Verizon iPhone: It's Poison for AT&T's Brand

Last Updated Jan 12, 2011 4:42 PM EST

Verizon (VZ) finally has the Apple (AAPL) iPhone, and it's projected to sell plenty of them. The industry has rushed to assess the damage, and the general consensus (reflected by my colleague Erik Sherman here) is that the damage won't be bad.

And it won't. For a while, anyway.

All reasonable projections indicate that AT&T won't hemorrhage customers, but not all effects of the Verizon iPhone can be assessed by the size of AT&T's subscriber base. The AT&T brand has been uniquely transformed by the iPhone -- although not always for the better -- and it's about to lose that privilege.

Bad reputation beats no reputation
In major markets like New York and San Francisco, where cell phone coverage can vary tremendously by carrier and neighborhood, people -- at least in my anecdotal experience -- talk about cell phone carriers often. Before the iPhone, nobody caught flailing in small talk would ever jump to such an arcane topic as a mobile phone network. With iPhones in common usage, crapping on AT&T in conversation has become an acceptable substitute for discussions of the weather, the stock market or the laziness of Congress.

It was precisely because AT&T's data network was so unreliable that it became the topic of so many conversations. Granted, this isn't great publicity, but it cemented a relatively obscure reality into commonly-known fact: AT&T is (or, used to be) the only carrier with the iPhone. And yet, most iPhone users love their iPhones anyway.
From a branding perspective, this is a marvelous fluke. In any other context -- with any other phone -- a discussion about a crappy cell phone network would be poisonous to the company's brand. But in AT&T's case it cemented the relationship between AT&T and the phone amusingly referred to as "the Jesus Phone."

Utterly awesome brand awareness
What does AT&T get out of this implicit connection? Utterly awesome brand awareness. If iPhone is synonymous with AT&T, then every single iPhone that Joe Consumer sees is recognizable as an AT&T subscriber. Look around the streets of most cities in the U.S., and it's like looking at a real-life AT&T coverage map: little iPhone users dotting every street corner, creating a powerful visual impression of AT&T's enormous (and very rapidly growing) 3G network of customers.

With Verizon iPhones out in the wild, AT&T's customers will no longer be wearing their carrier on their sleeve when they pull out an iPhone over lunch, or use it to host a conference call during a meeting. That seemingly minor obfuscation is enough to take Ma Bell off people's lips and out of range of such acute public awareness.

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