AT&T's Bet Against the Future

Fred Vogelstein has an interesting piece in Wired about AT&T's uncomfortable relationship with Apple and the origins of the now widely used shorthand "#attfail":

Wired: Inside the iPhone Network Meltdown

It's got some interesting insights, particularly how pissed off Steve Jobs was about idiot boy Ralph de la Vega promising tethering was coming "soon" before a deal had been worked out with Apple on pricing.

But it misses a big point.  It buys into the idea that AT&T was "shocked, shocked, shocked" that customers actually consumed a lot of data on their iPhones and simply couldn't keep up with demand.  It details that AT&T wanted to ramp down certain iPhone features, like tethering and video, in order to help it keep up with data needs.

But this is bullshit.   Vogelstein, probably trying to be balanced, buys into AT&T's lies about it's data problems.  Any idiot could have seen the iPhone was going to use a lot of data.  The biggest problem for AT&T is not handling data (though it clearly doesn't want to pay for the infrastructure necessary for quality service), but that it wanted to suppress features so customers continued to buy wi-fi and also to give it time to force in a tiered pricing system.

As Vogelstein points out, AT&T made record profits from it's wireless division thanks to the iPhone.  The proper response to data needs would be to seriously invest in infrastructure, something AT&T only reluctantly did.  And if that isn't enough, a modest raise in iPhone rates could have been justified.

iPhone customers biggest complaints are about dropped calls, which are not due to data demand, and lack of signal, which also has nothing to do with the amount of data being consumed.  Speed, which is also not that great on AT&T, is the real victim of data demands, but most customers are willing to wait longer to get what they want.  You loose a call, you get pissed off.  You can't make a call, you get pissed off.  You have to wait a little longer to download your Google map, not as big a deal.  Data demand has NEVER been the real issue with the iPhone.  Being able to make phone calls, THAT'S an issue.  If you buy a cell phone in a major city, like New York, you expect to be able to make calls on it.  No one has been yelling because they can't download pirated movies fast enough.

Meanwhile, AT&T had more important goals than servicing iPhone customers desire to simply make phone calls on their $100 a month two year minimum plans.  They used iPhone profits to build out their cable and wi-fi business (which the wireless business competed against).  iPhone customers ended up subsidizing all those McDonalds that offer free wi-fi.  (And those $19.95 initial monthly cable service deals.)   If people started using their iPhones for tethering (unless there was tiered pricing or it was cost prohibitive) and for video (therefore not needing AT&T's cable offerings) the wireless business might cut into AT&T's other, less profitable enterprises.

In short, AT&T was betting from the beginning against the iPhone and a wireless all you can eat network.  They want a wired network (that they can control better) and a tiered wireless network that is too expense to really use for all their customer's needs.  They want people to pay two bills.

AT&T's justification for tiered pricing is that most people DON'T use much data (which of course is a lie).  The problem is not that AT&T didn't realize that it needed to build a much better wireless network to service customers, the problem is that AT&T doesn't want customers to have access to a really great wireless network.  They want customers money, but they don't want to provide a service good enough to cut into their other business, which is wired.  Also, they don't want customers to have a lot of options, which was what the lobbying against net neutrality was all about.  AT&T spend it's early iPhone years hoping it could get Google to pay it extra money for simply providing access to it's internet sites.  After buying out all those little regional companies, they wanted a deal to lock up the internet forever.

AT&T (and the other US telecoms) realize that wireless is dangerous.  For all the bitching about finding places for towers, and needing spectrum, the real problem is that as technology improves, it will become easier and easier for competing companies to offer competing wireless services, and easier for products like the iPhone to switch carriers.  If people abandon wired networks, AT&T will not only have wasted billions in buying up old wired networks, but will have real competition.

So the problem is not that AT&T didn't anticipate the future.  AT&T doesn't want the future to happen.  They are like feudal Japan when it decided they didn't like guns and preferred swords.  That didn't work out very well in the long run and AT&T's giant bet against wireless will turn out to be a bad move too.

More Rumors of a Verizon iPhone

Here's an interesting piece by Bob Faulker discussing the most recent Verizon iPhone rumors:

Why iPhone on Verizon May No Longer Be a Rumor

Unfortunately, Faulker makes a powerful argument we may have to wait until next year for a LTE iPhone so that Apple can skip over CDMA all together.  While this makes some sense in the "Apple doesn't go backwards" argument, it's hard to see why Apple can't make a lot of money off the existing CDMA market in the US (and in Korea).  Why give that up, especially when Apple seems to expect it's own customers to buy new phones every couple years?  (And they happily do.)  For the sake of suffering AT&T customers, I hope other rumors of a Verizon iPhone in the fall come true.

