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What Happens When the iPhone Is Set Free


Apple's media event on Wednesday could mark the end of the tumultuous relationship with AT&T.

Rumors. Even when they're far-fetched, they're fun to pass around -- and nothing lends itself to outlandish gossip and supposition quite like Apple (AAPL). But today, tech blogs and news sites are abuzz with one pretty plausible tidbit for the clandestine media event scheduled for this Wednesday.

Along with the Apple Tablet -- widely purported to be unveiled that afternoon -- an "inside source" claims that Steve Jobs and Co. will announce the end of iPhone's frustrating exclusivity contract with AT&T (T). The scoop was published on, which hasn't exactly proven itself to be a reliable resource and all but includes the grain of salt with its report. But given the ubiquitous disapproval of AT&T and the majority of its actions in 2009, it's not outside the realm of possibility that this announcement will come sooner than later. (See also, Why AT&T Is the Biggest Loser of 2009.)

Hot Hardware's source couldn't provide information on which mobile provider jumped aboard the iPhone train. Both Verizon (VZ) and T-Mobile (DT) are likely candidates with Sprint (S) being an outside chance. But another rumor says the Apple Tablet might utilize the 3G networks of both AT&T and Verizon, so a Verizon iPhone has a kernel more credibility than the competition.

Also substantiating the claim: Apple wasn't sure how Google's (GOOG) new smartphone was going to fare upon its January 5 release and may have been planning to release a few bombshells -- not just the coveted Apple Tablet -- to compete with the possible Google frenzy. Little did anyone know that the Nexus One wouldn't be a hit and Apple would have to worry more about the Motorola Droid (MOT) and the Android platform as a whole. Still, those two factors may have been enough incentive to play damage control.

Plus, many iPhone users have been clamoring for Verizon coverage for years. AT&T's frequent dropped calls, dead zones, and flaky 3G coverage have had customers itching to shred their contracts even with the early termination fees. All they needed was a better alternative, and with Verizon, they may get their wish.

And that sentiment would be mirrored on the corporate side as well.

Verizon would undoubtedly enjoy the increase in business, eager to prove its claims of having a beefier infrastructure than iPhone's currently beleaguered provider. (See also, AT&T's Lawsuit Only Magnifies Spotty Service). Apple, of course, would reap the benefits of more customers and increased satisfaction with the service.

And as unlikely as it sounds, AT&T -- all set to roll out Android, Windows Mobile (MSFT), and Palm (PALM) devices of its own this year -- may not shed too many tears over losing the iPhone. Sure, it ushered in a wave of new customers and earned the provider some prominent television ads. But for a device that overloaded its network and invoked an avalanche of negative press, the iPhone and its insurmountable data traffic held AT&T back from recovery. With that segment gone, AT&T would be given a chance -- and stripped of any excuse -- to improve its network.

Toward the end of last year -- when AT&T and Apple were pointing fingers in either direction as to who holds the blame for crappy service -- the partnership looked to be on the wane. Customers were upset, company spokespeople were sweating, and competitors -- mostly Verizon -- had plenty of ammunition. In order to please the user base, dodge the negative publicity, and forge a powerful front against the escalating competition, Apple and AT&T are almost certain to go their separate ways soon.

It's no longer a question of if, it's a question of when. And that question may have just been answered.

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