Is the Verizon iPhone deal a disaster for AT&T?

No longer the exclusive carrier of Apple smartphone, AT&T will lose subscribers

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Starting next month, Verizon Wireless will become only the second U.S. wireless carrier to sell the iPhone, breaking AT&T's 3 1/2-year run as the nation's exclusive provider of Apple's wildly popular smartphone.

At an announcement event in New York City's Lincoln Center, Verizon executives said the carrier will sell the iPhone 4 for $199.99 for a 16 GB unit and $299.99 for the 32 GB version. Both will require a two-year contract (which, as I wrote Monday, could be a sticking point for some customers).

(Also see: Some advice Apple and Verizon don't want you to hear)

Verizon said it is offering current subscribers an exclusive opportunity to preorder the iPhone 4 now. Industry analysts estimate that Verizon could sell between 9 million and 14 million iPhones this year.

The real question, though, is how many they'll sell to current AT&T subscribers. I've seen estimates that from 3 million to 3.5 million AT&T iPhone users will defect to Verizon this year. Given that AT&T has nearly 93 million total subscribers, that's not exactly an instant death blow. But it's a big hit in terms of image. After all, AT&T had something popular and unique that millions of consumers wanted. Now it's lost that edge.

Over time, however, the damage could be considerable. A study released last fall by Deloitte before the Verizon deal was reached suggested that nearly half of all iPhone users would switch to Verizon Wireless from AT&T if they had the opportunity. As their contracts expire, they'll have that opportunity.

In the past few days, AT&T's response to the Verizon-iPhone deal has been to snipe at Verizon, questioning whether its CDMA technology could adequately handle the expected data load. Coming from a carrier routinely rated the worst by subscribers, that's a bold tack. But it's really just corporate spin and damage control, and AT&T will have to do better than that if it wants to continue challenging Verizon as the top wireless carrier in the U.S.

Verizon's decision to begin selling the iPhone also is expected to negatively impact sales of Verizon's popular Droid phones powered by Google's Android mobile operating system. Over the past year Android has been gobbling up smartphone market share in the U.S., mostly at the expense of BlackBerry maker Research in Motion. With Verizon customers disinclined toward the business-oriented BlackBerry now able to choose between Droids and iPhones, the Android OS may begin to lose momentum.

We won't get a real sense of the new landscape until market-share numbers are in for March, the first full month that the iPhone is available from Verizon.

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