Will Apple Attack AT&T With the iPhone?

While beloved by it's customers to the point of obsession, Apple (or rather its boss Steve Jobs) has a long history of stabbing it's business partners in the back. Or, even more often, the front. The list of victims is long. Here are just a few big ones:

1. Apple Tricks Microsoft: In 1997, when Steven Jobs returned to a broken down and almost bankrupt Apple, he convinced Microsoft to make a high profile $150 million dollar investment and promise to keep supporting the Macintosh system with Office to help the company stay afloat. Microsoft, like all of Apple's eventually betrayed business partners, had it's own reasons to support Apple. Mainly, at the time Microsoft was so dominant in the tech world that it was facing business monopoly lawsuits and government investigations. A crippled Apple with a tiny market share seemed like a good thing to keep breathing with a pocket change investment. Yet a perplexed Bill Gates wondered aloud why Jobs would even bother to fight for Apple's survival. Gates famously said, "He can't win." Gates thought Microsoft's continued dominance of the tech world could never be challenged. At the time, it was assumed any market Microsoft decided to enter it would control. Unfortunately, Apple not only survived, but flourished. It's new operating system was first class, and made inroads in business and government while Microsoft has made several missteps with Vista. Apple became the dominant force in sexy new tech businesses showing Microsoft could be beat. Apple took over music with the iPod and smart phones with the iPhone. It's market share for browsers, Macs and multi-media products continues to rise. Apple's Stores are some of the most profitable retail space in the world. Apple's early partnership with Google's search engine provided comfort and support to a key Microsoft enemy at a critical time in the development of the internet. Microsoft's star has fallen greatly since it's "partnership" with Apple. Bill Gates retired not looking like a victor, but like someone who needed to get out before his company sank further. Apple looks likely to pass Microsoft in market cap this year, something that even the most wild eyed Mac enthusiast never would have dreamed of in 1997.

2. Apple Double-Crosses Intel: In 2005, Steve Jobs got big time support from Intel to switch microprocessors. Apple had been using it's own co-designed PowerPC processor but simply couldn't compete with Intel's deep pockets of R&D money to keep competitive in the processor speed race. It made more sense to let Intel make processors so Apple could focus on other key areas of it's growing business. Naturally, Intel was happy to have a new customer (even with a tiny market share) and a little less competition for processor design. But Intel went a step further. It highly publicized the partnership, it's CEO danced around an Apple stage in a costume for Jobs, and Intel provided a lot of tech support to help Apple make the critical transition to Intel processors. This gave Apple computers a lot more credibility in business and government circles. It isn't going too far to say that if Apple hadn't successfully made the shift it's entire flagship Macintosh business might have imploded. So what was Intel's big reward? Who's making the processors for Apple's hot new iPad? Apple's new processor design company. While allowing Intel to keep making processors for it's older graying desktop computer business, Apple has cut Intel out of what might be the biggest new tech sector of the next decade.

3. Apple vs. Adobe. While Apple and Adobe have long had a love/hate relationship, when Apple was on the ropes in the late 1990's, Adobe could have completely pulled the plug by cutting off updates to it's Photoshop, Illustrator and After Effects products. High end graphic design was one of the only business areas where Apple had significant market share. Adobe hung by Apple with two massive updates, first to Apple's new OS X operating system and then through Apple's shift to Intel processors. While Apple could complain about Adobe being a little slow on the updates, Adobe spent fist fulls of money to do them. Apple's response? It first came out with Final Cut Pro, which killed Adobe's own film editing market, and hurt it's After Effects business. Apple also came out with iPhoto, which cut into Photoshop and finally, Apple dug the knife in deep by actively going to war against Flash with the iPhone and the upcoming iPad. With a business partner like that, you don't need cancer.

In Apple's defense, in all of these cases it did what was best for it's customers. Rarely has Apple made moves against the best interests of the people who buy Apple products. (Apple even dumped it's own technically superior Firewire for the more popular and less expensive USB.) But still, anyone who gets in business with Apple should be looking over their shoulder for sharp objects. Because if Apple sees an good opportunity, old relationships rarely get in the way.

Which brings us back to the subject of AT&T. Apple and AT&T have had a great partnership with the iPhone. Both have made a ton of money and gained huge market share quickly. Which means, if history has taught us anything, Apple is about to screw AT&T. Here's a piece on some of Apple's options:

iPhone as Weapon Against AT&T

The question is not whether Apple will turn on AT&T, the question is when. I don't know the answer to that, but my guess is over the next two years.

The other question is what AT&T is planning to do about it. The answer to that I know: nothing. AT&T has no post Apple plan. It simply sucked up as much money as fast as it could with the iPhone and has been burying it's head in the sand about what to do if Apple turns on it. It is a company lead by reactive managers. They hope something like the Google phone or a new Palm handset will provide the iPhone with some competition. They hope they can buy up enough market share to be irreplaceable to Apple. They hope… they hope…

What they should have been doing is investing. Investing iPhone profits to build cell tower infrastructure so good Apple wouldn't think to replace them and customers wouldn't dream of leaving them. They should have come out with original apps to enhance the value of iPhones and other services that would make using an iPhone without AT&T service unthinkable. They didn't and now it looks like it's too late. AT&T execs are more focused on talking about charging for data "like water," complaining about data "hogs," waging battles against net neutrality, and figuring out how to cut land lines to small towns. In other words, warring against the interests of it's own customers. So when Apple finally does turn on AT&T, the people who will be cheering the loudest will the the one's with AT&T subscriptions.