AT&T reported its quarterly numbers Wednesday morning, and they certainly showed that the iPhone is still a significant driver of growth for the carrier. 3.6 million iPhones were activated during the quarter, and iPhone subscriber churn (customers with the device who left for a competitor) was unchanged from the same period last year.
This is significant for one reason: it was the first quarter that the Verizon iPhone was available. Being able to keep churn flat is quite an accomplishment, considering that so many analysts said that Verizon would siphon customers away from Big Blue.
PC Magazine’s Peter Pachal thinks that the iPhone 3GS–which is available on AT&T but not Verizon–was the X factor here, and may have helped the company artificially bolster its numbers. While the $49 iPhone 3GS may have helped the company sell and activate more phones, I believe Peter’s logic is a little off when it comes to keep people on the carrier.
Here’s why. The 3GS is now a two year old device. The iPhone users who would be churning off of AT&T and onto Verizon in all likelihood are already on a 3GS. Add to this that anecdotal evidence has shown a majority of iPhone purchasers go for the latest and greatest and the 3GS’s effect seems relegated to the most economy-minded buyers.
It seems no different to me for AT&T to use its position with the 3GS to sell phones as it’s done with older Android phones — provide a cheaper version for those that don’t need all the bells and whistles. Until Apple provides an all-new “cheap iPhone” (which I think it needs to do), why not? Verizon’s going to do the same thing with the iPhone 4 when the 5 comes out — whenever that may be.
AT&T was wise to make the 3GS a bargain. It’s still is a very capable device, and probably will be able to handle almost anything Apple does with iOS for a while yet — so for $49 on a two-year contract, you can’t go wrong.
One last note: Several industry watchers have come out saying that the number of Verizon iPhone purchasers coming from AT&T was nowhere near as big as first thought. All in all, Verizon just added to the iOS ecosystem, but did not cannibalize it.