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Apple confirmed it signed a 5-year iPhone exclusivity deal with AT&T

May 11th, 2010 at 1:17 AM

Three years. That’s how long it took for the world to get confirmation that the iPhone exclusivity deal Apple signed with AT&T back in 2007 was good for 5-years. Here’s how the info came about. Back in 2008, Apple’s legal team was in a courtroom in San Jose fending off a lawsuit which alleged that it was benefiting from an illegal monopoly over the iPhone, saying that AT&T’s 5-year exclusivity would really require iPhone owners to re-sign with AT&T for an additional 3-years after their initial 2-year contract had expired. This, in part, was Apple’s response:

[…] there 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. In fact, the iPhone box itself disclosed to the prospective purchaser that a “[s]ervice plan with AT&T [would be] required for cellular network capabilities on expiration of initial new two-year agreement.” This at-purchase information was more than enough disclosure to put consumers on notice that they might never have a choice of cellular service for their iPhone, and to thus preclude a Kodak-type aftermarket.

Moreover, it is sheer speculation –- and illogical -– that failing to disclose the five-year exclusivity term would produce monopoly power, i.e., would allow Apple, a brand new entrant in cell phones, to “exert raw power in the aftermarket without regard for commercial consequences in the foremarket.”

The only question now is whether or not the contract is still valid. As Engadget’s Nilay Patel points out, “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.”


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