AT&T’s massive iPhone blunder

marco:

Some numbers:

  • Verizon Wireless has about 87 million subscribers. (ref)
  • Before the iPhone’s release, Verizon had about 61 million subscribers (ref). Much of their growth to 87 million was from the recent acquisition of Alltell, which brought about 15 million. (ref)
  • AT&T has about 77 million subscribers. (ref)
  • Before the iPhone’s release, AT&T had about 62 million subscribers. (ref)
  • About 21 million iPhones have been sold worldwide. (ref)
  • Most new subscribers to AT&T since the iPhone’s release have been iPhone buyers (ref, ref). Presumably, a very large portion of them had previously owned another mobile phone, so they came over from another carrier. And, given Verizon’s size, it’s likely that a very large portion of them came from Verizon. By the numbers and their relative growth rates, it seems reasonable to assume that Verizon has possibly lost 5 million subscribers to AT&T just for the iPhone.

Getting the iPhone exclusive could be the best thing that AT&T has ever done for their wireless business.

And what have they done with that great fortune so far?

Well, one thing they haven’t done is adequately expand their capacity. Cellular networks have been able to add major features (such as web browsing, conference calling, photo- and video-MMS, media streaming, and tethering) quickly in the past because an incredibly tiny percentage of people would ever figure out how to use them. The networks were hardly touched for anything except voice calls and SMS. Most people didn’t buy smartphones, and those who did rarely used anything beyond a regular phone’s data capabilities except email. They hardly even browsed the web because mobile browsers were so awful.

The iPhone has dramatically changed that. iPhone owners actually use the data network far more than owners of other devices because the functionality is finally accessible and pleasant to use, and many iPhone buyers have never owned another smartphone — they came straight from dumb flip-phones.

So while the iPhone has been a boon to AT&T — not only did they get a huge influx of customers, but iPhone users spend twice as much as AT&T’s average on their monthly bills — the additional network burden is significant. As soon as these trends became apparent to AT&T (easily within 2 months of the original iPhone’s 2007 release), they should have scrambled to expand their data-network capacity.

Instead, they sat on their asses and enjoyed the extra profits. AT&T has always been a “cherry-picking” network, building out coverage and upgrading speeds only when absolutely forced by competitors, and then only doing the bare minimum and only serving the most profitable areas.

Their mistake was in the assumption that AT&T was getting a bunch of new, loyal customers. In reality, iPhone owners are loyal only to the iPhone. The carrier is just a required utility given a few pixels in the corner to show their name. That’s it. We’re as loyal to AT&T as we are to our electric company.

The same passion that drove all of these customers to abandon the excellent Verizon network for this awesome device is also pushing them to demand more functionality and more bandwidth. iPhone users pay twice as much as flip-phone users, but AT&T can’t just pocket the difference — we have high data needs that we expect to be served for that additional money.

And now, the network is so strained and AT&T is so slow-moving that they’re holding Apple back, cramping the iPhone’s growth, and leaving them vulnerable to competing devices on better networks.

AT&T was given a great fortune with the iPhone exclusive, but they’ve completely failed to do anything to hold onto it. As soon as there’s a better option, they’ll lose a big portion of iPhone users who feel no loyalty to them because they’ve done absolutely nothing to deserve any.

I wouldn’t have left Sprint for AT&T (and my first iPhone), but my situation is somewhat unique. I had been a Sprint employee (web content & design for Digital Lounge) until the end of March when the company implemented huge reductions.

My phone benefit ran for a few months after the layoff date andmy plan had been and, at that time, continued to be: get a Palm Pre. I had seen some of the early info on the device and, although I had been admiring iPhone from afar since it was first released, Pre has a lot of advantages.

For me, as “a loyal company man” (with a free Sprint phone benefit), getting an iPhone didn’t make sense. Also, I very seriously need to have some passion and belief in the company I work for, so I would never have subscribed to a competing service just for the new hotness factor. So, when talk of the new iPhone release started around the time I was laid off, I decided to remain a Sprint customer. I would just upgrade to the Palm Pre and remain an early adopter! I had made it without iPhone this far, so why not, right? Sprint is reliable and AT&T is not so much.

