Follow up to my last piece on AT&T's ongoing dilemma with subsidies, a problem they created in the first place. CEO Randall Stephenson spoke at an investor conference in New York yesterday and declared that "… the model has to change."
WE STILL HATE IPHONES
This pretty much confirms my original guess that Sam Mattera's report on subsidies for The Moltey Fool, that if they disappear it's bad for Apple, was influenced or even planted by AT&T PR people. They wanted to set the negative Apple spin before Randall Stephenson's speech.
Rather than dwell on the absurdity of all this wishful thinking that losing subsidies will hurt Apple's growing grip on the cell phone industry, I'd like to offer some friendly advice to Mr. Stephenson. It's a famous quote from the Godfather:
"Never tell anyone outside the Family what you're thinking again."
Stephenson has hardly proven himself to be a visionary in the telecom industry. But regardless of what personal opinions he has about whether subsidies are good or bad, whether they help or hurt Apple, or whether they help or hurt AT&T, he should think before he speaks.
AT&T is facing a huge problem as real competition takes hold in the mobile marketplace. There is going to be a race for the bottom, which during the speech he euphemistically addresses this by saying it's a "… new opportunity in going down market." Yes, it is an opportunity: to get less money for providing the same services you used to overcharge for.
But it's silly for AT&T to talk about subsidies going away until they're really ready to kick the habit. He's basically saying that his competitor, T-Mobile, is already ahead of AT&T. Hardly makes him look like a visionary. More like a waffle. And what are customers to think? Oh, I should really rush and get an new iPhone while subsidies last at AT&T? Or, I should really dump AT&T now because I'm sick of hearing how they keep wanting to take things away from us in the future. AT&T has learned nothing from their unlimited data grandfathering debacles?
More importantly, AT&T's best hope in the short run, and quite possibly in the long run, is to try to brand itself as a premium service. Yes, that's hard given how crappy their customer service has been. But they still have a little of the aura of being the exclusive carrier of iPhones, and they still have some coverage advantages over T-Mobile and Sprint. The better line for the company is to say, "Yes, we proudly offer subsidies because that's what our customers like. And our main goal is to satisfy our customers." Or perhaps, "We're a premium service, and subsidies are part of the premium."
Instead, Stephenson complains about breaking customers of their annoying habit of wanting to upgrade their iPhones every two years. Annoying for AT&T, not for customers. Premium customers want to upgrade frequently, and those are the people AT&T should be targeting and trying to retain. They shouldn't be trying to to convince them they should settle for less. (While also expecting them to pay a premium for AT&T service over T-Mobile and Sprint.) Even if Stephenson believes it's best for AT&T in the long run, he shouldn't say it. But guess what, it's not good for AT&T. The AT&T brand should be focusing on the top end of the market, and their sub-brands like Leap can race to the bottom. And the quickest way to piss off an iPhone lover is to tell them they can't upgrade.
This is particularly a mistake for AT&T because Sprint has fully embraced the iPhone, fully embraced subsidies, and has the best upgrade policies and UNLIMITED DATA, which is what premium iPhone customers want. The last thing AT&T needs is for Sprint to be perceived as being more iPhone friendly than AT&T.
Hopes of a mobile monopoly or oligarchy are rapidly vanishing. Right now, in terms of brand, I think the general perception is that Verizon has the best service and coverage (but higher prices), Sprint offers unlimited data and is more iPhone friendly, and T-Mobile is the rising champ of low cost/no contract. What is AT&T? They're the first ones to get rid of unlimited data. Yeah, customers loved that! So now AT&T wants to get the word out their future is to chase after T-Mobile's no contract customers and dump subsidies? (But not follow T-Mobiles Unlimited data options?) Bad messaging. Really, really bad messaging.
I suspect some of this undercover Apple bashing is an effort by AT&T to position itself as having leverage whenever it is forced to negotiate with Apple over business issues like how many iPhones they have to pre-buy, etc. Negotiations Apple always wins anyway. But whatever these beefs are between AT&T and Apple, they shouldn't be aired in public as long as iPhone customers continue to be the best customers a mobile service can have. So we'll end with another helpful Godfather quote:
"Keep your friends close, but your enemies closer." AT&T needs to stay close to Apple.