AT&T iPhone Exclusivity May Be Until 2012

iPhone ATT exclusivity for five years

As Apple gets ready to launch their next generation iPhone in June this year, speculations over a possible end to Apple's network exclusivity with AT&T in US have been on the rise.

We have seen a few rumors in the past that indicate a possible CDMA iPhone to be in the works, which is expected to be offered by Verizon.

However, a recent report on Engadget notes that these rumors may have to be taken with guarded skepticism. This is because the original AT&T's iPhone exclusivity  seems to have been signed for a far longer period than initially assumed. Engadget points out to an ongoing California class-action lawsuit where Apple is believed to have confirmed the existence of a five year exclusivity agreement with AT&T.

In the class-action suit, filed back in 2007, it was alleged that Apple and AT&T had offered their customers a two-year contract despite the fact that the exclusivity deal was actually for five years. The plaintiffs argued that this effectively meant that customers would have to remain locked to AT&T for an additional three years despite ending their contractual obligations. They had further pointed out that this was an illegal exertion of monopoly over the iPhone service.

In its defense, Apple is reported to have responded:

"The duration of the exclusive Apple-[AT&T] agreement was not 'secret' either. The [plaintiff] quotes a May 21, 2007 USA Today article – published over a month before the iPhone's release – stating, "AT&T has exclusive U.S. distribution rights for five years-an eternity in the go-go cellphone world."

"[T]here was widespread disclosure of [AT&T's] five-year exclusivity and no suggestion by Apple or anyone else that iPhones would become unlocked after two years… Moreover, it is sheer speculation – and illogical – that failing to disclose the five-year exclusivity term would produce monopoly power…"

As Engadget points out, a five year exclusivity agreement does not necessarily rule out the launch of a CDMA iPhone this year since there has been a lot of change in the market realities since then. The extremely successful launch of the iPhone has resulted in congesting AT&T's network due to the 5000% increase in data traffic in the last three years. AT&T is yet to allow iPhone tethering, a feature that was introduced by Apple in iPhone OS 3.0 almost a year back. 

We seem to have come to a point where AT&T doesn't seem to be able to independently cater to the huge data usage requirements from iPhone users without compromising on user experience, which is expected to increase exponentially with the launch of the next generation iPhone as it is likely to include a front facing camera for video chat feature. In fact, according to a report published last week, AT&T's customers had reported three times more dropped calls compared to Verizon

Given these changes in the market since the Apple-AT&T agreement was signed, Apple might be within its rights to modify the agreement with AT&T to let one or more carriers offer the iPhone to US customers. What do you think?

[via Engadget]