Buyers Wary of Extended AT&T Contracts with iPhone 4

Apple CEO Steve Jobs unveiled the latest smartphone in Apple’s repertoire, the iPhone 4, on June 8 at the WWDC, and though it boasts some fancy new features—a slimmer body, a “retinal display” with more pixels than the human eye can process, and video chat capabilities with FaceTime—some buyers remain wary because of the extended contract with AT&T.

After Apple first offered the device to Verizon four years ago and was turned down, they turned to AT&T, who agreed to the exclusive contract and reaped 4.3 million subscribers toward the end of 2008 in benefits.

According to comScore’s Data Passport report, AT&T is second only to Verizon in smartphone purchases, but leads the market in smartphone purchases by users over the age of 13. Since users in this demographic tend to download more data, AT&T collected 18 percent more revenue a month in data revenues per customer than did Verizon last quarter.

Data revenues, which come from Web browsing, messaging, and wireless application downloads, are projected to be the way of the future as they are quickly supplanting phone calls—and AT&T is positioned at the forefront.

However, several market analysts predict that the extended honeymoon for AT&T is quickly running dry, and some say that the iPhone may be available for use with Verizon in 2011.

A June 8 Wall Street Journal Article reported that executives at both Apple and Verizon speak regularly and say that Apple is even developing an iPhone that is compatible with Verizon’s service.

All of this bodes for shaky ground for AT&T customers, many of whom feel locked into contracts with a provider that has reportedly dropped three times more calls than any other carrier—including Verizon.

Additionally, it is speculated that AT&T is using stepped-up measures to lock customers in to their contracts. As of June 1, AT&T jumped the early contract termination fee from $150 to $325. Also, anyone who currently has a contract with AT&T that will expire in 2010 can purchase the iPhone 4 at a lower rate, provided they renew their contracts for another two years.

Is this a coincidence, or is AT&T trying to lock customers in before their exclusive contract is up?