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Apple and AT&T Did Have a 5-year Exclusivity Deal

- By - Source : Tom's Guide US

Fresh reports may have pointed towards the next iPhone being Verizon's first 4G device but recently uncovered court documents paint an uncertain picture when it comes to the possibility of a Verizon iPhone.

When Apple launched the iPhone on AT&T three years ago, there were reports that the two had a five year contract that allowed AT&T to exclusively offer the iPhone until 2012. However, though some newspapers and websites mentioned a five-year deal, this was never confirmed by Apple or AT&T and no evidence to suggest such a deal existed was ever made available.

However, Engadget's resident legal expert, Nilay Patel, cites a class action lawsuit filed in California that is centered around the AT&T/Apple exclusivity contract. Because of the nature of the suit, the court documents contain information regarding the contract between Apple and AT&T.

According to Patel, the suit alleges that Apple and AT&T illegally exerted a monopoly over iPhone service by telling customers the iPhone's required contract was two years when the Apple/AT&T exclusivity deal was actually for five years. The suit claims that this agreement means users actually have to renew their contract for a further three years if they want to keep using the iPhone.

Engadget published two Apple quotes from 2008, which are included in the lawsuit (originally filed in 2007) and repeatedly mention the five-year agreement between AT&T and Apple:

"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..."

Though this would seem like bad news for anyone hoping to get an iPhone on Verizon, there's a chance that the contract could have been voided by something – AT&T's crappy service – over the years.

Full scoop on Engadget.

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mauller07 05/11/2010 11:31 PM
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what rubbish, if ive bought the phone and finished the contract then i can bloody do what the hell i like with the phone at the end of it.

the exclusivity should be to the network that can distribute it and not have anything to do with the customer

pooflinger1 05/11/2010 11:40 PM
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Once you finish your contract out, you are free to do whatever you want with the device. Furthermore, the company can not legally force you to sign a new contract just to continue using said phone if no changes are made to your plan. Now if you were to call in and say change to a new plan, then they could require you to sign a new contract in order to get on the new plan. But I know TONS of people on both AT&T and Verizon that are still using the same phone they bought years ago (some of which own iphones) and they are not under any contract and free to do what they wish at any time without any termination fees.

The article just reads badly as if you have to be under a contract or AT&T will turn your iphone off.

RicardoK 05/11/2010 11:44 PM
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That's the main reason people buy the iPhone and jailbreak/unlock it..

chripuck 05/11/2010 11:49 PM
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Go for it, I'm sure that GSM iPhone will work nicely on Verizon's CDMA network.

rooket 05/12/2010 12:06 PM
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Why is this news? I knew this for several years.... it's been AT&T exclusive all along. *moves along from shoddy apple product*

Montezuma 05/12/2010 12:44 PM
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The only reason that exclusivity contracts, like the one that Apple and AT&T have, is only an issue because all cellular providers are not all using the same technology. If these companies want to get more customers, then we need a standard that all cellular providers use. Since these companies use public airspace to conduct their business, then it is the people's right to demand this.

CDMA, while is does have its advantages, it lacking when you look at GSM. Verizon is certainly trying to assist world travelers, by offering phones with GSM radios, but this is not sufficient. Even if there needs to be a new standard engineered, it would be nice to see the playing field leveled for customers.

I am not going to list the differences between GSM(TDMA) or CDMA, but this information can be found in many places on the internet. Of course, 3G AT&T phones, Verizon, and Sprint phones do have one thing in common(at the very least): Qualcomm is getting rich off of all of them. AT&T's UMTS uses W-CDMA, Verizon is going to use UMTS for their 4G service, but I believe Sprint is going to use WiMax for their 4G.

I do not believe in stifling innovation, but I believe that most customers want to be able to purchase any phone that exist and use it with whatever carrier that choose. Carriers should be able to sell any phone that exist as well. If carriers want to offer a new technology, then it should be able to work with at least one or two previous technologies to ensure proper coverage for customers.

Proprietary hardware looks good for those that are getting rich off of it, but it sucks for the end-user and many in the tech field. There is a reason why Windows-based PCs are so popular and why the old proprietary PC market died(hello Tandy and old IBM). People want choice; they always have wanted a choice. While it would be unreasonable to believe we can ever create something that will not be locked out of all future-available markets, we should strive to make products that work in all current markets/carriers(within financial reason). This will only occur when we have a proper standard.

knowom 05/12/2010 12:46 PM
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Exclusivity is what Apple does best. You want free choice look elsewhere that's never been Apple's game. Apple is more close minded than the KKK.

pogsnet 05/12/2010 12:52 PM
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That is why I use Nokia

Montezuma 05/12/2010 1:00 AM
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In the end, I really do not buy into the monopoly argument. No one is forcing people to purchase an iPhone. There are other phones that offer similar and many of the exact same features that the iPhone offers. For this to be an actual monopoly, then it would require Apple's iPhone to be the only phone that works in any given area and for it to only work on AT&T's network. This is not the case.

