Confirmed: Apple and AT&T signed five-year iPhone exclusivity deal -- but is it still valid?
By Nilay Patel 
posted May 10th 2010 5:04PM
posted May 10th 2010 5:04PM
The term of Apple and AT&T's iPhone exclusivity deal has long been a mystery -- although USA Today reported a five-year arrangement when the original iPhone came out in 2007, that number has never been independently confirmed, and it's been looking suspect in recent weeks as Verizon iPhone chatter has gotten louder. But we've been doing some digging and we can now confirm that Apple and AT&T entered into a five-year iPhone exclusive in 2007, based on court documents filed by Apple in California. Read on!
Here's the deal: an ongoing California class-action lawsuit filed in 2007 claims that Apple and AT&T illegally exerted a monopoly over iPhone service by telling customers the iPhone's required service contract was two years long when the Apple / AT&T exclusivity deal was actually for five years -- thus requiring buyers to re-up with AT&T for three years (and not, say, T-Mobile) if they wanted to keep using the iPhone. Obviously Apple had to respond to these allegations, and in addition to arguing that no one was ever promised an unlocked iPhone after two years, the company's lawyers repeatedly confirm the existence of the five-year agreement while noting it was publicly reported in USA Today. It's extremely black and white -- check these choice quotes from Apple:
Now, this all went down in October of 2008, and while it's sort of amazing we hadn't seen it earlier, the real question is whether or not the exclusivity deal is still on the books. (The case is ongoing, but most of the relevant bits have been under seal since 2009.) Contracts can be canceled, amended, and breached in many ways, and AT&T's spotty recent service history plus the explosion of the iPhone and the mobile market in general have given Apple any number of reasons to revisit the deal. In addition, the two companies obviously hit the negotiating table again to hammer out the iPad's pricing plans, and there's no way of knowing whether that deal involves the iPhone as well. But it's nice to finally know for certain that AT&T's initial iPhone exclusivity period was booked until 2012 -- now we just have to see if all this recent chatter means something's changed."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..."
P.S.- Oh, and this case also covers some other relevant and controversial ground: the plaintiffs argued that Apple exerted illegal monopoly power over the iPhone applications market by barring third-party apps from iPhone OS 1.0, and the court ruled the argument was valid enough to go forward. Pretty prescient for 2008 -- we're guessing Adobe and the Federal Trade Commission are very interested in what's going down in California's Northern District right around now.
Im not sure I understand the big deal anymore anyway. Android has almost the same commercial (most used) apps as the iPhone does now anyway, and the Incredible's form factor is really good. I mean, a year ago, this was a huge deal.. even 8 months ago. But now? Who cares.
MLB AT BAT, MINT, FACEBOOK, NFL MOBILE (NOT ON ATT), NBA, ALWAYS ON AIM AND GTALK, ENGADGET APP. EBAY, PAYPAL, PANDORA.
Heck, even Android has the OchoCinco app now.
It's really not a big deal anymore.
@hitdog042
what about the 70,000 games on the iPhone? :S
@Wesscoast Yeah, I guess if you use your phone to play games.
So the iphone is exclusive to the network with the MOST dropped calls? LOL.. I thought they went with Cingular because --at--the--time, they were. Until att bought them.
This is too funny. How is that for a worm... Apple?
When the iphone was introduced Apple wanted the sweetest deal from ANY carrier... AT&T stepped up... I bet Apple regrets the exclusivity agreement now. Verizon doesn't pay a dime for Android, they just toss the manufacturers a bone and all is well..
Apple apparently did not learn from the Microsoft war.
Ahahahahahah!
This is GREAT news.
Android already outnumbers the fruit phone and by the time the contract ends, apple will barely fit inside Android's shadow.
Hahahahahahaha!!!!
I don't care about the iPhone anymore, I'm switching to sprint and I will be getting an htc Evo 4g, far Bette then this stupid iPhone I'm typing right now.
