iPhone drama: True AT&T gripes vs. uninformed chatter, Part 2

While the popular thing to do nowadays is relentlessly bash AT&T, not all of it is warranted. In the followup to MacYourself’s first iPhone drama analysis, more sensitive subjects are addressed and brought to the forefront.

Continuing the discussion about AT&T’s exclusive agreement with Apple to carry the iPhone, the topics of pricing, MMS holdups, and public perceptions are covered in this post. As mentioned in Part 1, AT&T is getting hammered by the media and Apple fans, even though they may not quite deserve all of it. If you haven’t read the first part yet, you’re definitely going to want to check it out before diving into what’s written below.

Controversial pricing

A significant bit of anti-AT&T propaganda spreading around the web and other media outlets focuses on pricing. Both the monthly service charges and early upgrade fees for iPhone users have generated quite the stir. Upon further review, however, there’s not really anything out of the ordinary going on here. In fact, it’s all standard practice for any mobile phone carrier. Although we as customers can buy an iPhone 3GS for $199, the real price is actually $599. The $400 difference is paid for by AT&T directly to Apple as an incentive to get customers to sign a two-year contract with them. Since iPhone users pay a minimum of $70 per month for service, AT&T is counting on us to finish our contract term so they can recoup the large hit they took at the beginning. This is the reason early termination fees exist.

The result of this business model is that customers in the middle of their contract are not eligible to buy the very next year’s iPhone at the same $199 price. Instead, they must pay $399 – half of the normal subsidy. Well, doesn’t that make sense since their two years is only half over? Many folks are up in arms about this, but it’s entirely logical. Nobody is entitled to a fully subsidized new phone until their original contract is all paid up and AT&T has made back their $400 loss. Forget the self-centered “I’m a premium paying customer” stuff – a contract was signed with AT&T and customers will be held to it. Verizon, Sprint, and T-Mobile all do the same exact thing with other phones as well. Verizon even touts the deal as “New Every Two” in their marketing materials. There’s no shady business deals or abuse of exclusive agreements going on here. Apple and AT&T are just doing what’s expected of them as cell phone companies.

Along these same lines, no matter how much people may whine, AT&T is not price gouging by offering a 450-minute calling plan with unlimited data for $70 per month. At least not when compared to their competitors, that is. A quick look at Verizon’s website reveals a Blackberry Storm with the same package is also $70 per month. Oh, and by the way, visual voicemail costs $2.99 more if you’d like that feature. After the iPhone made this convenient (and free) feature popular, Verizon had a change of heart and decided to offer it to their customers as well for a small monthly fee. Other more robust plan configurations may vary in price (especially when you look at Sprint’s all-you-can-eat plan), but the fact remains that AT&T is competitive with its pricing.

Valid complaints & reasons for bashing

Even though I have been very pro-AT&T in both Part 1 of this analysis and the beginning of Part 2, I do believe some of the common complaints against the exclusive carrier are valid. They should be commended for their successful efforts and innovations, but they’re far from perfect. First and foremost, MMS (Multimedia Messaging Service) should have been available at the launch of iPhone OS 3.0. I find it extremely hard to believe Apple sprung this on their partner out of nowhere, so AT&T surely had enough time to get their affairs in order. A large group of Apple’s international iPhone carriers had MMS ready at launch. What made AT&T incapable of doing the same? There’s simply no excuse for the delay. Not being forthcoming with customers about the reason and not providing a more specific time frame than “later this summer” is embarrassing. It has damaged the public’s perception of AT&T and it has made Apple look foolish for allowing this to happen – something they’re undoubtedly miffed about.

The other major gripe I can agree with is customers’ unrest about AT&T’s rejection of the SlingPlayer iPhone application for use over 3G and EDGE. SlingPlayer, for those who are unfamiliar with it, is a set-top box which allows users to watch & control their TVs from anywhere with an internet connection. Citing some very wishy-washy verbiage in their Terms of Use, AT&T claimed the iPhone is so far beyond the realm of a smartphone that they consider it to be a “mini-computer.” As a result, the iPhone is not subjected to the same terms that allow other smartphones like the Blackberry to support SlingPlayer streaming over their network.

The iPhone already gets video from Safari, YouTube, and a variety of other apps (like MLB At Bat) over AT&T’s network, so what’s the difference here? It doesn’t make sense, and iPhone users have a right to be ticked off. If it’s a network capacity issue, AT&T needs to work it out instead of remaining silent on the matter. If it’s because AT&T has something up their sleeve regarding their U-Verse TV service, then we have a major problem here. I can understand Skype not being allowed over the cell network since the number of voice minutes is the basis for a cell phone provider’s business model. Data, on the other hand, is data and they shouldn’t be able to dictate where this kind of outside content is allowed to come from.

Final thoughts about Apple’s partner

The bottom line is, despite the media circus surrounding the matter, Apple and AT&T have been fantastic partners thus far. Their exclusive agreement has been highly beneficial to both companies. Apple was able to make the product they envisioned and AT&T was able to increase their number of subscribers and overall revenue. Remember that we’re only 2 years into the iPhone’s existence, which means there are bound to be imperfections that get worked out over time. This is all new to both companies and, as much as we all want things right away, major progress like this takes a while.

AT&T admittedly does deserve some negative attention for their current lack of MMS support and their refusal to allow SlingPlayer over the cellular network. On the flip side, they had the foresight to trust Apple would deliver a game-changing mobile device and have given up a lot of the power that has traditionally been reserved for carriers. In addition, they have worked hard (albeit not quickly enough for some folks) to beef up their 3G network’s reliability, coverage, and speeds. A great deal of money is being spent to keep up with the demand iPhone users have created for connectivity and it will only continue with the network upgrades planned for this year.

All in all, AT&T should be given at least some credit for what they’ve done right instead of focusing solely on their faults. If all AT&T hears from the media and online community are ill-informed, petty complaints, they will be less likely to listen to legitimate criticisms. Making complaints count instead of spewing them non-stop results in more focused areas AT&T can work to improve. More importantly, it’s about managing perceptions. While they’re not perfect, AT&T isn’t nearly as bad as one would believe from what they read.