impact on AT&T, it’s not going to break AT&T’s back. The network has been preparing itself for the loss of its iPhone exclusivity contract for a long time. It’s ready to do battle with Verizon.
Huge Switching Fees
While a group of early adopters are likely to burn their contracts and switch to Verizon on day one, the vast majority of people will not. The reason is that the switching costs are simply too high.
AT&T made a smart business decision last year: they bumped up the iPhone’s early termination fee. If consumers want to switch, the first fee they will have to pay is the ETF, giving AT&T even more money to pad its profits.
The second fee is the cost of the Verizon iPhone. The AT&T iPhone 4 is based on UMTS 3G technology, while the Verizon iPhone will be based on Verizon’s CDMA 3G tech. The result is that consumers will have to buy a new iPhone and a new contract. While they can sell their AT&T iPhones, it won’t offset the cost of a new contract and it definitely won’t offset the cost of that early termination fee.
While some consumers can afford to switch, the vast majority don’t have that kind of money and are on family plans that they won’t abandon immediately.
There is at least one more switching fee for AT&T users who want to jump to Verizon: the switch from UMTS to CDMA. UMTS is a more prevalent 3G standard for a simple reason: it’s a better technology. AT&T actually does have the fastest 3G network in the U.S. and it does have the advantage of being able to send and receive data and voice at the same time, while the Verizon iPhone will not be able to do data while on a phone call.
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