Tying of the iPhone to AT&T
Encyclopedia
When Apple initially released the iPhone
on June 29, 2007, it was sold exclusively with AT&T
(formerly Cingular) contracts in the United States. The tying arrangement between Apple's smartphone and a specific service provider caused some controversy, bringing the concepts of jailbreaking and bricking into the mainstream debate over the future of smartphone technology.
reached an agreement with the wireless division of the telecomm giant AT&T (Cingular at the time) to be the iPhone's carrier. In return for five years of exclusivity, roughly 10 percent of iPhone
sales in AT&T stores, and a thin slice of Apple's iTunes
revenue, AT&T granted Apple roughly $10 a month from every iPhone customer's AT&T bill. In return, consumers were unable to use any other carrier without heavily modifying their device.
Apple retained complete control over the design, manufacturing, and marketing of the iPhone.
Since some customer were trying to jailbreak their iPhone to avoid the At&T network, AT&T decided to charge consumers if they were to leave the network. This caused complaints among many consumers, as they were forced to pay an additional early termination fee of $175 to end the contract, and the device would remained locked. Other companies such as Google
complained that tying encourages a more closed access based wireless service.
A second case was filed in the United States District Court for the Northern District of California
in 2007. The plaintiff, Paul Holman, filed a complaint against Apple, Inc. and AT&T Mobility, LLC. Holman alleges that he is unable to switch carriers or change SIM cards without losing improvements to his iPhones which he is entitled to. The plaintiff similarly references the Sherman Act as being violated by the defendants. On July 8, 2010 the case was affirmed for class certification. On December 9, 2010 the court ordered a stay
on the case, awaiting the Supreme Court's decision in AT&T v. Concepcion. This secondary case disputed whether a clause in AT&T's contract that limited complaints to arbitration, met the stat's basic standards of fairness. On April 27, 2011 the Supreme Court ruled that AT&T did indeed meet the stat's standards of fairness.
IPhone
The iPhone is a line of Internet and multimedia-enabled smartphones marketed by Apple Inc. The first iPhone was unveiled by Steve Jobs, then CEO of Apple, on January 9, 2007, and released on June 29, 2007...
on June 29, 2007, it was sold exclusively with AT&T
AT&T
AT&T Inc. is an American multinational telecommunications corporation headquartered in Whitacre Tower, Dallas, Texas, United States. It is the largest provider of mobile telephony and fixed telephony in the United States, and is also a provider of broadband and subscription television services...
(formerly Cingular) contracts in the United States. The tying arrangement between Apple's smartphone and a specific service provider caused some controversy, bringing the concepts of jailbreaking and bricking into the mainstream debate over the future of smartphone technology.
History
After a year and a half of negotiations, Steve JobsSteve Jobs
Steven Paul Jobs was an American businessman and inventor widely recognized as a charismatic pioneer of the personal computer revolution. He was co-founder, chairman, and chief executive officer of Apple Inc...
reached an agreement with the wireless division of the telecomm giant AT&T (Cingular at the time) to be the iPhone's carrier. In return for five years of exclusivity, roughly 10 percent of iPhone
IPhone
The iPhone is a line of Internet and multimedia-enabled smartphones marketed by Apple Inc. The first iPhone was unveiled by Steve Jobs, then CEO of Apple, on January 9, 2007, and released on June 29, 2007...
sales in AT&T stores, and a thin slice of Apple's iTunes
ITunes
iTunes is a media player computer program, used for playing, downloading, and organizing digital music and video files on desktop computers. It can also manage contents on iPod, iPhone, iPod Touch and iPad....
revenue, AT&T granted Apple roughly $10 a month from every iPhone customer's AT&T bill. In return, consumers were unable to use any other carrier without heavily modifying their device.
Apple retained complete control over the design, manufacturing, and marketing of the iPhone.
Since some customer were trying to jailbreak their iPhone to avoid the At&T network, AT&T decided to charge consumers if they were to leave the network. This caused complaints among many consumers, as they were forced to pay an additional early termination fee of $175 to end the contract, and the device would remained locked. Other companies such as Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
complained that tying encourages a more closed access based wireless service.
Court cases
After the iPhone was released, questions arose about the legality of Apple's arrangement, and in October 2007 two class-action lawsuits were filed against Apple, one in federal court and the other in state court. The suits claim that Apple's exclusive agreement with AT&T violates California antitrust law. The suit was filed by the Law Office of Damian R. Fernandez on behalf of California resident Timothy P. Smith, and ultimately sought to have an injunction issued against Apple to prevent it from selling iPhones with any kind of software lock, in addition to $200 million in monetary damages. The plaintiffs of the Smith v. Apple Inc. case claim that Apple failed to disclose their five year agreement with AT&T to purchasers when they bought their iPhones with a two year contract, citing the Sherman Act's prohibition on monopolization. The court has not yet rendered a decision in the case.A second case was filed in the United States District Court for the Northern District of California
United States District Court for the Northern District of California
The United States District Court for the Northern District of California is the federal United States district court whose jurisdiction comprises following counties of California: Alameda, Contra Costa, Del Norte, Humboldt, Lake, Marin, Mendocino, Monterey, Napa, San Benito, San Francisco, San...
in 2007. The plaintiff, Paul Holman, filed a complaint against Apple, Inc. and AT&T Mobility, LLC. Holman alleges that he is unable to switch carriers or change SIM cards without losing improvements to his iPhones which he is entitled to. The plaintiff similarly references the Sherman Act as being violated by the defendants. On July 8, 2010 the case was affirmed for class certification. On December 9, 2010 the court ordered a stay
Stay of proceedings
A stay of proceedings is a ruling by the court in civil and criminal procedure, halting further legal process in a trial. The court can subsequently lift the stay and resume proceedings. However, a stay is sometimes used as a device to postpone proceedings indefinitely.-United Kingdom:In United...
on the case, awaiting the Supreme Court's decision in AT&T v. Concepcion. This secondary case disputed whether a clause in AT&T's contract that limited complaints to arbitration, met the stat's basic standards of fairness. On April 27, 2011 the Supreme Court ruled that AT&T did indeed meet the stat's standards of fairness.