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Verizon's New iPhone Ad Brings Back "Can You Hear Me Now?" Guy to Unload on AT&T

Verizon (VZ)'s new TV commercial for the iPhone 4, to launch Feb. 10, keeps up the implicit pact it has with T-Mobile (DTEGY) to whip AT&T (T) like a rented mule (video below). It's fun to see companies go at each other hammer-and-tongs, but this is one scenario that points out how irrelevant advertising often is to corporate strategy decisions.

The campaign brings back Verizon's "Can you hear me now?" guy, who ruled cellphone advertising from 2002 until 2010. At the end of the new spot -- which consists largely of closeup beauty shots of the new phone -- Test Man (as he's officially known) puts the device to his ear and in a slightly sarcastic voice says, "Yes, I can hear you now."

That's a clear punch aimed at AT&T, whose wireless service is best known for making iPhone users sound like they are underwater, at least when their calls aren't dropped altogether.

T-Mobile is keeping its girl-in-the-pink-dress commercials in heavy rotation, and those ads also attack AT&T. (They also borrow stylistically from Apple's (AAPL) discontinued "Mac vs. PC" campaign.)

AT&T has employed a multi-pronged strategy to deal with this hostile environment. It's offering new iPhones to customers for just $49; it's offering some existing customers their own free mini-cellphone tower to boost reception (I am not making that up); and its TV ads are focusing on the speed of its 4G network with a series of comical office scenarios in which the idiots who are not on AT&T get their messages a few seconds too late.

Will any of it make a difference? No. The entire market is currently being driven by three factors:

  • The perceived superiority of the iPhone as a product.
  • The perceived superiority of Verizon's coverage over AT&T's.
  • And the switching costs that AT&T has imposed on its existing customers to prevent them from flipping to Verizon.
That last factor will be much more significant than the effectiveness of Verizon or AT&T's ads in terms of new iPhone sales. For existing customers to leave AT&T, they must currently pay a usurious $325. We know the policy is successful because only 1.32 percent of AT&T's customers bail in any given quarter.

So that's the short run. The long run, of course, is that when any AT&T customer considers switching to Verizon they will encounter the $325 penalty and become even more furious at the company. This is what a brand in freefall looks like.


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