AT&T Is Desperate: iPhone Upgrades For Everyone!

Nobody doubts that Steve Jobs will announce a fourth-generation iPhone at WWDC 2010 tomorrow, but the delivery date remains unclear. It must be soon, though, because AT&T is pulling major shenanigans with their customer contracts! They recently changed the early-termination clause and replaced unlimited data with less-expensive tiered options. And now AT&T is aggressively accelerating upgrade eligibility!

The Queen Is Dead

The iPhone is the best thing that ever happened to the modern AT&T. Thanks to Apple, AT&T grew their customer base even though their GSM network was unable to compete with Verizon’s EV-DO in the USA. Thanks to Apple, AT&T was immune to the attack of the Androids and deep-sixed Palm. In short, thanks to their exclusive deal for Apple’s game-changing iPhone, AT&T survived as one of the “Big Two” of US wireless companies.

This can’t last forever. Android gets better all the time, and the 2.1 and 2.2 ‘Droids have emerged as real competition for the iPhone.The superiority of Verizon’s 3G network will continue to tempt customers until 4G takes over the entire industry. Prepaid mobile is killing the basic (non-smartphone) market. Finally, maybe not today and maybe not tomorrow, but soon AT&T will lose their exclusive hold on the iPhone.

Strangeways, Here We Come

AT&T has about 25% of the US mobile handset market, and seems desperate to maintain these customers and the revenue they bring. They seem prepared to do whatever it takes to make this happen, and will use the forthcoming iPhone HD (or whatever it is called) iPhone 4 as a pawn. We’re about to witness some strange moves.

How will AT&T maintain and grow its customer base for an inferior (and infuriating) network amid serious competitive pressures? It’s all about the smartphone contracts!

  1. Sign ’em up! The reduction in data plan pricing makes smartphones much more attractive, expanding the market and enticing basic phone customers to jump into a contract for something like a new iPhone.
  2. Get ’em back! Existing iPhone customers are reaching the end of their contracts, so AT&T will encourage them to sign on for 2 more years by allowing them to upgrade immediately (see below).
  3. Lock ’em in! AT&T ramped up early-termination fees for smartphones effective June 1. Leaving AT&T with your iPhone will now cost $325, with a $10 monthly decrease until the 2-year term is reached.

Frankly, this is a brilliant plan. AT&T can’t give iPhones away for free – Apple under Steve Jobs would never allow their products to be devalued like that. So they’ll use everything else at their disposal to bring in higher-value iPhone customers, even if it means losing a bit of data plan and hardware upgrade revenue in the short term.

How Soon Is Now?

So if you’re an existing iPhone user, how soon will you be able to upgrade? How about now?

I upgraded my original 2G iPhone to a 3GS in late-November, 2009, signing a new 2-year contract in the process. I didn’t mind the contract – AT&T and Verizon charge about the same for service, I love my iPhone, and I’ve got a Family Talk plan going with two other contracted lines. I’ve been an AT&T customer for almost 10 years (since the Cingular days), and will probably remain for the foreseeable future.

Considering that I just upgraded to the iPhone 3GS in November, I assumed I would have to wait another 6 months or more for an iPhone HD iPhone 4 upgrade. But AT&T just accelerated my upgrade date to now.

This is really amazing: These long contracts aren’t just about provider lock-in; they’re also about recouping the cost of subsidizing expensive hardware like my new iPhone 3GS. AT&T is so desperate to keep me as a customer that they’ll let me walk away with a nearly-new top-of-the-line iPhone after just 6 months!

Wondering if you’re eligible for an upgrade? Try this out:

  1. Using your AT&T-contract iPhone, dial *639# (that’s “*NEW#”)
  2. You’ll get a (free) text message letting you know if you’re eligible.

If your text looks like the message below, you’ll probably be watching Steve Jobs’ iPhone HD iPhone 4 unveiling tomorrow with extra interest!

Are you upgrade-eligible? AT&T made me eligible after less than 8 months!

Stephen’s Stance

AT&T is desperate to retain their customers, and it shows. The market has shifted, and they will do whatever it takes to compete with Verizon, even if it means letting folks like me upgrade from really-new to brand-new hardware. If this is was market pressure looks like, I love it!

But Apple is under pressure, too. The HTC EVO is, by all accounts, a great phone, and Android 2.2 might just make the sluggish Nexus One worth tolerating. Then there’s the undeniable fact that smartphones are commoditizing. Is Apple’s walled garden of delights unassailable? We shall see!

Update: Steve Jobs unveiled the iPhone 4 today, and confirmed that “AT&T is going to make an incredibly generous upgrade offer. If your contract expires at any time in 2010, you can upgrade to the iPhone 4. You can get it up to six months early.” Your mileage may vary, but it seems that AT&T is making even more-generous offers to some based on their monthly bill!

  • Rick Vanover

    Yes, something needs to change with the competitive landscape from Apple's perspective with Android's quick rise in popularity.

    AT&T, on the other hand, will need to do something to keep that 25% mark; which I think is attractive. Until they can do what Sprint is doing in the corporate telecom realm (getting big contracts) or become the 'natural choice' for the consumer; I'm just not sure what they can do.

    Ironically, I am a smart phone naysayer. To be fair, work gives me this terrible Palm thing. I hate it, I am about to turn it in – but I can Tweet from it with Opera Mini. So, I'm keeping it for that. Oh yes, I can check my work email too :)

    My own phone that I use, gulp, is a prepaid mobile. I've spent $175 over the last 3 years for that service. I can Tweet from it, just to make Tweets, however.

    Disclosure: Nickels are like manhole covers to me.

  • Vaughn Stewart

    Stephen – as an iPhone customer, thanks for the info.

  • Chris M Evans

    Quoting The Smiths in your posts now….

  • sfoskett

    Not that I'm a Smiths fan, but I figured Morrissey was apropos of AT&T's current mood…

  • sfoskett

    I respect the move to prepaid feature phones. Smartphones and plans are amazingly expensive! Even the cheaper new AT&T plans cost $1500 total!