Memo to AT&T: Help Me to Help You

Includes: AAPL, CMCSA, T, VZ
by: Robert H. Heath

This summer I wrote about AOL (NYSE:AOL) and how widespread service failure can actually be a bullish signal for a company, if the company responds correctly.

This week, AT&T (NYSE:T) Mobility Chief Executive Ralph de la Vega disclosed that AT&T was considering "incentives" to encourage customers, especially data-guzzling iPhone (NASDAQ:AAPL) users, to reduce the amount of wireless bandwidth they consume. To which, Dan Lyons, in the persona of Fake Steve Jobs, responded in a typically humorous and profanity-laden post:

So let’s talk traffic. We’ve got people who love this goddamn phone so much that they’re living on it. Yes, that’s crushing your network. Yes, 3% of your users are taking up 40% of your bandwidth. You see this as a bad thing. It’s not. It’s a good thing. It’s a blessing. It’s an indication that people love what we’re doing, which means you now have a reason to go out and double or triple or quadruple your damn network capacity. Jesus! I can’t believe I’m explaining this to you. You’re in the business of selling bandwidth. That pipe is what you sell. Right now what the market is telling you is that you can sell even more! Lots more! Good Lord. The world is changing, and you’re right in the sweet spot.

This is the "AOL Offline" problem all over again. Consumers on a flat-rate bandwidth plan with a choice of 100,000 apps to run on their iPhones want to take advantage of all the cool stuff they can do with what is essentially a pocket-sized computer. When it faced the same problem, AOL responded by aggressively adding bandwidth and signing up 27 million households at its peak. True, things eventually went south for AOL... but come to think of it, if AOL had figured out how to offer even more bandwidth by migrating to broadband, it might not be the shrunken colossus it is today.

It's been a rough week for AT&T. Mr. de la Vega's disclosure of AT&T's thinking absent any specific proposals led to a groundswell of online suspicion, complaints and rants about AT&T's wireless service at a time when Verizon (NYSE:VZ) is aggressively attacking AT&T's 3G wireless coverage in a series of pointed and amusing ads.

What's worse, when Dan Lyons (half?) jokingly suggested that subscribers should engineer a "chokehold" on the AT&T network by using bandwidth-intensive applications at a coordinated time, the meme spread via Twitter and Facebook and was picked up by the mainstream media, ensuring, that by the end of the week, every sentient American was aware, at a minimum, that a lot of other people thought AT&T's wireless data service sucks.

The Verizon marketing guys are undoubtedly enjoying an extra round of drinks at happy hour this evening.

AT&T, here's what I'm willing to do to help.

Send me one of those 3G Microcell devices you've announced but seem to be testing only in Charlotte, North Carolina. I'll hook it up to my home network and it'll route my iPhone calls from my home over my DSL service instead of your wireless network.

Admittedly, this isn't going to free up much existing bandwidth on your wireless network, because -- ahem -- I don't make too many calls from the one window on the third floor where I can actually get two bars of service. But at least my cell phone will work in my house and you won't have to put up another tower in the vicinity, so we'll both be ahead.

Oh, and when the 3G Microcell arrives, I don't want to pay $150 for it, nor do I want to pay an additional $19.99 or even $9.99 per month to use it on top of the $100 per month I already pay for my cell phone service. After this week, do you really want to deal with the PR implications of that pricing model? "Unhappy with your cell-phone service? Now you can pay more!" Trust me, you really don't want to go there.

But I'm a fair guy, so let me know what your marginal cost is for the millionth unit you manufacture, and I'll pay that.

Now comes the good part. If you build appropriate security into the device, I'll let strangers in my neighborhood route their calls through it too! That will free up bandwidth on your network, provide more coverage and save you money. Even better, you could offer the same deal to my neighbors and pretty soon, you might not see any wireless traffic on your network at all in this neck of the woods. Hell, if y'all want to have some real fun, pay me to switch to Comcast high-speed internet and we'll route your traffic over their network. This net neutrality stuff is delicious with irony if you just work at it a little.

Admittedly, I didn't think this up all by myself; engineers and entrepreneurs have been talking about wi-fi mesh networks for awhile, but now you have an economic incentive, a user base and a compelling business reason to make it happen.

Rarely in business do you get an opportunity to see the future so clearly because the past provides such a compelling example of how to act.

Let's make this happen, whaddya say?

Disclosure: No positions

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