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Why Is Apple Tethering Itself to AT&T?

Why Is Apple Tethering Itself to AT&T?

It appears iPhone OS 4.0 will support tethering -- a feature also flaunted last year when iPhone OS 3.0 rolled out. Yet it's still not a reality in the U.S., and the ball remains in AT&T's court. Clearly Apple's overall finances aren't suffering as a result of AT&T's reluctance on the issue, but anything that sullies the image of Cupertino's flagship product could constitute a liability. Will anything change at WWDC?

By Renay San Miguel
05/28/10 5:00 AM PT

Thanks to advances in computer-generated technology, the images simply jump out at you from the TV screen, as all good commercials should: massive sheets of orange fabric covering up the Hollywood sign in Los Angeles and unfolding down the sides of buildings on the Las Vegas Strip, dropping from the top of the Gateway Arch in St. Louis, being unfurled by shiny happy people all along an East Coast beach. The late British singer-songwriter Nick Drake's "From the Morning" lulls you into accepting all this as just another day in the U.S. right before the voice-over announcer brings us to the point with the (ahem) blanket statement: "AT&T covers 97 percent of all Americans."

Even the ones using iPhones in San Francisco and New York?

It is the latest incarnation of the carrier's marketing campaign to reverse the widespread perception that it can't adequately support Apple's smartphone. Even "The Daily Show's" Jon Stewart, as he was taking down Apple for its tactics regarding the lost iPhone last month, couldn't pass up a glancing blow at the phone company in his now-classic "Appholes" rant of April 28: "If you want to break down someone's door, why don't you start with AT&T, for God's sake? They make your amazing phone unusable as a phone! How do you drop four calls in a one-mile stretch of the West Side Highway-- with no buildings around! What, does the open space confuse AT&T's signal?"

Stewart's crowd goes wild. iPhone users go, "damn right!" AT&T's public relations specialists go into shock.

Heard This Before

Now Apple's Worldwide Developers Conference looms on the technology event horizon, and while Steve Jobs' keynote has been confirmed, I'm not detecting any disturbances in the Force (aka the Mac rumor mill) about any new network carrier partnerships that might be announced from the WWDC stage. There was a wild story making the rounds that Steve Ballmer could join Jobs on stage to talk up Visual Studio support for iPhone and iPad developers (Microsoft promptly shot that one down), but the most relevant rumor for our purposes is the one that popped up on the MacRumors Forum about iPhone OS 4 supporting tethering, with screen shots from a beta version to back it up.

So. iPhone users will finally be able to use the smartphone as an Internet modem for other devices. Just like iPhone OS 3 promised last year. And just like AT&T said it would support, only it hasn't yet. But it's coming. Soon.

It took forever for AT&T to get MMS support for the iPhone, and that episode launched its own subset of negative headlines in the technology press. But if a new iPhone (a "4GS," perhaps?) with tethering capabilities is unveiled at the Moscone Convention Center in San Francisco, and AT&T isn't ready to back it up from the start, then the bad PR will go far beyond "Daily Show" levels.

The dysfunctional AT&T and Apple marriage has become one of the more compelling and puzzling tech stories. Here is a device that has rewritten the playbook for smartphones; the ship that launched a thousand apps (about 150,000 at last count). And yet it's tethered, so to speak, to a carrier whose eyes were clearly bigger than its network when it convinced Jobs that it would be the perfect partner for the phone.

The perception was already set in cement that AT&T had coverage issues with the iPhone when the iPad had its turn in the spotlight earlier this year. Considering the gamble that the Apple tablet represented for the company, I would have bet half the farm and all the animals on it that Apple was going to announce a new carrier agreement with Verizon for the iPad; instead, Jobs and Apple stuck with AT&T, although Cupertino was able to trumpet a "breakthrough" data-per-month deal -- $15 for 250MB, $30 for an unlimited plan.

Apple fans may be wondering why Jobs doesn't put more pressure on AT&T to get its network act together. I have no insider knowledge of the negotiations between Apple and AT&T, so for all I know, Jobs uses his own iPhone to yell daily at Ralph de la Vega or Randall Stephenson, who have said in previous interviews that they feel confident about their exclusivity deal. The Apple user base might think that the famously mercurial Jobs would care that the company supporting the iPhone is the butt of so many jokes, and not just those from the "Daily Show" writers; Fake Steve Jobs, if you'll recall, had his 15 minutes late last year with Operation Chokehold, his kinda satirical bumrush of AT&T's network.

Why Care?

But the news this week that Apple has now become a bigger company than Microsoft in terms of market value shows little to no damage to its sales because of network difficulties. The AT&T-supported iPad keeps sailing out of the Apple Store, eager customers bouncing out of its doors, perhaps hoping and praying that their 3G tablet won't have the same problems that their iPhones do with dropped voice signals.

Keeping that customer happy should be the obvious priority. Yet there is the danger on Apple's part of appearing just a little too cynical about what the users think if it keeps putting up with bad service from a key partner. The bottom line does indeed look awfully rosy these days in Cupertino, but why take chances with having that disappear with AT&T's fading signals? Apple may have its own PR issues to deal with when it comes to stories like Jobs' illness last year, or the recent lost iPhone fiasco.

However, when it has to do with the strength of their products -- whether they work as advertised, whether they approach new heights of elegance from a user interface and design standpoint -- Apple is on a roll. Anything that would eventually get in the way of that viewpoint -- whether in New York, San Francisco or anywhere else under that bright orange AT&T blanket -- could eventually lead to problems that Apple simply can't ignore.


TechNewsWorld columnist Renay San Miguel started his journalism career with his hometown newspaper in Texas in 1979. He moved to television in 1985, anchoring, producing and reporting in Austin, Dallas and San Francisco before joining CNBC as a technology correspondent from 1997 to 2000. Following a stint with CBS MarketWatch, which included filing tech stories for the CBS Early Show, San Miguel joined CNN Headline News in 2001 as an anchor/tech reporter. He also contributed digital content for CNN.com. After his 2007 departure from CNN, San Miguel founded Primo Media and now freelances in television/online reporting and media consultation. San Miguel is host/managing editor for Spark360, which produces news-style paid content for SMBs distributed via branded Web video portals and social media platforms.


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