Can AT&T Handle the iPhone?

By MG Siegler

You almost have to admire AT&T’s (T) consistency. They are consistently finding new ways to screw up almost daily now.

The latest issue involves the story we covered Tuesday about apps using the Google Voice service getting pulled from Apple’s App Store. In a follow-up post, we didn’t exactly go out on a limb suggesting that it was AT&T and not Apple (AAPL), that was responsible for the app being pulled. After all, word is that Apple VP Phil Schiller personally ushered one of those apps, GV Mobile, through the approval process initially. And today brings word that the apps were indeed removed at AT&T’s request. Daring Fireball’s John Gruber cites a “reliable little birdie” on the news, and we’ve just heard the same thing from a source as well.

While some found it very hard to believe that AT&T would be the ones behind something like this, given that it allows Google Voice apps on other phones on its network, those kind of contradictions are nothing new when it comes to AT&T with the iPhone. It’s the same contradiction that prevents the SlingPlayer iPhone app from working on AT&T’s network, while it works just fine on other AT&T devices. And the same one that is likely to cripple a Hulu app, if it ever gets released.

It’s well known that iPhone users consume a lot more data than other smartphone users, and so all of this seems to be a case of AT&T getting more than it bargained for when it signed the exclusive deal to be the iPhone carrier in the U.S. And while you might think that it would be a nice problem to have, a number of sources have indicated to us that the iPhone’s rapid growth is what is responsible for AT&T’s network degradation over the past several months, particularly in places like San Francisco, where iPhone usage is very high.

Now just imagine the service nightmares if AT&T permitted high-use/high-bandwidth services on the device. While it has been laughably slow to roll out its official tethering option for the iPhone, I shudder to think of what it will do to the network when it does become available later this year. Of course, AT&T is expected to charge and arm and a leg for the option, in a move that is undoubtedly, at least in part, to limit the number of users who will sign up.

And that’s what it has come to for AT&T with regards to the iPhone: Restrictions, restrictions, restrictions.

AT&T is constantly promising that network upgrades are coming, but Apple keeps selling more and more iPhones. While it would never admit it, I think it’s beyond time to wonder if AT&T can handle the exclusive iPhone partnership anymore. I’m not saying that the situation would be different had it been Verizon (VZ) who got the exclusive deal, I’m simply stating what is on everyone’s mind: AT&T is simply not working the way it should be for customers who are paying close to, or in excess of, $100 a month.

Certainly, losing the exclusivity would hurt the company’s bottom line, and would hit the customer base pretty hard, but losing the iPhone exclusivity may end up being a good thing for AT&T. Good in that it’s network may finally work again.

Of course, AT&T is said to be working hard to extend the exclusive deal with Apple beyond next year. But that will be a nightmare for everyone involved. We have no shortage of sources, some very close to Apple, now telling us that as mad as all of us (the customers) are with AT&T, Apple is just as mad, if not more so. Apple can speak in platitudes all it wants during earnings calls about its partnership with AT&T — behind the scenes, trust me, they hear our complaints loud and clear.

But the one hot new wireless partner that is always mentioned, Verizon (since it is the biggest network and generally considered to be more reliable), looks like it is still playing hardball. Wednesday morning it officially announced that it would be getting the Palm Pre in early 2010, and it’s playing up its RIM partnership and its own app store. That’s what you call leverage in negotiating with Apple, which it is.

Still, even the iPhone on another, smaller GSM carrier, like T-Mobile, would undoubtedly help ease some of the strain on AT&T’s network. Again, AT&T would never admit it, but the era of iPhone exclusivity may have to be ended over sheer strain. And when that happens, we may just see AT&T approving of Google Voice apps and SlingPlayer apps on the iPhone again. AT&T has painted itself into a corner, and it’s fighting hard to keep itself there, but it’s simply not a viable option anymore for any of the parties involved (Apple, the customers, and even AT&T).

When I asked for a comment from AT&T on this latest fiasco, here’s what I got:

Nope – Apple is the one who can talk about their App Store.