@zholy If you bought a phone you don't understand you blew it.
Sent from my iPad
Android is growing.
I'm still waiting on the First Else... or is it Else First?
T-Mobile has had the sidekick since day one and that's easily been 5 years. and if we look we could probably find other devices that were at least 5 years with a single company
Apple picked GSM for the iphone/ipad. Verizon is CDMA.
China, which is several times the CDMA market of Verizon got GSM which is a huge sign of how much Apple isn't going to make a CDMA anything
in 2012 Verizon's LTE coverage should be enough that they can technologically handle the phone.
@Charlik
China has a billion people... but the addressable market of China is only about 50 million people (most of China is rural or poor). While there might be a lot of CDMA coverage in China... it's probably for inexpensive flip-phones or prepaid phones. There's just not a big smartphone market in the entirety of China.
And how can you dismiss CDMA when every other person in these comments are saying "I love my Incredible" and "I'm getting an EVO"
Surely, Motorola and HTC don't mind making money selling the Droid, the Incredible and the EVO... all CDMA phones.
You can talk about GSM and the rest of the world all you want... but half of the iPhones in the world are in the US. The United States market is just too big to ignore.
So what if Apple would have to make a CDMA iPhone? ALL cellphone manufacturers make CDMA phones... including the 2 companies I mentioned earlier.
Motorola and HTC have the most the gain from Apple's current "AT&T fetish"
Sorry Apple... if you signed a 5 year contract in the fast-moving world of mobile phones, limiting sales of your product in your home country where demand is the highest... you blew it.
If they signed a 5 year contract with AT&T, they blew it.
The way Apple is been behaving lately, I'd say they deserve each other.
Might as well buy out AT&T while your at it Apple
http://tcrn.ch/920qBS
Hold up, I think Nilay may have missed 2008 articles stating the date of the end of the contract changed to 2010. Now the question becomes did Apple extend the contract again?
When I signed up to get the iPhone 3g then waited for my contract to end I was told the samething. As a matter of fact I called apple tech support about unlocking the phone and they said there's a way but they can't release such info only in certain countries the guy then said on the phone that theres something called a "jailbrake", I acted like I didn't know what he was talking about and he said that will unlock the phone so I can use it again. So I said won't that void my warranty, he said yes so I said that's kind of grimmey then, long story short contact my state rep. Point is if you don't renew your contract you are told just that and are stuck with a crippled device and have to stay with att even though you don't want to any more. That bs, worse if it needed to be activated. Where's my option after upholding my end of the contact deal to gey it unlocked like any other phone on the same dam network?
@G building OK and which carrier would you use then? The iPhone works with GSM/UMTS - as used everywhere else in the world.
Not supported by iPhone Hardware:
- Verizon (CDMA)
- Sprint (CDMA)
- T-Mobile (UMTS uses 1700 MHz uplink)
@clochard42 The only other network I could go to was tmoble and yes I fully understood no 3g only edge, but thats not the point. Why is the offer to unlock a phone after your contract is over with is offered for one phone and not the other. I would think that was the thought about the article when talking about a monopoly. Plus given my experience throughout the whole deal it was really bs, being told that you are stuck basically with a itouch because they wont unlock the phone even though upholding to the deal. for me that's a problem and this is what i was told from att and apple themselves in regarding this. I didn't like att service when i switched to them, and I didn't like their pricing plan either. So i waited out the contract and switched again, but to be told to jailbreak your phone of which I had to because i liked the phone nonetheless, yet it will void my warranty is just ridiculous. Because of such a deal I would never go through that again and I wasn't the only person who found this to be troubling either.
That does it' NO MORE GOOD PHONES ON AT&T. I'm leaving and going to PREPAID.