The Pre was released about a month before my Sprint phone benefit ran out. I decided to wait and watch until I converted over to “regular” customer. Plus, I’m not one for standing in line. I could also follow news about the device until it was my time to “upgrade” with Sprint.

Toward the middle of June, I was contacted by Sprint about signing over my Advantage accounts—friends and family I gave a lower Sprint rate plan who, like me, would need to become regular customers as my phone beneift ended. They sent me an .xls spreadsheet that listed all my accounts in an email with instructions to sign it and fax the form back. As if that wasn’t ridiculous enough , the file was encrypted and would not open!

I called back about the form and casually mentioned I would also be upgrading to Palm Pre. The Sprint rep told me I was not yet eligible to upgrade. I reminded her that I was on the employee plan and therefore, would be starting as a new customer (paying full price instead of a free monthly bill). This didn’t seem to matter to Sprint. Although it was decision time for me, Sprint wasn’t offering me anything to help make that decision. I would be a new customer and like it.

Not hardly! I mean, Sprint was trying to add me as a regular customer. How ridiculous that they wouldn’t allow me to begin my new contract with a new device!? I needed that incentive. Sprint = FAIL :-(

At this point, the iPhone had been released. I had planned a trip to see some friends in California before starting my new job and was leaving the next day. I had two weeks left on my free phne benefit with Sprint, but they could have it as far as I was concerned. I arrived in California on Friday night and relaxed over the weekend. On Monday, I had some errands to run and when I was done, I found The Shops at Mission Viejo to be the closest Apple Store to her place and parked the convertable for an hour about 15 minutes.

I’v e been really happy with iPhone other than an evening of unannounced 3G service interruption here in DC on my eigth day as an AT&T customer. Of course, my problem there was not with iPhone, but with the carrier. I’m sure there’s a paragraph of legalese in my contract with them that says AT&T doesn’t have to announce outages, nor do they guarantee 100% uptime, but as a customer, I want these things! In this case, there were two towers “down” (did they fall or something?) and the DC area was EDGE only all night. I had just started tethering that day and, at first, thought maybe they cancelled my account!

If Apple and Verizon launched a CDMA iPhone tomorrow, I would break my contract, buy the new phone and drop AT&T. Nothing else has happened yet, but from the blogs and news I’m reading, AT&T just sucks. Marco’s article here makes it that much more obvious that AT&T is not in the business of providing anything other than the bare minimum.

I had considered just becoming a Verizon customer and waiting. Now I wish I had.

Reblogged from marco with 90 notes / Permalink

  1. elbles reblogged this from marco and added:
    I certainly can’t disagree with...revenue into their clearly deficient network. But I...
  2. justanotherprettylie reblogged this from mentalfiction and added:
    HAHAHA, in the end that’s all that matters
  3. mentalfiction reblogged this from justanotherprettylie and added:
    That is odd. :/ I’ve heard AT&T is really stupid about iPhone stuff, or even smart phone stuff. I like them well enough,...
  4. justanotherprettylie reblogged this from mentalfiction and added:
    Interesting. I guess it depends on where you live. My verizon phone works great but I live in California. Most of my...
  5. elizabethanne reblogged this from marco and added:
    sole reason why I don’t...all my heart. I really hope Apple wises up and moves their...
  6. mentalfiction reblogged this from justanotherprettylie and added:
    I don’t like the iPhone either but At&t works wonderfully for me. I almost have service where ever I go and they have...
  7. shawnblog reblogged this from marco and added:
    I wouldn’t have left Sprint for AT&T (and my first iPhone), but my situation is somewhat unique. I
  8. missbhavens reblogged this from clintus and added:
    Man, ain’t THAT the truth? I was dying for an iPhone but AT&T is being such a butt about it and you know what? Screw...
  9. figuremeout reblogged this from iambal and added:
    As a part of the retail team that was on the front lines of this experience for 2 years in a row, from the first iPhone...
  10. clintus reblogged this from mikehudack