AT&T's Last Chance to Get It Together With the iPhone?

Tech Crunch speculates that with rumors of AT&T's exclusivity coming to an end, Apple's deal to make AT&T the initial exclusive partner on the iPad may be a going away gift:

iPad a Parting Gift to AT&T?

But another way to think about this is that AT&T still has some time to get it's at together in regard to providing good service to iPhone customers. Like not lying to them about tethering, being honest about cell tower problems and not having flacks blame the hardware, not double billing for text messages, and not working night and day to force tiered pricing down customers throats. Will AT&T change it's colors? Probably not until it has no choice.

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.

Canada Gets Free iPhone Tethering. Why Can't Americans? Oh, Because We're Stuck With AT&T.

If you don't live in American, technology is a wonderful thing. You see, in Canada, if you have an iPhone, you can tether it to your laptop for free:

Free Data Tethering in Canada

Of course, if you live in America, you can't use an iPhone without having an expensive contract from AT&T. Which means not only do you not get tethering, but you have to listen to AT&T Executives lie year after year that it's coming "soon."

Unlike in Canada (and other parts of the world where people have phone companies that don't hate them), AT&T normally charges an extra $30 a month for tethering. That's a huge rip off, but at least if you have a need for tethering, you might bite the bullet. But AT&T won't even offer that crappy deal to it's iPhone customers (it's most profitable base). Why?

Well, probably because AT&T has this big pipe dream for tiered pricing, which it also says is coming "soon." But customers hate the idea and AT&T hasn't been able to convince other carriers to come aboard in forcing it down American's throats. So better to prevent customers from being able to use their products, than let them get used to the idea that things shouldn't cost extra for no reason.

When will AT&T finally come to its senses? Probably too late. Only after it has real competition, and by then it will have antagonized so much of it's most profitable customer base, it might not survive.

Poor AT&T Signal? AT&T Offers a Solution: Pay Us More

Once again, the rocket scientists at AT&T are inventing new ways to piss off customers that are unhappy with AT&T service:

Pay Us $150 if You Want Your Cell Phone to Work at Home

AT&T should be giving MicroCells away for free, because they basically save AT&T tons of money by channeling calls off of their cell towers. Also, providing good service (so people continue to pay monthly bills and don't switch carriers) should be more important to AT&T in the long run, than making a few bucks by selling something that shouldn't be needed in the short run. But short term thinking is what get's execs their yearly bonus, so screw customers who complain.

Like this comment at the bottom of the link:

"Classic AT&T. Having failed to provide the service subscribers pay for, their solution is to sell them another service. Their motto should be "We add insult to injury."

Uncle Bell couldn't have said it better himself. It's staggeringly greedy to charge for something people shouldn't need when they pay you each month for service "anywhere." Are customers really supposed to go: "Wow, I've been paying $60 a month and my phone doesn't work good. Now, I only have to pay $150, and maybe it will get better!"

UPDATE: Here's some more commentary on AT&T's latest efforts to insult it's customers:

Dear AT&T, WTF?

I remember many years ago when satellite TV came around and cable companies laughed because it was really not nearly as convenient as cable and cost just about as much. They were then stunned when it took off very quickly. What they didn't count on was that people absolutely despised their cable companies, even though they reluctantly paid for cable.

AT&T is heading for a very similar wake up call. One of these days, when iPhone customers have a choice, they're going to be surprised at how many of their customers go running. Now, maybe AT&T thinks it can worry about that when it happens, cut rates, improve service, whatever, but I suspect they will find that there are a lot of customers that will run regardless of deals, just because they're so angry at AT&T's shoddy service for so long. They might find they will lose millions of customers for life.

Apple Dumps AT&T!

Actually, not completely. But news just hit that Apple is selling iPhone's without a required AT&T contract.

Apple Sells iPhone's With No AT&T Contract

But these phones are not unlocked, so unless you take them out of the country, they won't work. So what exactly does this mean? Apple is preparing for iPhone competition? Getting rid of old inventory by selling it to people sneaking them to Dubai? Uncle Bell doesn't know. I'll keep you informed as it develops.

How the iPad is Dangerous to AT&T's Profit Strategy

It's looking more and more like AT&T CEO Randall Stephenson's hope/delusion, that the iPad is simply a wi-fi device and customers won't be interested in AT&T wireless service is wrong and wrong headed. This is not to say that he won't be correct and a majority of iPads will be sold without 3g connectivity. But it's likely that everyone is radically underestimating how many iPad's will be sold it's first year, and AT&T will be completely unprepared for the extra traffic even a percentage of those will mean to it's network. He's also missing the larger implications of the iPad replacing the iPhone as the Apple geek's favorite mobile internet platform. Here's typical geek thinking:

What Do I Need Voice Service For?

