The value of AT&T’s service on the iPhone has been set at negative $400/per phone. This valuation is not from over-entitled iPhone users. It comes from AT&T and Apple.

Recently, AT&T and Apple started selling iPhones without a service contract for a $400 premium. Given the recent high profile problems at the SXWSi trade show and complaints from the media, apparently the two companies feel there is a market for iPhone users willing to pay a premium to not have their world delivered by AT&T.

Why This is News: Apple is coming out with a new generation of the iPhone, and wants to clean out the existing inventory. Typically, when a handset model is about to be replaced, the price drops significantly. Sometimes, the buyer even gets paid to take the phone (with a  contract).  It is interesting that rather than discounting the handset, AT&T and Apple think they can clear out inventory at a premium by losing AT&T. In a bad economy, this speaks volumes about AT&T’s perceived value.

Why This Matters: Presently, AT&T has the exclusive right to sell iPhones in the United States. But its exclusivity will eventually end. AT&T  should be using its exclusivity period to build customer loyalty and ensure that they keep customers once they have the choice of carrier.  Best case scenario for AT&T would be happy customers  that would want to stay with AT&T even if it did not have the iPhone.  However, it would probably be good enough if customers thought that AT&T was an important part of the the iPhone experience that they will stay with AT&T when they upgrade their iPhone.  If  customers are not loyal to AT&T, it risks a serious price war on the cost of the handset and monthly service on newer versions of the iPhone.

The Bottom Line: Right now, it seems clear that customer loyalty lies with Apple.  AT&T has announced upgrades and investments in its network that will become available later in 2009. Only Apple and AT&T know when the exclusivity period ends.  So perhaps, AT&T will clean up its act before the end of that period.

But, I suspect that its real ace in the hole is the fact that even after the expiration of the exclusivity period, customers  will only have a limited number of choices for wireless service providers. Moreover, the other three 3G service providers are likely to follow a similar short-term business model when they sell the iPhone.  As typically happens when marketing and customer service are ignored, it won’t end well, as we will see my next post: This is the iPhone’s Business Model on Crack.

Nine months and two Facebook redesigns ago, Jennifer Kutz wrote a post about the Wisdom of the Crowd Goes to a Trade Show. She discussed the trend of trade shows opening the show agenda selection process to their audience.  She mentioned one proposed panel in particular: Privacy and Personalization – Oxymoron or the Perfect Match?, for the SXSW Interactive show in Austin, and invited people to vote for that panel.

As SXSWi just completed, I thought it would be fun to fill you in on how things turned out. Our efforts to get the word out about the panel was successful. Privacy and Personalization – Oxymoron or the Perfect Match? received enough support that it was selected. The Guardian featured the panel in an article: @SWSXi: The impossible balance between privacy and personalisation?, and called the topic: “one of SXSWi’s core conversations.” The picture on the top left of this post is from the panel courtesy of the Guardian.

The experience also gave us an insight into the power of blogs and social media to create conversation about key issues.  We used Facebook and Twitter to point people to Vantage Points to get the word out. Rather than asking or pitching people to vote for our client, all we did was to discuss the topic and offer people a link to vote. This was a departure from the traditional PR model. But we believed facilitating conversation was more appropriate for topic and the SXSWi show audience.

The wisdom of the crowd approach has extended to voting for awards. This year, CTIA is allowing people to vote for its Emerging Technology Awards and Best of Show.  One of  our clients, Ditech Networks is nominated for its cool mStage platform which allows people to use their voice to access web applications in the middle of a mobile phone call.  You can read more about it in Technology Review. If you would like to vote for mStage for Best of Show, follow this link and choose mStage (third from left on the third line) as one of your favorites.  Feel free to check out and vote some of the other great nominated products too. It is good to part of the crowd that leads.