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AT&T's Winter, Spring and Summer of Discontent

By Renay San Miguel
Jun 18, 2010 5:00 AM PT

"Orders for the iPhone 4 Top 600,000, Apple Says," according to a New York Times headline last Wednesday. Now that's a headline guaranteed to grab the nearest Mac fanboy, technology enthusiast and even casual geek by the lapels and slap the caramel mochaccinos right out of them. And if things hadn't fallen apart for Apple and AT&T during the iPhone pre-order process this week, several key groups would have been spinning that breaking news amongst themselves thusly:

  • The Apple acolytes: Suck it, Android and Blackberry, Verizon and Sprint. Apple and Jobs still work that voodoo that they do so well.
  • AT&T: It's amazing how a shiny little well-designed piece of glass will make one forget about network capacity issues.
  • Apple and Steve Jobs: 275 bucks a share, here we come.

Instead, we heard the rest of the world: Um, 15 consecutive error messages when ordering an iPhone online is, like, normal -- right?

AT&T's Winter, Spring and Summer of Discontent

Some Perspective, Please

I can't begin to describe the anger I saw on the Twitter streams I follow when the pre-ordering process for the iPhone 4 started melting down Tuesday morning, Pacific time. I mean, we're talking about iPhone owners and potential buyers whose default setting is already at "anger" when dealing with anything related to AT&T's support of Apple. But the error messages were also showing up at the online Apple Store, not just AT&T's website. Gizmodo, they of the Great Lost iPhone Caper of 2010, had it pegged: Apple needs AT&T's servers for those pesky phone upgrades.

Gizmodo also rubbed it in by chronicling what it eventually dubbed the "iPhonepocalypse" in minute detail, complete with screen captures of said error messages and plenty of their own iReporters (readers) sending in photos of long lines at AT&T stores in New York, along with horror stories that included the much-publicized security breaches of user information. AT&T said it wasn't able to replicate that particular problem but could assure everybody that no Social Security or credit card information popped up on somebody else's computer screens.

I agree with one of the Gizmodo commenters that the iPhone 4 ordering fiasco does not rank up there with the BP oil spill. The need for perspective dictates that we're talking about people being kept from their favorite smartphone, not an entire ecosystem in jeopardy. But there is one appropriate comparison that can be safely made, and that involves the public-relations reactions. BP didn't show enough concern and take enough blame from the outset, and it allowed outside parties to control the narrative. Naturally, it didn't help to have BP executives wedging their Italian loafers into their mouths at every opportunity.

AT&T was forced to shut down the pre-order system, which guarantees people a phone and supposedly keeps them out of long lines at retail, but the company spun it to say it was all about the incredible demand for the iPhone 4 -- 10 times that of the iPhone 3GS last summer. It took Apple, also crowing about the demand, to actually use the "A"-word -- "apologize" -- in describing its reaction to the problems that customers had in trying to place their orders for Steve Jobs' "magical" phone.

Disorder and Disarray

It was actually the second PR misstep for AT&T in a week. Following the iPad data breach that was discovered by the very independent Goatse Security guys, AT&T blamed the leak on "malicious hackers." It can be argued that Goatse went out of its way to make sure AT&T plugged the damn hole in its iPad registration process before it gave the story to Gawker, a blog in the same media family as (wait for it) Gizmodo.

Yet this is all a part of the continuing storyline that has AT&T blaming iPhone users for all the data they hog on the devices, hence the problems with dropped calls in San Francisco, New York and other areas. It's prompted a move to metered data plans with the new iPhone 4, which Philip Leigh of Inside Digital Media says will be bad for Apple because consumers don't want to think about how much data they are using on a daily basis; they like the insurance that comes with a flat-rate plan.

You see the pattern here? It's never AT&T's fault. They don't seem to have the ability to prostrate themselves at the altar of the consumer and say, "We get it. We're sorry. We will try and do better. Here's how. And in the meantime, here are some incentives/discounts/goodies so you'll stay with us and not bolt to Verizon." [*Correction -- June 18, 2010]

Speaking of Verizon, Sprint, T-Mobile, Google and other carriers/handset makers: If you don't have your marketing gurus locked in a whiteboard room somewhere, figuring out a new snarky campaign that takes advantage of yet another AT&T/Apple support issue, then you don't really get it either. You have new HTC Android phones that can finally play on the same field as an iPhone, and one of them, the HTC Evo 4G, even does that video phone call thing that had Jobs all hot and bothered for his iPhone 4 at WWDC last week. Worse yet, the Evo is tetherable now. Apple fans have learned to just sigh and shrug when asked about AT&T's long-promised tethering for the iPhone.

Here's what you may be wondering: A contract is basically a promise written in legalese, so are any of AT&T's problems with Apple and iPhones literally deal-breakers? Do a steady stream of complaints and bad PR headlines equal a violation of the exclusivity contract between Apple and its iPhone carrier? I'm no lawyer, and I don't even play one on TV, but I suppose the massive interest in the new iPhone for pre-ordering could negate any damage claims that Apple lawyers could dream up. Sure, the lines in Apple and AT&T stores will be twice as long in a few weeks thanks to the pre-order fiasco, but those long lines could also be spun to indicate that Apple is still the king of the iPhone mindshare game, if not actual market share.

Competition Calling

But that's where AT&T is indeed doing some damage to its top-selling hardware partner. Incredibles, Evos and anything RIM will have up its sleeve soon means a much more crowded marketplace, and sooner or later Apple and AT&T will buckle under the weight of so many hot new smartphones coming out on several different carriers. Many of those Android customers, however, get surveyed about whether they would switch to an iPhone if Verizon or Sprint offered one, and the range of answers they give goes something like this: A) Yes; B) Hell yes; C) In a heartbeat; D) In a New York minute; E) All of the above.

There are more rumblings in the Force about an iPhone coming to Verizon soon, despite all the disappointment that one wasn't announced at WWDC. If you're going to eventually lose your exclusivity with a hot product, as AT&T probably will next year, you'd like to do it on your own terms, in a positive way, and with the least amount of damage to your bottom line.

In AT&T's case, the damage is done by their own hands, by their own network. That's a headline you'd rather not see on anybody's front page.


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.


*ECT News Network editor's note - June 18, 2010: Thanks to aoeu for calling our attention to the unfortunate typo.


NICE inContact February 12 webinar
How do you feel about government regulation of the U.S. tech industry?
Big tech companies are abusing their monopoly power and must be reined in.
Stronger regulations to protect consumer data definitely are needed.
Regulations stifle innovation and should be kept to the barest minimum.
Over-regulation could give China and other nations an unfair advantage.
Outdated antitrust laws should be updated prior to serious regulatory efforts.
Tech companies should regulate themselves to avoid government intervention.
NICE inContact February 12 webinar