Blogger Jeff Haywood voices prototypical tech geek thinking. If forced to make the choice between having a phone or an internet connection, they quickly choose the internet connection. In fact, without even thinking twice about it. This AT&T's worse nightmare. Geeks who hate talking on the phone and prefer e-mail wonder why they're paying 40 bucks to be reminded that they're too afraid to ask for a girl's phone number.

Naturally, AT&T prefers that people pay for things they don't use, it's free money. And they prefer people are forced to keep paying for things they don't use by long term contracts. The iPad threatens both of these things, which is why Stephenson is whistling in the dark when he thinks it won't impact the iPhone business.

No, the iPhone business won't go away because of the iPad. Not everyone is afraid to call girls. But iPhone growth won't continue as quickly if people who don't really need it for voice end up switching to the iPad. And people who do need voice, wonder if they aren't better served by an alternative cheap cell phone with no contract and an iPad with no contract.

AT&T needs to rethink it's policy of forcing people to pay for what they don't use if it wants to stay competitive in the iPhone business. Instead of thinking about how much money it can rip from customers pockets in the short term, it should think about how to develop long term customer loyalty. Self identified geeks, like Haywood, should have the option of not activating their voice service, or getting very low cost "emergency" voice plans. Who knows, maybe someday they'll find a girl they can talk to and get married and need a family plan. Non-geeks who want the iPhone for voice, but don't use it to connect to the internet, should have the option of not paying for data plans. Who knows, maybe someday their grandkids will teach them how to Twitter.

In the meantime, if AT&T won't provide iPhone customers with real choices, the iPad, with a contract AT&T seems to already regret, might provide it without them.

Sprint Ad Demolishes AT&T iPhone Service

I've been warning AT&T for some time that it's monopoly on the iPhone was not something to take lightly and here's one reason why:

Sprint for the iPhone?

In reality, iPhones always work better with a wi-fi connection and what Sprint is offering here is not huge breaking news. But it's very bad press for AT&T and very good press for Sprint. It takes what AT&T relies on as a strength, it's exclusive deal with Apple, and turns it into a weakness. Sprint gets to bask in a little Apple glow, and makes AT&T look like the dumpy "I'm a PC" guy in the "I'm a Mac" commercials.

But the real message here is even more troubling for AT&T. What Sprint is doing is setting the stage for it to be the 4G wireless carrier for the iPad, something AT&T should be having night-sweats about. Stupidly, AT&T exec's have tried to downplay AT&T's wireless service for the iPad, apparently because they do fear competition. They have actually gone on the record saying iPads will work better wi-fi connections. (Like Sprint's 4g wireless modem?) AT&T prefers it's iPhone customers who are tied to long term expensive monthly deals. They seem unhappy with their own announced low cost no contract iPad deal. But how many die hard Apple nuts are going to wonder if they can live without an iPhone and simply Skype phone calls on their iPad with a 4G Sprint wireless modem? Enough to make a difference in AT&T's profits? But surely those people are still going to need a iPhone, right? Well, why not an iPad and a cheap throw away cell phone? Why carry around an iPhone and an iPad? Which one are you going to pull out when you need to access the internet or check a map? And what more do you need from a phone than phone service if you have an iPad and a Sprint 4g modem in your backpack?

AT&T made a calculated bet not to invest in a 4G network (until at least 2011), and it is already looking like that it going to be a huge mistake. While it is true that improvements to it's existing 3G networks are more important than starting up a 4G network, who doesn't think 4G sounds better than 3G? It's a strong marketing tool Sprint will have to club AT&T with in television commercials. AT&T should have fixed it's 3G network long ago, and been ready to complete for faster speeds needed by customers.

And where does AT&T's desire for tiered pricing fit into all this? Hmm? They keep saying it must be coming soon, but how exactly is it going to explain that customers need to pay tiered pricing for a "second grade network"?

Finally, tying this into my other pet peeve, by not allowing iPhone users the option of tethering their iPhone, they also play into Sprint's 4G hand. Since you can't save money by using your iPhone wireless connection on your laptop, why not get a Sprint 4G modem? It not only helps your laptop, but also speeds up your iPhone. Oh, and now I have an iPad with Skype… why do I need that $100 monthly AT&T bill again? So I can surf the internet on that tiny iPhone screen? Hmm…