Was the iPhone Too Big a Bite for AT&T?

December 22nd, 2009 by · 10 Comments

A couple weeks ago, AT&T Mobility’s President Ralph de la Vega made comments at an investor event in response to a question, suggesting that the company is looking at various ways to reign in the data usage of their voracious iPhone users.  After the resulting firestorm of outrage that surprised nobody except perhaps Mr. de la Vega, the company has been seeking to soften the perception of their efforts as seen in this BusinessWeek article today.  I found this particular quote illuminating:

In an effort to explain his thinking, de la Vega told Bloomberg BusinessWeek that AT&T is knee-deep in a market research project that asks consumers in focus groups to give their opinions on a range of potential tactics to free up network bandwidth for Apple (AAPL) iPhone users and other AT&T subscribers.

Forget focus groups, I can tell you what those opinions are going to be right now.  They want their unlimited bandwidth, and they really don’t give a damn about maintaining AT&T’s cash flow margins.  Nor will they care about Verizon’s, or Sprint’s, or Clearwire’s for that matter.

The problem With AT&T’s plans to address iPhone data demands is that there is really nothing they can do in the short term.  Nothing at all.  The iPhone is built to guzzle bandwidth, and the more it guzzles the more people like it.  Whether AT&T raises prices err moves from unlimited to tiered plans or tries to herd err encourage people to use hotspots more, it doesn’t really matter how they market the changes it will only make users angry.  And if they bite the bullet and double the pace at which they roll out bandwidth without getting paid for it, users and apps will easily keep pace and demand they double it again – and no they will still not be happy.

The bottom line is that the iPhone is a 4G device on a 3G network.  People are ready for 4G, but 4G isn’t ready for people and it won’t really be here for a year or more.  In the meantime, we will be bombarded with press telling us how great it will be when it gets here.  But until it finally arrives, both the media and customers are going to continue to play an endless game of “Pin the Tail on the ILEC”.

Ah well, they’re AT&T, they can take it.  But sometimes I wonder if they aren’t themselves secretly rooting for Apple to finally sign up another carrier already.

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Categories: ILECs, PTTs · Wireless

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10 Comments So Far

  • carlk says:

    Thank you for the introduction, Rob. I also wonder what a cable company executive from Comcast is doing on the BRK board, with men including Walter Scott Jr.


  • Anonymous says:

    “People are ready for 4G, but 4G isn’t ready for people and it won’t really be here for a year or more.”

    Uhhh, for people in a number of cities, 4G is here and now via Sprint… Why does this get no recognition?

    Atlanta; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Portland, Ore.; Philadelphia and Seattle, Abilene, Texas; Amarillo, Texas; Austin, Texas; Boise, Idaho; Bellingham, Wash.; Charlotte, N.C.; Corpus Christi, Texas; Greensboro, N.C.; Killeen-Temple, Texas; Lubbock, Texas; Maui, Hawaii; Midland-Odessa, Texas; Raleigh, N.C.; Salem, Ore.; San Antonio, Texas; Waco, Texas; and Wichita Falls, Texas.

  • DaveRusin says:

    AT&T’s iPhone deal was a great deal for Apple … Steve Jobs snookered AT&T … AT&T subsidizes the phones and Apple also gets a piece of the Monthly Recurring Revenues for doing nothing …. I wish I could get business like that … Forrest Gump lesson in this — Stupid is what stupid does.

    Remember in Forrest Gump when Bubba explained to Forrest how many ways there were to prepare shrimp ranging from fried to coconut shrimp.

    Apple is Bubba in this case — lots of was to play out the iPhone via apps at the costs of AT&T.

  • anon says:

    Rob, in my opinion, there is currently no more boring or ridiculous discussion going on in telecom land than the “iphone swamps a network” discussion. If you give millions of people an iphone (essentially, a wireless laptop), the provider should not be surprised that they use it. also, i think VZ and others may want to be careful not to upset the ‘glass houses’ rule. Fact is, that their network would be strained too to support millions of data driven devices. Right now, there simply isnt much to do on their network — the devices are lousy except for the blackberry which is not really a web/video/etc browser.

    AT&T is in this mess for one reason — they chose to pull cheap copper circuits to towers. virtually everyone in the industry knows that VZ pulls fiber and plans for scale and att often does not. yawn.

  • carlk says:

    If Apple is Bubba, Mr. Rusin, then who is Forrest Gump after the storm wiped out all the competition, and he built the Shrimp Boat Fleet with Captain Dan??? 🙂


  • carlk says:

    I finally figured out what Mr. Burke’s addition to the Berkshire board from Comcast might mean!

    Mr. Buffett’s into PIPE businesses, and I don’t mean Private Investments in Public Enterprises where TOXIC HEDGES are created to destroy companies, valuable or otherwise, nor do I mean the others which people choose to SMOKE!

    I am referring to BANDWIDTH type PIPES for carrying media in addition to voice, video and DATA. 🙂

    The confusing part for me, of course, is where that Boy Wonder, Bill Gates, fits into all of this!

  • ES says:

    Burke’s father ran Cap Cities(ABC network) which was a long time BRK investment.

  • Jay says:

    As a former product manager for a wireless ISP, the issue truly does come down to the <1% of users who abuse the bandwidth at the expense of all others. Our usage numbers were so heavily weighted by a handful of individuals that we contacted them personally to ask them to curtail their usage or risk losing their service. In almost all cases they did just that. These people would leave their devices on 24/7 just because they could. Some were people we knew as friends of friends and it was the typical "uses".

    BW shows a number of parallels to other utilities. How would we react to neighbors with lush green lawns if water was all you could drink? In the end competition will prevail.

  • djwiegel says:

    As a former wireless engineer for AT&T (as well as other), this is easy to dissect.

    The simple truth is that if AT&T sold their plan as totally unlimited usage without restrictions or a method of modifying their terms and conditions, then it’s their own fault.

    Customers go with what was advertised and sold to them. Now of course few if anyone reads the fine print on things. If however it’s truly an unlimited plan, AT&T should pony up to it. Whether it will be further network upgrades or whatever else is necessary, they should pursue it.

    You cannot cry wolf at this point.

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