The triumph of exclusivity

A recent survey found 2 of the 4 US wireless carriers at the bottom of customer satisfaction scores. Both AT&T and (surprise) Verizon were at the bottom of the list. If the above ratings are valid in 2011, consumers should end up with a similar experience on both networks for any smartphone, unless there is a really significant difference in carrier technology.

It is also quite possible that this outcome is due to consumers having much higher expectations than before, owing to the numerous digital avenues that are available for collective expression – think Twitter and Facebook.

In a previous post I had pointed out why the Verizon-Apple combination does not make sense especially to Apple. Outside of those issues, let’s see how the AT&T-Apple business model is actually doing. One of the most successful alliances in the PC industry was that of Intel and Microsoft ( also known as Wintel). In the mobile industry the AT&T- Apple combination seems to be heading in a similar direction.

Financial performance seems to be the best indicator. AT&T’s most recent Q3 highlighted 5.2Mil iphone activations out of a total 8 Mil smartphone activations, while Apple’s comparable Q4 was equally outstanding with 14.1 Mil iphones sold worldwide. So that would indicate that roughly 37% of Apple’s iphone sales are riding on the AT&T network( assuming that quarter is reflective of a full year).

From an AT&T standpoint the below chart shows that from a revenue standpoint, nearly 50% of AT&T’s business is now riding on the wireless segment.

In addition, related research talks about how the AT&T iphone has stolen Verizon’s growth. To extrapolate, it means that the iphone segment within AT&T wireless is growing much faster than the other smartphone combined. And to top it all this is very profitable growth for both companies.

This is clearly a triumph of exclusivity. I doubt these results at Apple would have been achieved had other carriers offered the iphone also. Think about it and the benefits for them-

1) The arrangement concentrates the source of distribution through online and in stores.

2) The cost of acquiring a customer is well defined and streamlined to an optimum point

3) In a world where carriers managed device distribution, Apple has effectively managed full control

4) Controls the end user experience 100% – no carrier customizations on the device

5) Direct access to phone consumers through device registration and extended warranty

Managing to achieve all these benefits, by extending the iphone to all 4 carriers will be unlikely since there will be significant effort and cost from Apple’s end to manage all 4 carriers. Not to speak of the impact on profitability. So with all the buzz of the Verizon iphone happening in 2011, the question is – will this not dilute the benefits of exclusivity? Looking forward to 2011. Happy New Year!