AT&T Scrambles to React to Apple Leasing Program

AT&T continues to take one step forward, three leaps back. After mounting an unpopular and misguided effort to get rid of subsidized phones (particularly those pesky and expensive iPhones), AT&T is now forced to offer extra perks to get and keep customers, like it's recent 2 for 1 deal (which they only reluctantly admit includes iPhones). Why is AT&T scrambling, other than its lack of subsidized phones gives customers little reason to stay with them? They're scrambling because Apple's own iPhone leasing/upgrade program is a huge success:

APPLE UPGRADE PROGRAM A SMASH SUCCESS

This has some pretty huge long term effects, because all of Apple's leased phones are unlocked, meaning customers can ditch AT&T anytime they want, if they even bother to sign up with them in the first place. Customers buying iPhones online and in Apple stores means they're more likely to go with the carrier that offers the cheapest data rates, something AT&T never does.

You see, those rocket scientists at AT&T forgot the whole reason they were subsidizing iPhones was to keep people locked in. Once they took away the incentives, why wouldn't people flock to Apple, who they trust a lot more than AT&? If this becomes a trend, AT&T can not only expect less iPhone subscribers, but also less foot traffic in their stores. A really bad combination.

But don't worry, AT&T bought into the satellite TV business!  Just in time for everyone to cut the cord on expensive TV subscription packages.

AT&T'S Losing War on Apple

AT&T broke out in the mobile world thanks to an exclusive deal with Apple on the iPhone.  To get the deal, AT&T had to agree to Steve Jobs steep terms.  Never-the-less, the deal put AT&T in a position to dominate the mobile world.

And then AT&T dropped the ball.  They let the exclusive deal lapse and other carriers leapt in and stole iPhone market share.  Meanwhile, AT&T did everything it could to alienate Apple and Apple loving mobile customers.  First with attacks on customers who had grandfathered unlimited data contracts, then with marginal iPad support, failed attempts to push customers to Android and then removing subsidizes for iPhones in hopes customers would learn how expensive Apple iPhones were and buy alternatives.

Of course, if Apple customers are going to be forced to pay more for their iPhones, why shouldn't they give the money directly to Apple, and receive perks like Apple Care and yearly upgrades?  And that's exactly what the are doing:

APPLE'S UPGRADE PROGRAM HURTING AT&T

AT&T needs to realize they have no future in mobile without strong support of the iPhone.  They need to stop playing games and realize Apple loving customers are the best ones to have, or they will lose them all.

If AT&T wants to hold on it's the shrinking base of iPhone customers, and possibly grow it, it needs to really send out a message it's on team Apple.  Here are my humble suggestions:

1. Go back to unlimited data plans for post pay customers for a small extra fee.  (They aren't really unlimited anyway.)  iPhone customers like unlimited data and by not offering that option, you're just driving customers to Sprint or any other carrier that offers it.

2. Offer free "unlimited" data for an iPad on family contracts with at least two iPhones.

3. Offer generous iPhone subsidizes before everyone flees to Apple's upgrade program.

4. Market AT&T as the best place for iPhone customers.  That includes getting executives to say how much they love Apple customers, rather than trying to downplay Apple's every move.

Are Smartphone Customers Holding onto their Phones Longer?

To give credit where credit is do, Glenn Lurie comes across very well in this interview on re/code with Ina Fried:

RE/CODE INTERVIEW WITH AT&T'S GLENN LURIE

However, this is AT&T Critic, so I have to pull apart one thing he said.  Which is that he thinks smartphone customers are "holding onto their phones longer" instead of upgrading every two years.

I don't think this is true and he doesn't cite any specific statistics.  I think it's AT&T wishful thinking.  Every time a customer upgrades, there is a danger they might switch carriers.  AT&T used to offer subsidized phones for exactly that reason, to give customers a reason to stick with them.  But the amazing success of the iPhone, and it's high expense to AT&T, encouraged them to try to transfer the costs of new phones back to customers.  In particular, they wanted customers to realize how darned expensive those iPhones are.  I think this will turn out to be a huge mistake in the long run.