Could Class Action Lawsuit Against AT&T Over Data Limits be Just the Beginning?

This just in: a class action lawsuit is brewing over AT&T's decision to put sudden data caps on already sold iPads.  As class action lawsuits go, this one is a no brainer.  AT&T is bound to settle or lose:

Class Action Lawsuit Against AT&T and Apple Over Data Limits on iPad

This is just the beginning of problems for AT&T over it's greedy and irrational desire to force tiered pricing on unwilling customers.  The specifics here, that customers were promised unlimited data for iPads, and then suddenly found out they can't have it as promised, are pretty straight forward.  Customers bought iPad's based on those promises, and then AT&T decided to change the rules with little notice (or reason) and rip them off.  End of lawsuit, AT&T pays.

The problem for AT&T is once a class action lawsuit gets started, there is no telling where it will go.  Hopefully, where this one will go is to question the entire economic logic behind tiered pricing.  I suspect, once we see the e-mails between AT&T execs over their real reasons for capping data, and find out the real stats on iPhone and iPad usage, we'll quickly find out AT&T has been lying through it's teeth about wanting to "lower" prices for customers.  We'll find out that the whole tiered pricing scheme was, as everyone knows, simply an effort to gouge customers who have no choice to switch carriers.

Maybe the settlement will also force Apple to dump it's exclusivity deal with AT&T.  We can only hope.

Sick of AT&T on You iPhone? Now is the Time to Jailbreak.

So Apple announced the iPhone 4.0 to much acclaim, except for the big disappointment, we're still stuck with AT&T.  Rumors, and all logic, say that at least Verizon will be added as a carrier in the fall, but what can an AT&T hater do in the meantime?  Well, now is probably a good time to seriously consider jailbreaking your 3.0 iPhone and switching to T-Mobile in protest.

JAILBREAK YOUR 3G IPHONE AND SWITCH TO T-MOBILE

The logic works like this.  You hate AT&T.  You've put up with their crap for years.  You almost are considering abandoning Apple and switching to Android.  But don't give up yet.  Surely the iPhone 4.0 will come to other carriers, eventually…

But if you buy a new iPhone 4.0, in order to use it, you'll be stuck with a new two year contract with AT&T.  Don't do it!  Better to jailbreak your old phone and have some fun with a new carrier (and get free tethering!).  Then when the iPhone 4.0 is finally available for other carriers, you'll have some real choice at last without having to pay to get out of your AT&T contract.

EXCLUSIVE: Interview With a Mythical AT&T "Data Hog"

According to the mainstream press, evil "data hogs" have been ruining AT&T's iPhone service for everyone. Because of them, AT&T claims it was forced to initiate a tiered pricing plan that supposedly will make everyone happy except those evil data hogs.

For example, the New York Times states: "The trouble for AT&T was that a fraction of users-fewer than 2 percent-made such heavy use of the network that they slowed it down for everyone else." The Times doesn't state where it came up with that number, presumably AT&T. In the same piece, telecommunications industry analyst, Roger Entner, says: "The free lunch for the ultra-heavy data user has been taken off the menu." In the Los Angeles Times, Jack Plunkett, another analyst states: "There are a handful of subscribers that are using a ton of bandwidth…" No facts or figures are independently confirmed or researched by either paper, which seems odd since there would seem to be some big logic holes in this "data hog" story. (For example, all of AT&T's iPhone contracts have a data cap of 5 gigs which isn't a lot for supposedly "unlimited" plans.) Thanks for keeping your readers informed, leaders of the fourth estate!

While AT&T Critic doesn't have access to the same crack reporting staffs that are able to reword AT&T press releases, repeat corporate dogma without question and quote paid industry analysts without any fact checking, we do have this EXCLUSIVE interview with one of those elusive DATA HOGS.

AT&T Critic: "Hello, so you are a real life iPhone data hog?"

Data Hog: "Yes. I'm a data hog. Oink. Oink."

AT&T Critic: "I have to say, I didn't really believe you existed. I thought you were just a mythical corporate scapegoat invented to justify a complicated tiered pricing scheme aimed at ripping off all customers."

Data Hog: "No, no, I really exist, I suck up lots and lots of data and ruin things for everyone."

AT&T Critic: "But AT&T widely advertised that it was offering "unlimited" data access for iPhone customers. Why are you such a bad person because you take full advantage of a service they promoted that you paid for under a minimum two year contract?"

Data Hog: "Because I hog so much data."

AT&T Critic: "AT&T says that 98% of smart phone customers use less that 2 gigs of data and even claims that 65% use less that 200 megs. These are very low amounts of supposedly unlimited data. So isn't the real story that most smart phone customers aren't using their phones that much and AT&T has been racking in profits on people who are paying for services they barely use?"

