The real reason the AT&T exclusive iPhone contract expires 2010 | new iPhone release

NOTE: If you’re looking for information on the new iPhone 3GS announced at WWDC 2009, click HERE.

In the US, AT&T has an exclusive contract to support the iPhone.  No other carriers can sell or officially support the iPhone.  This deal between Apple and AT&T was originally due to end in 2009. This date was moved to 2010. Interesting. The change of this date could indicate that the next generation iPhone isn’t set to be released until 2010.

Here’s a quick comparison of the difference between a 2010 and 2009 next generation iPhone release date.  Keep in mind that the exclusive contract with AT&T doesn’t end until 2010.

1. Ability of Apple fans to upgrade | 2010: By 2010, all the people that originally bought an iPhone in 2008 will have the opportunity to upgrade their phones at a discounted price due to the 24 month AT&T contract expiration (after 24 months you get the ability to upgrade or buy a new phone at a discounted price).  2009: Alternatively, if the iPhone came out in 2009, Apple’s largest fan base (those that bought the iPhone 3G immediately after it was released in 2008) would not have the ability to upgrade to the new iPhone at the discounted, subsidized price.  Despite the loyalty of Apple fans and their willingness to buy brand new products regardless of whether or not the last model is obsolete, they will probably not shell out the extra $400 for a phone – they’ll wait for the discount.
2. iPhone availability and market hype | Due to the fact that the iPhone is only available to AT&T customers, those without AT&T only have two choices if they want to own an iPhone – switch to AT&T to get the best, or settle for a different smartphone from their non-AT&T carrier.  These two options have led a lot of people to settle for the second option, and it’s been said that the iPhone is single-handedly driving smartphone growth.  Apple is going to want to make sure that when they release the next iPhone that ALL of the hype will drive growth strictly to iPhone sales, not to the entire smartphone market, and there’s no way to do that besides increasing its carrier availability. 2010: In 2010 the iPhone will be open to all carriers which will multiply the intensity of the marketing for the iPhone – everybody will be excited about the new iPhone, and there will be no reason for non-AT&T customers not to be excited since every carrier has them.  2009:  If the next generation iPhone is available in 2009, the hype around the release of this smartphone is going to continue to follow the trend where the iPhone drives smartphone growth with other carriers that don’t have the iPhone, until 2010 when the exclusive contract expires.
3. iPhone availability and non-AT&T upgrades 2010: Some people weren’t able to get the iPhone in 2008 because they didn’t have AT&T.  Instead they bought a different smartphone that works with their non-AT&T wireless service provider.  When do these contracts expire?  When can they buy a new phone at a discounted price?  2010.  2009: If the next generation iPhone comes out in 2009, non-AT&T customers still won’t be able to buy the iPhone, resulting in amazingly slow sales for the first year of the next generation iPhone.

The next generation iPhone release date seems to lend itself well to 2010.  Other interesting factors come into play here regarding carrier adoption of the iPhone and the competition of other smartphones creating a lockout of the iPhone with a specific carrier.  I won’t dive into these issues, but if anybody is interested it would be great to see some discussion about the different business impacts of some of the pros and cons of releasing the next generation iPhone in 2009 vs 2010.  Let me know your thoughts in the comments section.  Open discussion! (I’ll try to approve comments ASAP).

Note: this article relies on the following assumptions:

• That the contract between AT&T and Apple will in fact expire in 2010
• That with each release of the iPhone there is a period of increased hype, resulting in larger sales volume
• That other carriers will adopt the iPhone after the contract between AT&T and Apple expires.

UPDATE: My assumptions about the iPhone not being released until 2010 is incorrect.  However, the issues above still pose as questions as to why Apple would choose a date other than 2010.