Last time, I argued that Verizon (NYSE:VZ) has three good reasons to book a deal with Apple (NASDAQ:AAPL) to carry the iPhone. Today, I'm here to offer you three reasons why Apple should approach Verizon.
But before we get to the details, let's talk about what a sacrifice it would be for Apple to ditch AT&T (NYSE:T). Going by both the math and external sources, we've reason to believe that Ma Bell pays the Mac maker $450 per handset in subsidies, a 50% premium to the $300 typically paid to Research In Motion (NASDAQ:RIMM), Palm (NASDAQ:PALM), and their peers. Neither Verizon nor AT&T would be likely to pay as much as Apple gets now for a non-exclusive distribution deal.
So why break up with Ma Bell? Here are my three reasons.
First, the iPhone is testing the limits of AT&T's network, and the network often comes up short. Users are at least partly to blame; the iPhone is responsible for more than 50% of U.S. smartphone traffic, researcher AdMob reports. Of course AT&T is having problems; no single network is capable of handling as much data traffic as the iPhone generates. Why not share the wealth and improve the customer experience, Apple?
Second, the iPhone has more relevant competition today than it had when it was introduced. Consider Motorola's (NYSE:MOT) new Droid handset. Reviewers are already praising the device for its sleek design. Mix in the fast-growing Android market, and you've got a smartphone with the smarts to be an iPhone alternative. (Notice I didn't say "iPhone killer.")
Third, consumers may be less willing to commit to a two-year contract with anyone now that Deutsche Telekom's (NYSE:DT) T-Mobile is offering customers an unlimited, no-contract plan for $79 per month. Call it a desperate move if you want, but it's one that will make it harder to sell iPhones through AT&T.
Which means it's time to open up, Apple. Start talking with Verizon about a deal.
