There's a meme going around that because Verizon turned down Apple when it came to it with the iPhone that the company is obviously stupid, or at least the guy who made that decision is. Why is he/they stupid? Duh, because the iPhone is selling like mad, breaking all kinds of records, making AT&T a fortune. Oh wait, about that last part, has anyone confirmed that AT&T is making a mint on this deal? We know Apple is going to make out pretty well, but AT&T?
I'm not sure the answer is as obvious as people think it is.
Let's first talk about how many subscribers the iPhone is likely to net AT&T. The most optimistic forecast I've seen is that the company will sell 8 million of 'em in 2008. Based on the most recent data I could find, that would be somewhere between 3-4% of the market. Of course, AT&T already has over 25% market share, so many of these customers will be their own, bringing the market share gain somewhere closer to 2%.
There's another problem, which is that Apple is getting some sort of payment from AT&T, either in the form of a revenue share of a bounty of sorts. This further reduces the value of these captured customer. As for AT&T's existing users that it turns into iPhone customers, it's conceivable that they'll see an ARPU drop, no?
There's also the problem of image and public perception. Anytime someone has a problem with their iPhone, the default will be to blame AT&T. In fact, there's already the viewpoint that AT&T's presence in the whole affair is actually bring down the value of the iPhone. There are plenty of people that want the device unshackled from Apple's chosen carrier. Ultimately you have to ask how much money can there be in it for AT&T if there's a sense that it brings absolutely no value to the table. All the value comes from Apple and its designers, which means that (almost) all of the profit is going to go to Apple. It's safe to assume that AT&T won this deal, because it was the quickest to genuflect in front of the iGod.
So yeah, Verizon is stupid for passing on the iPhone, obviously.