Data Hog: "No, no, that's not the story, the story is that data hogs are ruining things."

AT&T Critic: "But how could AT&T not assume in advance that some small percentage of people might use data more than others? Where is the surprise in that? After all, it actually seems pretty amazing that only 2 percent of people are using more than 2 gigs. How could AT&T have not planned on some tiny percentage of people taking them up on their widely advertised offer of unlimited data? Why should that be such a problem?"

Data Hog: "Because I'm such a hog. I'm ruining it for everyone else."

AT&T Critic: "That makes absolutely no sense. Cable companies don't get upset when people watch more TV. 24 hour fitness centers don't get upset when people work out a lot. It would seem that you're one of AT&T's best customers. Why should you be vilified?"

Data Hog: "Because… I'm evil? Oink?"

AT&T Critic: "In addition to paying $30 a month for the right to use "unlimited" data, you also have to pay above average fees for having an iPhone. I still don't understand what you've done wrong. I assume if you're such a heavy data user, you probably do a lot of texting, which AT&T has the highest rates for, and therefore they get extra money from that. Not to mention you probably use your phone a lot and pay for unlimited minutes. If you use so much data, perhaps you're a customer of AT&T's internet service, second lines and land lines. AT&T offers mapping and family tracking services for extra fees… surely you're a customer with above average phone bills all around. AT&T must be making a ton of money off you already."

Data Hog: "No, no, I don't do any of that. I don't text, use the phone, or anything. I just hog data."

AT&T Critic: "Even if you personally are not using a lot of AT&T's expensive services, a large percentage of other supposed "data hogs" probably represent AT&T's most valuable business customers. So, what exactly are you doing with all this data you're hogging?"

Data Hog: "Oh, I'm just hogging it. Lots of it. Lot's of data. I'm a data hog."

AT&T Critic: "But what EXACTLY is the data? What is it you're down loading all the time?"

Data Hog: (Long pause.) "Umm… porn."

AT&T Critic: "Porn? Why are you downloading porn on your iPhone? But why not use your computer if you want that much porn? I mean, wouldn't it be faster? In fact, if you're doing a lot of data hogging, why not use faster services like wi-fi, many that are free? Why would you use your iPhone to download lots of data? It doesn't make any sense."

Data Hog: "Because… I'm evil?"

AT&T Critic: "Well, okay, but exactly how much data are you hogging?"

Data Hog: "Oh, tons and tons. All porn."

AT&T Critic: "AT&T already has a 5 gig per month limit on iPhones. So if you went over that, why didn't AT&T cut off your service or bill you extra?"

Data Hog: "I don't know…"

AT&T Critic: "I mean, if data hogs are a problem, isn't it AT&T's fault for not enforcing it's contractual 5 gig limit? If congestion was really all because 2 percent of customers who were violating their contracts, why didn't AT&T cut them off or charge them extra? Why change the rates for everyone because AT&T didn't follow it's own rules? Are you saying that AT&T's service problems were all AT&T's fault for not enforcing their own limits in the first place?"

Data Hog: "Umm… maybe I was just under 5 gigs."

AT&T Critic: "So data hogs are really a tiny 2 percent of iPhone customers who went over 2 gigs (which is about two feature films a month) and less than 5 gigs using a service advertised as "unlimited?" Anyone watching You Tube on a two hour daily train commute could use 5 gigs a month easily. Why should these people be condemned as data hogs and have their rates doubled? And why should everyone else have to worry about their phone bills suddenly spiking, when they had been using well under the iPhone's contractual capacity? Isn't the real story here that people have not been using much data on their iPhones, so AT&T is lowering it's data limits to bill everyone more? Wouldn't a better justification of raising rates be that everyone was using lots of data, not just a few data hogs? Wouldn't the real way of solving this imaginary "data hog" problem just be to enforce the original contracts 5 gig limit or lower it to 4 gigs if necessary? That is, unless AT&T is lying about data hogs being a problem, and simply wants to raise rates on everyone."

Data Hog: "Oink… oink, did I mention I hog data?"

AT&T Critic: "Isn't the truth that you are not a mythical data hog at all. You're just Randall Stephenson wearing a fake pig nose?"

Data Hog: "No comment."

AT&T's War on the Internet

There's lot of commentary out there about AT&T's latest move to punish people for using the internet. Jeff Jarvis at BuzzMachine correctly points out in this post that what AT&T is doing is just plain evil:

BuzzMachine Gets It Right

John Gruber at Daring Fireball takes a good news/bad news approach. He's right about all the bad news, but wrong about the supposed "good."