That would seem to suggest that AT&T is saying Apple is in complete control over all of this. But we know that’s simply not the case. Is AT&T in denial? No, I think that they think we just can’t handle the truth. And I think that truth is that they can’t handle the iPhone, anymore.

Original post

Comments

[isellapple:]

I have not experienced any problems with my new iPhone on the network here in Cincinnati. When the 3g came out last year there were some issues with the network, but everything is good here as of late. AT&T does need to roll out a faster network in order to keep its current customers. Otherwise everyone will want to switch to Verizon if they get next years iPhone. As far as Apps being denied, I wish Apple would have a better system of accepting applications because my current App has been denied twice, and currently with my third submission I have waited 2 months and Apple has yet to update my approval status. Hopefully my Sell Your Mac App will be available soon to offer you free price quotes on your used computers!

Jul 29 02:10 AM

[potstickerfan:]

Apple is just as mad? Why would that be? AT&T's so called inadequate network hasn't slowed the record sales of each iPhone model. If the 3Gs sales somehow didn't meet expectations i could understand your recycled argument, but Apple is more than happy with all the AT&T cash flowing their way. Loss of an exclusivity deal means loss of revenue for Apple. Apple wont collect a single dime from the carriers if it is opened to the general masses and they will never sell enough of the $400-600 phones to the general public to make up for AT&T's current $300+ subsidy on each phone sold. Apple is about cash, not network quality. As for AT&T, cut them a little slack. They are dumping $10 billion a year into wireless upgrades. Read the earnings reports. Verizon wouldn't have fared much better with the amount of data being used by iPhone customers. It's like the early stages of the internet. No one knew what the demand would be when dial-up ISPs first introduced the internet to the world. Surfing the net was done at 28k. Today we are at 10 megs+. The hardware is always ahead of the network. Relax.

Jul 29 03:01 AM

[dave in boston:]

There were no iPhones when 3G networks (and associated standards) were designed. In "information super-highway" terms, roads designed for trucks and busses during commuter periods are being adapted to serve a sea of scooters that are busy all day. VZ and Sprint's 3G technology has an earlier end of life and is therefore less suitable for such adaptation: at a reasonable cost to their margins. With this in mind, it is unclear why Apple would bother to re-design iPhone for VZ and Sprint's outdated 3G networks when both are talking 4G already. Instead I suspect that real competition (and choice) in the iPhone network service provider space is with 4G. That's when operators will have a real chance to show how good their plans and networks really are: and consumers will have a real choice. Until then, we have no basis for comparison.

In the meantime, the "highway department" has a real responsibility to keep their roads safe for all who travel and pay tolls. That's why there are rules for the drivers and vehicles that use them. If you (the loyal customer) have gotten used to your commute experience, would you appreciate a bunch of farm equipment, goats and sheep on the road? I suspect these customers would not appreciate the travel interruption any more than the highway department would appreciate the cleanup. :-) Keep this in mind before criticizing Apple and AT&T for rejecting applications proactively. This strategy is much better than letting all in and figuring out what to do with them after the complaints that come later.

Jul 29 07:04 AM

[SiliconVall...:]

Very nice analogy, love that scooter part!

Jul 29 09:04 AM

[vassar:]

I have not had any problems with ATT. Verizon, my prior carrier, was no better (and had worse customer service than ATT).

I think ATT has become the (undeserved ) whipping boy of the wireless industry.

Jul 29 09:29 AM

[buoy:]

I think there is more going on behind the scenes than anyone is admitting to...all of these companies are very hush, hush at this time.

Jul 29 09:32 AM

[darkphoenix...:]

Living in San Francisco, I have NO cell signal in my apartment. I have to go outside to make a phone call and I still have 2 - 3 bars on E even with AT&T telling me I am in a 3G network. When I called AT&T about my lack of coverage, I was told "maybe you need to upgrade your phone". Excuse me, I have a brand new iPhone!!! That is not acceptable. I have friends who work at Apple, and all they get are complaints about the service, because the customers are told by AT&T that Apple is responsible. So here is my problem: I love the phone, hate the service. I just want to be able to make a phone call without it dropping... I am paying AT&T $130 a month for crappy service. That is unacceptable. When my contract expires, I will never choose AT&T as my service provider ever again.

