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iPhone in, Android out at Verizon – We think people are getting carried away

Alright we now all know that Verizon has its hands on an iPhone and that it will begin taking first orders on February 3rd and that it will be a great

By PETER WHITE

Published: 13 January, 2011

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Alright we now all know that Verizon has its hands on an iPhone and that it will begin taking first orders on February 3rd and that it will be a great and wonderful thing for a) Apple b) Verizon and a very, very bad thing for c) AT&T and d) rival handsets suppliers traditionally strong at Verizon like Motorola, HTC and RIM. Right? Well we’re not so sure.

Let’s talk about each constituency one at a time, starting with those people who were soooo in love with the iPhone that they jumped shipped and left either Verizon or another US cellco, and went to AT&T. This number is just over 4 million in the last four quarters and probably closer to 3 million in the previous four quarters.

Now we all hear that the AT&T network sucks, has performance and support issues and that the Verizon network is wonderful. But that won’t be the experience of all of its customers or they would have all gone by now, iPhone or not. And in some parts of the US, as there is in any network, there will be patches where the Verizon network is cursed by its customers. So not all 3 million of those customers are going to run back to their old network or to Verizon when their two year contract is up, let’s say that perhaps 40% will want to switch but only perhaps half of these have actually come from Verizon in the first place. And the 4 million who signed this year have two year contracts to run. Maybe people that have left Sprint and T-Mobile and others, will want to leave AT&T, and be happy to go to Verizon. So at 40% of those, that’s a set of customers, perhaps 1.2 million over a year, who might choose to experience the same phone, and a better network, which about half of them are used to. That might make a difference of 300,000 per quarter, and that’s a number small enough to lose in the quarterly figures.

Another, more important, constituency, are those people who wanted an iPhone, but who have remained loyal to Verizon as their carrier. It’s hard to put a number on this, which is why people are assuming that it’s the same number who have bought iPhones at AT&T. But the phones they will have taken are other smart phones, supplied for the most part by RIM, Samsung, Motorola and HTC and, oh yeah, Palm. And with the exception of Palm, and perhaps RIM, they all have hot devices which are now the equivalent of the iPhone.

And remember it is only those who bought their phones 12 to 24 months ago that will come up this year. Simple Cognitive Dissonance, whereby people are generally happy with the decisions they make, simply because they made them, will account for many of these. They’ve got by without an iPhone, and they like the brands they’ve bought. However many of these phones will be things like the HTC Touch Pro2, and the Samsung Rogue or the Nokia 7705 Twist – not fully smart phones, but people coming off contract with those will be likely to take a smart phone this time around. Later in the cycle it would be devices like the

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