Daring Fireball Gets it Wrong

On the bad side, as Gruber points out, yes, the tethering deal sucks, the overage charges for the lower priced tier are criminal, and changing the pricing structure on the iPad so quickly after it was released shows AT&T's contempt for its customers.

On the "good" side, Gruber is flat out wrong. First off, $25 for 2 gigabytes is not a price cut. AT&T is offering less for less. A lot less for a little less. iPhone customers originally were paying $30 for "unlimited" access (which was actually capped at 5 gigabytes so it never was unlimited). In order to get 5 gigabytes in the future, AT&T customers will now have to pay $55 almost double the previous rate. Like most iPhone customers, John may not have been using over 2 gigabytes, but it doesn't take much imagination to realize that the more people come to depend on their iPhones, and the more cool apps that come out, the more data they will need. How many people used the internet for much more than e-mail for the first few years it was around? The iPhone is still in it's infancy and this move by AT&T is an attempt to strangle it, and the iPad.

Charging $10 per gig isn't a good deal just because Verizon charges more. I can buy a new hard drive for less than $1 a gig. A real, physical hard drive. AT&T is charging for electrons passing through an existing network. John says, "If you use more, you pay more. Why is this hard to understand?"

Well, what if your cable company suddenly decided to charge you for how many hours of television you watched? It's not hard to understand that that would take a lot of the fun out of watching television. That that would represent a serious cut in service, regardless of whether you watched a lot of television. It's not hard to understand that providing 24 hour unlimited access to the service you paid for doesn't cost more than pennies, and that charging by the hour (or by the gigabyte) is simply a method of ripping people off. It also isn't hard to understand that once such a rate structure is crammed down the throat of customers with no other options, rates will likely increase.

What's hard to understand is why AT&T should be allowed to use the public airways to change the basic business model of the internet to the detriment of everyone but AT&T. Flat rates for service has been enormously successful in encouraging innovation and free content creation on the internet. For AT&T to use it's market share (gained by providing flat rates for unlimited service for 4 years) to unilaterally change the rules on what is now a critical communication and educational service is not acceptable. For AT&T to expect to be paid per bit for content created by others and services provided by others is wrong.

One of the great things about the internet is, up till now, if a child asks where Madagascar is, it can be looked up on the internet without any concern as to whether it will cost more. AT&T wants to change that equation. It wants people to be worried about how much they data they consume, not because it actually costs more, but simply to make additional profits. "Okay, dear, you can google Madagascar, but don't watch any videos about it! We can't afford it."

Gruber also seems to think that $14.95 for 200 megs is a "great" starting price buying into AT&T's bullshit that most smart phone customers use less than that. He correctly guesses that AT&T is deliberately trying to confuse things by saying "smart phone" rather than "iPhone." But Gruber still thinks a lot of iPhone users will find this a deal. Well, they won't. The average iPhone users uses 270 megs, and the average person's usage grows every year. So the entry level price won't work for all but a few iPhone users, and odds even they will bump over the limit and into AT&T's excessive overage fees.

Gruber also fails to note that AT&T is lowering the starting rate from 250 megs to 200 megs on the iPhone. Where's the discount there? By cutting one fifth of customers monthly allowance, it's clear AT&T is not serious about providing a low cost option. The $25 deal is really the only option for anyone who actually plans to use an iPhone. $14.95 simply functions as a misleading price point. (And if we are to assume that these electrical bits have some actual cost associated with them, why does it cost over half as much money for a tenth as many bits? Why not simply a 1gig $14.95 option and a 2gig $25 option?)

The bottom line is: AT&T has been profiting enormously by providing unlimited (5gigs) data service on iPhones for $30. Now everyone will be paying $25 for half of what they were getting before, just as new iPhones and iPad are coming out that will likely consume a great deal more data.

Gruber may not be concerned about his iPhone usage because he also pays for an home internet connection. That's great if you're making enough money to have the option of paying for two separate ways to access the same service. One of AT&T's goals is clearly to keep customers viewing smart phones as a secondary way to access the internet, and thus protect it's land line business. While that may be nice for AT&T, to charge extra for one service to force you to buy another, it's not good for customers or frankly… America.

It's a huge rip off, and one that people need to actively fight. Customers should refuse to patronize AT&T, and Congress and the FCC should demand AT&T change it's policies. America has the worst, most expensive, and slowest internet service of any modern nation. AT&T's new plans encourage it to continue to provide lousy service at high prices. And that is too high a price to pay.

Further Proof AT&T Hates Its Customers

It doesn't take a psychology degree to figure out that AT&T CEO Randall Stephenson is a jerk. The way he runs his company is enough of a clue. But you'd think someone, somewhere in the company might gently encourage him into not going out of his way to look like an asshole. But I guess not:

AT&T Threatens Customer Who Dares to E-Mail CEO