The iPhone's AT&T exclusivity extended to 2011?

AT&T's exclusive deal to be the carrier for the iPhone in the United States has been a boon to the company. In the second half of 2008, AT&T gained more than four million new iPhone subscribers. 

But the exclusive deal is reported to end in 2010, according to "people familiar with the matter." If AT&T wants to keep its grip on the next-generation versions of this revolutionary device, it needs to convince Apple to extend the exclusivity arrangement.

It's going to be tough -- Apple wants to get its products in the hands of more people, and many customers are too loyal to another carrier, unable to get good AT&T coverage, or wary of AT&T's reputation. There has been a lot of interest in our prediction about a Verizon iPhone being announced by the end of June 2009, as well as an earlier prediction around MacWorld 2009.

On the other hand, AT&T has shown it will go out of its way to work with Apple's demands on the iPhone. The latest rumor: AT&T will drop the monthly service plan price by $10 when a new iPhone model is reportedly released next month. Another potential reason for Apple to agree to extend its exclusivity deal with AT&T is the cost associated with developing and rolling out an iPhone that works on other carriers' networks (see discussion here and here).

Apple would also have an incentive to announce such an extension soon rather than later: Too many potential customers are waiting on the sidelines, hoping that Apple will open up to other carriers such as Verizon. By making it clear that AT&T is the exclusive iPhone partner for longer, there will be a strong incentive for the holdouts to come in from the cold.   

PREDICTION: Reports say that AT&T is in talks with Apple to extend its exclusivity agreement for iPhone from 2010 to 2011. The key criteria for this prediction is that a formal announcement by AT&T and/or Apple will be made that states AT&T's iPhone exclusivity has been extended to some point in the year 2011. For favorable judgment, the announcement must be made by the end of August 2009.

Note that an announcement of an expiry date in 2011 will not count as a favorable criteria unless it is made clear that this date is an extension of the original expiry date of the exclusivity arrangement.