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Dumping exclusivity could double iPhone sales

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Apple could double its iPhone sales if it ended its policy of exclusive contract with mobile service providers.

That's the considered opinion of Morgan Stanley analyst Kathryn Huberty, voiced in a research missive issued Friday morning.

Huberty cites a 136 per cent increase in the iPhone's French market share after the überpopular smartphone became available from SFR and Bouygues Telecom after initially being limited to Orange.

"This total opportunity is substantial," Huberty writes. "It adds up to an incremental 20.3M iPhone units."

Although the iPhone is unarguably popular even in single-carrier countries, Huberty sees significant growth possibilities if those markets open up. "In the top six iPhone markets that are still exclusive," she writes, "we believe that Apple’s market share could rise to 10 percent, on average, in a multiple carrier distribution model from 4 percent today."

Not that Apple has limited itself to one-carrier-per-country arrangements. Although Huberty used France as her example, she could also have mentioned Australia (Optus, Telstra, Vodafone, Three, and Virgin Mobile), Canada (Rogers and Fido), Hong Kong (Three, Broadway, and Fortress), India (Vodafone and Bharti Airtel), and many other countries where multiple providers compete.

Even tiny Luxembourg offers iPhone buyers a choice of three carriers: Vox, LuxGSM, and Tango.

In the UK, exclusivity is about to be overcome, with Vodafone set to join O2 early next year. The US, however, lags behind. AT&T has a lock on iPhone distribution in the States, and is reportedly angling to extend its exclusivity deal for at least another year.

One barrier to breaking AT&T's hold on the iPhone is technological. AT&T's network is based on GSM mobile tech, while the most obvious additional carrier, Verizon - which has the largest mobile network in the US - uses CDMA.

But if Verizon could guarantee Apple a few million sales, we see no reason why Cupertino couldn't make a CDMA-based iPhone - although, of course, a customer-education effort would be required to inform owners of existing iPhones that they couldn't immediately shift their loyalty to Verizon.

And if Apple provided Verizon with a CDMA iPhone, those existing AT&T customers would be mightily peeved. AT&T has won few friends with its iPhone service, due to a plethora of problems: dropped calls, delayed MMS support (which resulted in multiple lawsuits), steep upgrade fees (from which it backpedaled - but only a bit), charges of playing favorites with media streaming (and American Idol voting), still-delayed internet tethering (perhaps waiting for progress on its current system upgrade effort), and more.

Odds are, however, that a CDMA iPhone 3GS won't appear. Verizon's chairman and CEO chairman Ivan Seidenberg said as much earlier this year, when he told The Wall Street Journal that if his company were to offer an Apple smartphone, it would most likely do so down the road, when their 4G LTE network is up and running.

At that point, both Verizon and AT&T will have LTE networks, and their competition would be based on service and price, not underlying technology.

So iPhone customers in the US aren't likely to benefit from Huberty's advice to Apple, at least in the short term - and despite calls by US senators to put an end to exclusivity contracts. ®

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