Even if it's true that some customers (even a majority) are holding onto phones longer, they aren't the best customers.  AT&T should be focused on high end customers, the kinds that have multiple lines and are happy to pay extra for great service.  Those kinds of customers are more likely to be interested in upgrading more often.  Those are the people that are going to flock to Apple's new leasing program.  And once AT&T loses it's hold on them, they are more likely to switch more often.  And if AT&T isn't all about service (including subsidizing high end phones) then why should people stick with it's higher than average monthly bills?

AT&T has got to stop assuming the market will cater to them, instead of the other way around.  They did this with their war on data hogs, only to help build up T-Mobile and Sprint which highlighted unlimited plans, and now they are trying to "educate" customers that high end smart phones are expensive.  Customers will get the message, AT&T doesn't want to subsidize high end phones.  Okay, Apple lovers will rush to Apple's leasing program.  The question is, will they stay with AT&T once they do?

ATT Stumbles as Apple Moves Ahead with New Upgrade Program

AT&T keeps losing the battle, and the war, against Apple:

APPLE'S IPHONE UPGRADE PROGRAM SHAKES CARRIERS

Notice that all three carriers have quickly launched programs to counter Apple's new upgrade program… except AT&T.  I expect it will eventually come in with the worst deal to try to play catch up in the most half-assed way possible.

Why Carriers Should Stop Selling Phones

So Walt Mossberg says that AT&T should close all its stores, stop selling smart phones, and basically get out of the way of customers and smart phone manufactures.  Agreed:

AT&T, YOU ARE A DUMB PIPE, ACCEPT IT

Key to his piece is Apple's latest announcement that it is going to start offering unlocked iPhones under an installment plan, which Walt correctly suggests is a great way to push carriers out of the retail market for smart phones all together.

Of course, this all comes about because the bozos at AT&T hate Apple and keep trying to think of ways to punish customers that want iPhones.  Despite the fact that AT&T owes it's entire cellular service to having been lucky enough to have a monopoly on the early iPhone, they hate the popularity of the iPhone because it gives Apple too much power.  Power AT&T wants.  So historically, AT&T stores have done everything they could, including having salespeople lie, to discourage customers from buying iPhones.  They punished early iPhone customers who had unlimited plans by throttling them, and they dismissed the iPad as not needing a cell connection.

Recently, they abandoned subsidized iPhone sales, forcing customers to pay full price on installment plans.  The idea was to make customers realize how darned expensive iPhones were compared to Android phones.  "So you still want an iPhone?  It's going to cost you an extra $18 a month."

Of course, like all of AT&T's anti-Apple moves, it completely backfired.  Apple now has it's own installment plan.  It's not cheap, but it's likely to be a big hit anyway.  And guess what, now that Apple has loaded that gun, it could lower prices, create incentives, or offer other perks that would make getting your iPhone from Apple a no brainer.   If Apple got serious about it, there is no way AT&T or any other carrier could compete in selling iPhones.

Meanwhile, AT&T still offers marginal service at the worst prices in America, and terrible prices compared to services around the world.  Maybe, instead of thinking of "clever" ways to undercut Apple, they should work on providing good service at a good price.  While they still have the time to do it.

The Google Fiber Threat to AT&T

AT&T's deliberate neglect of America's land line infrastructure was supposed to be a classic win/lose.  AT&T wins/America loses.  After buying up local phone providers across the country, AT&T then generally abandoned land lines, often reneging on their promises to upgrade to fiber optics.  Profits from their land line monopolies were then shifted into building out mobile service.  AT&T won because customers were forced to pay for lousy land line service, or shift into more expensive mobile plans.  Customers lost because… well, AT&T was screwing them.  Particularly hurt in this scam, were some of the poorest Americans in rural areas where they had little choice but to use AT&T's expensive second rate services.

Of course, this was all dependent on AT&T retaining monopoly control of land lines, and not having much competition in the mobile sector.  AT&T assumed it could kill any competition in mobile by simply merging with or buying up any competing companies.  Unfortunately, AT&T is so universally hated, for screwing their customers, that even corrupt politicians couldn't stomach letting it merge with T-Mobile.  So it faces serious competition in the mobile sector from T-Mobile as well as Verizon and Sprint.  That competition isn't going to go away any time soon.

