Short term, I think its bad for AT&T. Apple has done a fantastic job of making sure AT&T remains the sole whipping boy for most of the "negatives" around the iPhone. Until the antenna fiasco with the iPhone 4, it was considered heresy to consider that some of the issues with the iPhone were related to the phone itself, not just AT&T's crap network. Well, kids, we're about to find out if it really was the network. If it is, then AT&T loses out short AND long term. If it the problems continue to surface on VZW's network, its going to be hard for Apple to quietly point the finger at AT&T.
As far as Android, it will not be dramatically affected. The iPhone is available internationally with no exclusive deals like here in the USA, and Android has no problems competing with the iPhone.
For us, the end users, its a win all the way around. Android will have to step up its game and quicken the pace of improvement, especially if the iPhone sells as well at VZW as it does at AT&T. You'll definitely see a renewed focus if they see numbers that show android sales dropping in favor of iphone sales. Competition among the manufacturers is good, especially since we can't get it among the providers, at least not in the USA.