Should Apple Abandon AT&T?

October 7th, 2009

Let’s be clear about this: AT&T may have been the best wireless carrier partner for the iPhone from a business standpoint, but any customer who has encountered a spate of dropped calls will tell you there ought to be a better way.

Now the story goes that Apple first brought the concept of the iPhone to Verizon Wireless. Typical of Apple, they wanted a higher level of control than any other cell phone maker would ever be granted, and Verizon said absolutely not. So they took their proposal to AT&T which, busy putting together the pieces after a big merger, was willing to compromise.

In retrospect, the deal was certainly positive for AT&T, since it gave them the sort of prestige that was previously lacking, but it also created a host of side-effects. Whether or not the problems were predictable is anyone’s guess, but I doubt even Apple was surprised to see the iPhone and the App Store take off so quickly.

The biggest problem for AT&T is very much part and parcel of the iPhone’s ultra-simple Internet capability. Surveys have demonstrated that a much higher percentage of iPhones and iPod touches are surfing the Web compared to any mobile competitor, smartphone or otherwise. What this means is that AT&T’s network is heavily saturated, causing slower performance and, worse, dropped calls. This problem is particularly prevalent in larger cities.

Despite AT&T’s ad campaign boasting it has the best 3G network, they have also begun to admit that they have lots of work to do. Whether expected or otherwise, they claim to be spending billions of dollars to expand networks, install new cell towers and so on and so forth.

But improvements of the sort required to smooth out the iPhone’s connection difficulties won’t come overnight. Even if they have all the ingredients in place for a shovel-ready cell phone tower construction project, local governments may cause them grief. The other day, in fact, I got a letter from AT&T explaining that they’d encountered opposition to building extra cell towers in my area, and wondered if customers would express their point of view to local officials.

Now I won’t get into the issues of zoning, complaints about unsightly obstructions and other objections to building a cell tower in a given neighborhood. I understand all that, but it seems that the existing towers around here are reasonably well concealed so as not to call attention to themselves. What’s more, the local populace needs to realize that, if they want better cell phone reception, they’ve got to allow the wireless carriers to expand their networks. You can’t have one without the other.

Before you think I’m just siding with AT&T, bear in mind that I don’t encounter the sort of connection issues customers in New York and California routinely face. Yes, there are neighborhoods in the Phoenix metro area where dropped calls might occur, but the same is true for all cell phone systems. Looking back over my experience with Verizon Wireless, I’ve driven through neighborhoods where their service had serious issues.

Yes, I wish AT&T was quicker to bat with MMS texting and I hope they will offer a tethering feature sooner rather than later. The latter, by the way, simply means being able to use your iPhone as a broadband modem with, say your Mac or PC. The delays may indeed have been the result of poor planning.

However, the grass isn’t always greener on other wireless networks. Even if Apple decided to expand their carrier lineup when the exclusive with AT&T expires — which is expected next year — that doesn’t mean they can build a Verizon version overnight. The technology is different; AT&T uses GSM and Verizon uses CDMA. Yes, other handset makers do offer different versions of their products to accommodate the various network protocols. Indeed, I’d really be surprised if Apple didn’t have a CDMA version of the iPhone in is development labs. But since both AT&T and Verizon are going to be migrating to a new system, LTE evolution, in the next few years, is it worth it for Apple to build products supporting a standard that’s being phased out?

Actually, I think it is, even if a CDMA iPhone is available for just a year or two. In that timeframe, Apple may be able to sell several million copies, which ought to be enough to cover the development costs of an alternate version.

On the long haul, I happen to believe that Apple will simply do in the U.S. what is already being done overseas, and that’s to sell the iPhone to multiple carriers. Let those companies compete with each other to move as much product as they can, while Apple laughs all the way to the bank.

Besides, if will also give you a choice, if you find your existing wireless carrier doesn’t deliver the customer service or network experience that you expect.

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7 Responses to “Should Apple Abandon AT&T?”

  1. Karl says:

    “Besides, if will also give you a choice, if you find your existing wireless carrier doesn’t deliver the customer service or network experience that you expect.”

    If Apple does open it up to Verizon… What if you have an AT&T GSM phone and want to switch to the Verizon CDMA iPhone. Doesn’t sound like the phone would be compatible since it’s two different technologies. So the choice would probably be limited to new customers only. (This being pure speculation.)

    I think Apple will either renew the exclusive contract with AT&T. Not because they want too, but because AT&T will probably make it hard to walk away from.

    Or Apple will open it up to other GSM phone companies…. T-Mobile being the only other company in the US using GSM. (I think)

    • @Karl, With two different technologies, one assumes you would change providers (and phones) and your contract is up. But it may be more attractive if Verizon, should they get an iPhone deal, offers special incentives to AT&T switchers.


      • Karl says:

        @Gene Steinberg,

        True enough if you get a new phone in the process. But my point that I didn’t get across is… say in a year when my contract is up and I still want to use the same phone but under the Verizon network. I would assume that I would have to purchase a new phone too. I probably wouldn’t do it. That is why I think that if Apple does open the iPhone to other carriers it will be another GSM provider.

        But as Yacko comments… LTE is 12 months away. (Citation Needed) I assume that if AT&T doesn’t make a deal that Apple can’t refuse then Apple opens up the iPhone to any carrier who supports LTE.

  2. Louis Wheeler says:

    I don’t see an iPhone move to other companies happening. There is simply not enough reward for Apple given the headaches involved.

    There are the technical reasons. AT&T was behind the technology curve when the iPhone was introduced; then the iPhone’s success has congested the networks. AT&T will eventually get their act in gear at about the time it is ready to move to LTE which will use all technologies and frequencies. I suspect that it is better for Apple to tough it out while it concentrates on the world market.

    Apple has many other things to concentrate its attention on.

  3. Yacko says:

    What’s hard about this? LTE rollout in the next 12 months not several years. Unless AT&T or Verizon is inept and one is subpar versus the other. Otherwise they should be on equal footing and a carrier agnostic iPhone should be a reality. AT&T has proved the iPhone and coming tablet really needs the network capacity of LTE. Why move to Verizon CDMA now and prove Verizon also cannot handle the data flow on 3G? Everybody is assuming that somehow it’s only the carrier at fault (though there is some of that) and not 3G technology itself. Verizon might do a little better with a 3G iPhone but I think everyone would be shocked that Verizon would stumble too. The iPhone has accelerated the move to 4G.

  4. MichaelT says:

    Verizon says they will provide LTE in 2010—here’s your citation: (Last paragraph: Your agency will start seeing LTE in its service areas during 2010.)

    So they are on record. Now let’s see how the rollout goes!


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