Almost all markets have multiple networks with a great variety of phones. The markets and phone choices are far greater than they ever were and the choices grow at a rather rapid pace. People should rejoice in that they have such options today, when we had nothing like this in the past. Sadly, our "lawsuit happy" environment is started this.

Here are a few options all carriers and phone manufacturers should think about:

1. One standard. I discussed this in my post above and I really said about all that came to my mind.

2. Provide all phones on all networks and drop these exclusivity deals. This would increase the end-user price on phones(though it should not) since they would be making multiple copies of the same phone when they are unsure of which network will reign supreme.

3. Build all phones with a user, or on-site provider-removable radio board. This would be akin to a PCMCIA slot, but much smaller. If they want to force customer's into a contract, then that would be the contracted device. This might be a sort-of "good idea", but I am not sure we are at a place, technically, to make that work properly.

Really, a technology standard for voice and data transmission would be the only real, viable option at this point. Of course, I am not an expert, so there might be come points that I am incorrect. I am interested in reading other options on this matter.

Anonymous 05/12/2010 1:11 AM
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...On her five year mission to boldly go where no man has gone before.

tayb 05/12/2010 1:18 AM
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brendano257 05/12/2010 1:33 AM
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cyprod 05/12/2010 1:54 AM
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Hey montezuma, please research before you post. WCDMA is controlled by 3GPP and uses a core network similar to GSM, though not identical (replace RBS with RNC, add a packet gateway which the name of is escaping me as of the moment and obviously different antennas). But though the air interface between CDMA and WCDMA are similar, qualcomm doesn't get any cash (or at least very little) from WCDMA. As for 4G solutions, everybody other than sprint is going LTE, which has very little to do with UTMS other than a spread spectrum air interface. UTMS uses a GSM core, while LTE uses an almost wholey IP based core.

Anonymous 05/12/2010 2:31 AM
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att + apple= ratten apple lol.

JMcEntegart 05/12/2010 2:42 AM
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pooflinger1 :
Once you finish your contract out, you are free to do whatever you want with the device. Furthermore, the company can not legally force you to sign a new contract just to continue using said phone if no changes are made to your plan. Now if you were to call in and say change to a new plan, then they could require you to sign a new contract in order to get on the new plan. But I know TONS of people on both AT&T and Verizon that are still using the same phone they bought years ago (some of which own iphones) and they are not under any contract and free to do what they wish at any time without any termination fees.The article just reads badly as if you have to be under a contract or AT&T will turn your iphone off.



It's not that the article reads that way, that's what the lawsuit is alleging.

Yes, you can do whatever you want with your iPhone after 2 years. However, the plaintiffs behind the class action suit are claiming that if you wanted to do things by the book, you'd have to sign a new AT&T contract once yours is up just to keep using the iPhone.

I'm assuming they arrived at this conclusion because they figure that although your contract is only two years, it's not like you can get an unlock code from AT&T once that time is up. AT&T has exclusive rights to the device until 2012 so according to the agreement between Apple and AT&T, you'd have to sign a new contract with AT&T to continue using device.

Lan 05/12/2010 4:05 AM
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Quote :Exclusivity is what Apple does best. You want free choice look elsewhere that's never been Apple's game. Apple is more close minded than the KKK.


I couldn't have said it any better.

Anonymous 05/12/2010 4:54 AM
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I hate buy iphone as it is locked. ATT never provide any official unlock code to unlock the iphone. In all the ASIA countries iphone is unlocked so customer can user their own SIM when the travel out of their home country.

note that ATT provide unlock code for all other brand phones..

TheKurrgan 05/12/2010 5:29 AM
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Apple may simply not care about the agreement at this point. Its more profitable to pay the att bastards whatever was agreed upon than it is to loose out selling the iphone to another entire user base. I'd be surprised if we dont see a CDMA iPhone before 2012. Perhaps not this summer, but next for sure.

BPT747 05/12/2010 7:28 AM
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They will make a uPhone for verizon :-D legal problem solved

thearm 05/12/2010 1:18 PM
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Nobody knew this? I've always known.

jescott418 05/12/2010 7:36 PM
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I think AT&T stands to be the only ones hurt if the iPhone goes to another carrier like say Verizon.
Because AT&T consistently ranks at the bottom in customer service polls. It would appear AT&T would be the one to try a pay Apple off to not go elsewhere. But eventually Apple will grow tired of the lack of expansion in the US without another carrier. I suspect this will happen sooner rather then later.