On the land line front, AT&T simply assumed no one would bother to compete.  After all, AT&T kept telling everyone it didn't make any economic sense to invest in fiber land lines.  Well, bad news.  AT&T is now facing serious competition in land lines from Google fiber.  Google just announced they are going to start wiring public housing:

GOOGLE DOES SOMETHING REALLY NICE

Providing free and fast internet service to poor people is a really nice thing to do.  Of course, Google has some good business reasons to do it, not the least of which is that it makes politicians think Google is invested in making America better, not simply ripping it off like AT&T.  But there is another reason Google is doing it.

Providing fast/free/cheap internet is really easy.  For years AT&T has been trying to tell everyone about how hard it is to provide internet service, how data hogs ruin everything, and how everyone should be ready to pay more.  It's a lie.  Internet technology is following Moore's law.  Every year it gets faster and cheaper to provide.  Local governments can provide it at almost no cost, third world nations can do it for very little money, and Google can do it easily as an afterthought.

This problem has already been brewing for years because Americans pay more for worse service than many poor people in third world countries do.  Meanwhile, other countries like South Korea provide amazing service for very little.  And some European countries provide great service for free.  AT&T has really been holding back America from getting fast cheap internet.  If poor people can get free/cheap/fast internet service, why do middle class and rich Americans have to overpay for slow internet?  The answer is they won't put up for it for much longer.  Think of it as trickle up economics.

Google Fiber is increasingly going to be a huge problem for AT&T.  It screws up their plans to abandon land lines, and it screws up their plans to overcharge for mobile.  How is AT&T going to continue to explain why it is overcharging for slow speed internet service, when, thanks to Google, people in public housing are getting faster service for free?  How is AT&T going to keep up the myth about data hogs and how fiber land lines can't be profitable.  

Mobile service is great.  But land lines are still very important to customers and to America's infrastructure.  Businesses prosper with fast fiber access, and poor Americans also benefit from the educational opportunities fast internet provides.  This stuff is simply too important to America's future to be ignored.

There's still a little time for AT&T to try to turn the ship around.  They really need to think seriously about treating customers, even poor customers, better by providing great service at reasonable prices.  If they don't, there are others that will do it for them.  That would be another classic win/lose.  American wins/AT&T loses.

Isn't Time for AT&T to Stop Trying to Punish It's Customers?

AT&T just got a big fine for it's past actions trying to force customers out of their grandfathered Unlimited data plans:

AT&T Fined $100 for Throttling Customers

Now, it's important to remember, these are long time AT&T customers.  They're people who bought original iPhone (long before it became popular) and have stuck with AT&T's marginal service through thick and thin for one main reason, they liked the idea of unlimited data.  And AT&T has done everything they can to try to punish them for not accepting a pay-per-bit data.  And guess what, Sprint, T-Mobile and Verizon would love to take these customers away.

This is just part of a pattern with AT&T management which is completely focused on their own unobtainable goal of resurrecting a 1950's monopoly over phone service rather than serving customers in 2015 America.  It isn't working, it's hurting the company.  The efforts to buy out and shut down T-Mobile simply made it stronger with huge infusion of billions of dollars of AT&T money, money that could have gone to improving AT&T service, but is now being used to improve T-Mobile service.

Sure, AT&T has limited monopoly powers in certain areas where other companies can't provide good enough coverage.  They have monopoly power over local hard wire access in some areas (which they have generally abused by not investing in improvements).  But AT&T's abuse of these limited monopoly markets have only convinced customers, business and the government that no one wants to give AT&T any more control over the market than it already has.  It's losing almost every regulatory battle these days.  No one is going to approve any big mergers that give it more power.  People are fed up with a company that takes customers for granted.

AT&T execs tried to convince the world that "unlimited" data plans weren't technically and financially possible.  It was a lie, it didn't work, and T-Mobile and Sprint (as well as just about every international company) offer them.  Customers love them.  Unlimited is the future.

AT&T, give up on your war against Unlimited.  You already lost.  Stop assuming you can force customers to do business the way you want, and start listening to what they want.  Because whether you like it or not, you have real competition in the world, and better be ready to compete.