Jul 29 09:38 AM

[mollytjm:]

obviously Apple is in negotiation with other carriers. they'd be crazy not to be! Verizon will want a lot of control, so it might be right that Apple will go with someone like t-mobile. i had only slightly better service with Verizon than i had on ATT the first 6 months i had an iPhone. then ATT got a lot better...i live in a Philly suburb. So i think they are trying to upgrade but the iPhone took off like gang busters and even Apple (initially) was surprised. I never considered giving up my iPhone after the first hour i had it, though! It's wonderful.

Jul 29 10:40 AM

[Rocketmann:]

The reason AT&T is not rolling out 3G back haul even faster is because they are planning for LTE in 2011. Verizon and AT&T are both going LTE (Long Term Evolution) and Apple will make handsets in the iPhone and iPhone macro form factors. Under LTE all internet enabled services will function including VoIP, Hulu, Tethering, HandtopHotSpot, and even web serving. I would like to see Apple assist with the back haul hardware implementations under the X-serve division.

Jul 29 12:16 PM

[robbyx:]

In the two years since I purchased my iPhone, I've seen AT&T's quality of service fall of a cliff. These days I'm lucky if I don't deal with multiple dropped calls per day - all in areas where I used to have full signal. I've had voicemail and text issues too. They're charging ridiculous rates and providing a mediocre (at best) service. As much as I love my iPhone, I'm seriously thinking of picking up a free phone with a cheap voice plan and buying an iPod Touch when the new models are released in the coming months. I love the app store, but I'm stick of paying an arm and a leg for the iPhone.

Jul 29 01:51 PM

[User 463882:]

Baloney and I think you're one of those AT$T trolls they're putting out on threads to try and reflect resentment. Apple's not *all* about the cash otherwise why would they give me a new replacement phone to prove my network woes of the past few months (and going back a year to the 3G network rollout) is AT$T's fault and not theirs?! When I first got my iPhone over 2 yrs ago I got 3 bars at my house. 3G rolls out and it drops to 2 bars. 2 months ago it mysteriously drops to 1 bar and lots of dropped calls. Calls to AT$T and they blame me, my phone, Apple and anything else but their network. I'm not stupid, I hear the stories of them converting 2G space to 3G to help that side out but it screws me in the end. And the scum lie about it. $10 billion a year? Yeah, right. And that's why my service has gone from 3 bars to 1/0 bars, eh?


On Jul 29 03:01 AM potstickerfan wrote:

> Apple is just as mad? Why would that be? AT&T's so called inadequate
> network hasn't slowed the record sales of each iPhone model. If the
> 3Gs sales somehow didn't meet expectations i could understand your
> recycled argument, but Apple is more than happy with all the AT&T
> cash flowing their way. Loss of an exclusivity deal means loss of
> revenue for Apple. Apple wont collect a single dime from the carriers
> if it is opened to the general masses and they will never sell enough
> of the $400-600 phones to the general public to make up for AT&T's
> current $300+ subsidy on each phone sold. Apple is about cash, not
> network quality. As for AT&T, cut them a little slack. They are
> dumping $10 billion a year into wireless upgrades. Read the earnings
> reports. Verizon wouldn't have fared much better with the amount
> of data being used by iPhone customers. It's like the early stages
> of the internet. No one knew what the demand would be when dial-up
> ISPs first introduced the internet to the world. Surfing the net
> was done at 28k. Today we are at 10 megs+. The hardware is always
> ahead of the network. Relax.

Jul 30 09:57 PM

[PeterB:]

T-Mobile picking up the iPhone would only require a small phone fix (since they are also GSM), and maybe the rush from unhappy AT&T customers would help pay to upgrade their service. I cannot imagine buying a GSM phone without a SIM card (for cheap calls when visiting relatives etc. in Europe), but my T-Mobile service would presumably be better....

Aug 03 04:57 PM