I had to change that picture to resemble real life
http://i812.photobucket.com/albums/zz43/lasaldude/05-10-10iphoneatt.jpg
Currently a very happy iPhone user with 3G coverage up in the mountains of stroudburg, PA. I have never used an android device so I don't know If it's better or not so I can't comment on that. What I will say is what is all this hoopla of android outsellingthe iPhone. The iPhone is A device android is an operating system. How many handsets are currently using android? I don't know at Least 10. There are 3 iPhone models one of which is probably barley used considering it's age. What is all this garbage about android and iPhone how can you compare an OS to a device just doesn't make any sense.
Trust me if apple had buy one get one deals on iPhones like Verizon has on all there smart phones they would have market share too. You just can't compare it. There is always numbers behind those numbers the purest results will be iPhone sales numbers.
It's sold exclusivly by one carrier
one device two max
other than refurbished discounts. People Are purchasing these phones because they really want it not because of some buy one get one promotion.
ATT can keep their apple. Onwards with Android!
I'm content to wait on the iPhone on Verizon for a couple of reasons. 1) Up until last month, I have used Verizon for a number of years without problem. 2) I've always received great customer service from them. Beginning last month, I moved to a new city. I simply could not get signal at my new apartment. I called up Verizon and explained what was going on. They gave me a deal on the Verizon network extender so that I could get signal in my apt (I paid $60 for a $200 device, which obviously was much cheaper than paying an early term fee). It works very well, so now I have full signal in my apt. When the iPhone does come, I'll at least be able to make phone calls with it because I'll already have my network extender set up.
Thank God I won't have to worry about Hellish cellular coverage. At least not for a long period until people will be able to flee from AT&T. I'm glad Apple's shoddy wireless enabled devices will be stuck on a carrier I don't have any foreseeeble plans to switch to. There will only be a short period of time that I might have to put up with that. That is, unless I end up in the same place as Apple. Even it it's Heaven, it will still be Hell.
Currently sitting in class, and some loser is making a presentation on how the iPad is the greatest invention since the wheel.....
All I'm thinking about is how much apple has brainwashed the american public.......crApple is the new Vatican!
Interesting, especially that bit about after the 2 year contract. Is there anything in the AT&T/iPhone contract that states that your iPhone is locked to AT&T even after the 2 year contract is up? And that now the phone is useless on any other GSM/SIM card cell network and is now just an overglorified iPod.
After a 2 year phone contract, the phone is now your's 100%.
This could be another nail in iPhone dominance coffin and Apple's global domination theme. If that provision isn't or wasn't in the contract. or even if it currently is, looks bad for Apple.
This is huge. Great "scoop" Engadget. I imagine AT&T wants to leverage some hefty penalties if Apple tries to walk. I doubt either of them could have imagined Apple's unprecedented success in the mobile phone and applications space, or the sudden emergence of a strong competitor such as Google Android--remember at the time Eric Schmidt was on Apple's board!
Coming from Europe I don't understand why such "monopoly" can still exist ?
When you buy a cellphone/smartphone full retail price you can get an unlock code immediately. Why can't you get one for the iPhone ? Why can't you get it after 2 years of agreement ? There is something wrong here...
Before buying an officially unlocked iPhone from Europe, I bought an iPhone 3G full retail in the US. I already had a plan with AT&T. I couldn't get an unlock code to use a prepaid SIM card while traveling it is crazy.
In conclusion AT&T and Apple went too far this time, both companies are taking advantages of this exclusivity agreement. No one is strong enough in the US to say STOP !!! Sometime the US should look at what is happening in "old Europe" and what is doing the EU against such situation.
please let it not be valid.... i want the cdma iphone
No, joxes, the U.S. will not look at old Europe for anything. You guys pay through the nose for every last thing over there with VAT's going through the roof in almost every EU country. You could never go cell-only there either. Take your anti-American blabber somewhere else.
For Apple's sake, there better be an out-clause. If they don't launch an iPhone on Verizon this year or the next, Android will firmly be entrenched. Good luck to them at that point.
Awesome phone, terrible network. AT&T makes the iPhone useless. BRING IT TO SPRINT WITH 4G!!!!!!!!!!