iSuppli: Why Apple is sticking with AT&T

    By Philip Elmer-DeWitt

    Despite dropped calls, service interruptions, sluggish downloads and thousands of would-be customers who say they'd buy an iPhone in a New York minute if only Verizon (VZ) carried it, Apple (AAPL) is not likely to drop its exclusive service deal with AT&T (T) when the current contract expires in 2010.

    That's the conclusion of a report issued Thursday by analysts at iSuppli, a market research firm based in El Segundo, Calif.

    "The main reason Apple is likely to stick with AT&T beyond 2010," says iSuppli's Francis Sideco, "is the relatively wide usage and growth expected for the HSPA air standard."

    According to Sideco, the high speed packet access wireless standard used by AT&T is set to grow more than five fold over the next three years, from 269.1 million subscribers worldwide today to 1.4 billion in 2012.

    By contrast, the EVDO standard used by Verizon — but not widely overseas — is likely to grow at less than half that rate, from 145.2 million in 2009 to 304.6 million in 2013. (See chart below the fold.)

    As others have pointed out, sticking with Apple could be a mixed blessing for AT&T, whose image seems to suffer whenever anything goes wrong with Apple's phone.

    "iPhone users are overloading AT&T’s network with data traffic," writes iSuppli director Jagdish Rebello. "However, the real problem is that AT&T has not found a way to monetize data traffic generated by the iPhone."

    Below: iSuppli's forecast.