Court documents confirm Apple/AT&T exclusive five year deal, questions surface over contract renegotiations

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Date: Tuesday, May 11th, 2010, 05:51
Category: iPhone, News

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With additional chatter surrounding the idea of Apple extending the iPhone to Verizon this year, the exact specifics of Apple’s five-year exclusive contract with AT&T have never really been published. Fortunately, the cool cats at Engadget managed to uncover the following:

An ongoing California class-action lawsuit filed in 2007 claims that Apple and AT&T illegally exerted a monopoly over iPhone service by telling customers the iPhone’s required service contract was two years long when the Apple / AT&T exclusivity deal was actually for five years. Per the case, this required buyers to re-up with AT&T for three years if they wanted to keep using the iPhone. Within Apple’s response to these allegations, and in addition to arguing that no one was ever promised an unlocked iPhone after two years, the company’s lawyers repeatedly confirm the existence of the five-year agreement while noting it was publicly reported in USA Today.

Select quotes include the following:
“The duration of the exclusive Apple-[AT&T] agreement was not ‘secret’ either. The [plaintiff] quotes a May 21, 2007 USA Today article – published over a month before the iPhone’s release – stating, “AT&T has exclusive U.S. distribution rights for five years-an eternity in the go-go cellphone world.”

“[T]here 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… Moreover, it is sheer speculation – and illogical – that failing to disclose the five-year exclusivity term would produce monopoly power…”

Since this case occurred in October of 2008 and has gone relatively off the record, the real question is whether or not the exclusivity deal is still on the books. Even given that the case is ongoing and many of its relevant bits have been under seal since 2009, contracts can be canceled, amended, and breached in many ways, especially given AT&T’s track record and the explosion of the iPhone market. 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.

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