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Will AT&T Keep the iPhone?

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By Kevin Fayle on April 15, 2009 1:52 PM

The iPhone has been good to AT&T.  It's brought the carrier millions of new subscribers, and has shored up the carrier's brand by associating it with a sexy piece of mobile hardware.

That's why it's not surprising that AT&T wants to extend its exclusive deal to carry the iPhone - which expires at the end of 2009 - for another two years, according to the Wall Street Journal.  The WSJ, citing people familiar with the issue, says that AT&T's CEO is currently in discussions with Apple to stretch the exclusive arrangement until 2011.

Apple, in its usual fashion, ain't saying squat.  "We have a great relationship with AT&T," an Apple spokeswoman said, which is more than the taciturn tech company will usually divulge outside of carefully scripted press events.
There may actually be a reason for Apple's obstinant silence in this case, though.  We know that AT&T has benefited from the iPhone, has Apple benefitted from its "great relationship" with AT&T? 

There have been many complaints about dropped calls and poor data speeds over the AT&T network, especially at large events where big numbers of people using iPhones can overload the network.  This happened at this year's South by Southwest Interactive conference, and this author has experienced it personally at large gatherings in the San Francisco Bay Area.

So Apple might not be as keen to extend the deal as AT&T is.  In a wireless world where products rise and fall in infinitesimally short periods, Apple might want to ensure that customers can have the constant fast connections needed to fully utilize the iPhone's rich set of features and applications.  Otherwise, they might just choose a more banal smartphone that works as well as it promises.

For AT&T, a lot more than just the iPhone is riding on this deal.  The company has already spent $1.3 billion to discount the iPhone for subscribers, so profit from sales of the phone aren't what it's really aiming for.  Instead, the company is shifting its focus away from the rapidly evaporating home-landline business to wireless communications.  Attracting new subscribers who will throw in for an "unlimited" wireless broadband plan is the new name of the game for AT&T, and with a somewhat outclassed network, a sleek, lust-inducing phone might be the only thing that can get the company there.

Right now, however, it seems like instead of pursuing a "build the network and they will come" approach, AT&T has used the iPhone to entice everyone to come but it hasn't built the network.

The question is: Will Apple stick around until the network is built?

See Also:
AT&T to extend iPhone pact? (CNN SciTech Blog)

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