Consolidation over the past decade has left just four big carriers in control of 90 percent of the wireless market, making it harder for small and regional companies to compete, according to a government report released Thursday.
The study by the Government Accountability Office, the investigative arm of Congress, could help fuel the Federal Communications Commission’s recent efforts to increase oversight of the wireless industry. The FCC is currently considering rules that would require wireless phone companies to alert consumers before they reach roaming or data usage limits on their wireless plans. It has also been looking into common industry practices such as charging consumers early termination fees to break a service contract before it expires.
The GAO study found that despite the industry consolidation, consumers are benefiting from better wireless coverage and prices that are half what they were in 1999. The report says the number of cell phone subscribers in the U.S. stood at 285 million at the end of 2009, up from 3.5 million in 1989. It also says that nearly 40 percent of U.S. households rely on a cell phone as a primary phone.
Although the GAO reached no firm conclusion on the causes of limited competition in the wireless sector, it does list a number of factors regularly cited by smaller carriers and consumer groups. Those include early termination fees and handset exclusivity deals such as AT&T Inc.’s contract with Apple Inc. to serve as the sole U.S. carrier for the iPhone.
The report also cited complaints about the “special access” regulations that guarantee carriers access to the vital back-haul lines that connect wireless towers to broader telecommunications networks. Smaller carriers argue that they pay excessive prices for this access because much of the critical network infrastructure is owned by landline telephone companies such as AT&T and Verizon Communications Inc., which also have huge wireless arms.
The GAO report, which was requested by members of the Senate and House Commerce Committees, urges the FCC to collect better data on special access rates and other issues.
Rick Kaplan, chief counsel to FCC Chairman Julius Genachowski, said the commission has taken “proactive steps” to improve its data collection and analysis.
Although payments with smartphones are about to be tested, the Consumers Union, publisher of Consumer Reports, wants businesses that offer mobile phone payments to provide protections to individuals who use prepaid cards or have their purchases charged to their cell phone bills.
“There aren’t consumer protections for these two forms of payment,” said Michelle Jun, staff attorney for Consumers Union, which is based in Yonkers, N.Y.
Jun noted credit and debit cardholders are protected from fraudulent card use. Issuers place a $50 limit on illegal use of a credit card. Fraud on a debit card can expose a cardholder to $500 or more in liabilities depending on when the person reports an illegal transaction. Smartphone users would attach their debit and credit card accounts to their phones to complete a transaction.
Prepaid cards, however, lack even the protections applied to traditional debit cards because the funds are pooled from many cardholders, she explained. Smartphone users also could attach their reloadable prepaid card account information to their phones to purchase products.
Jun said it is not clear how many smartphone users will use prepaid cards or charge purchases to their mobile phone bills. She hopes, however, the Federal Reserve Board will enact new regulations offering protections for these two forms of payment before the end of the year. The new Consumer Financial Protection Agency also may address the issue, Jun said.
The Consumers Union called for clarity on protections for consumers who use their smartphones for mobile payments several days after Bank of America Corp. announced it will begin a mobile phone pilot this September in New York City. Charlotte, N.C.-based Bank of America is scheduled to conclude the pilot by the end of the year.
by Andrew Berg, Wireless Week
CTIA, along with five other major electronics and telecommunications organizations, yesterday signed a letter that categorically rejects calls for a mandate that would require OEMs to include an FM transmitter in all cell phones.
The letter cites concerns over an Aug. 6 release by the National Association of Broadcasters (NAB) and several recent trade press reports suggesting that parties to the long-standing dispute over performance rights royalties may be working to forge a legislative compromise that would mandate the inclusion of FM radio chips in all mobile devices.
The letter, which was signed by the presidents and CEOs of CTIA, CES, Tech America, the Information Technology Industry Council, the Rural Cellular Association and the Telecommunications Industry Association, argues that it is wrong for two entrenched industries to resolve their differences by agreeing to burden the wireless industry, “which has no relationship to or other interest in the performance royalty dispute – with a costly, ill-considered, and unnecessary new mandate.”
Further, the letter rejects the mandate on grounds that it would drive up the cost of phones by forcing OEMs to include a component that some consumers may not want on their mobile devices, adding that requiring devices to carry an FM chip may limit other functionality that may be more highly valued by consumers.
CTIA and the other co-signers said that the dispute is not about safety. They wrote that the wireless industry is already working with the FCC, the Federal Emergency Management Agency (FEMA) and other governmental stakeholders to develop a mobile broadcast emergency alerting system compatible with present and future wireless air interfaces that will allow for government-approved alerts.
By JOELLE TESSLER, AP Technology Writer
WASHINGTON – A long-running dispute between radio broadcasters and the recording industry over music royalties has taken an unexpected turn with a proposed settlement that threatens to drag the mobile phone industry into the ring.
The compromise under discussion by radio broadcasters, recording labels and recording artists could include a federal mandate that all new cell phones come with a built-in FM radio chip. While a deal is far from final, the prospect that the government could dictate a key design decision for such a ubiquitous consumer device has alarmed electronics manufacturers and wireless providers.
“This is two old-media industries attacking the new wireless broadband industry,” said Gary Shapiro, head of the Consumers Electronics Association. “This is a battle that doesn’t involve us.”
Building FM radio into cell phones requires an additional antenna, which could add weight and bulk to devices prized for their sleekness, Shapiro said. It could also drain battery life more quickly, which could lead manufacturers to remove other features from their devices, he added.
“We don’t think Congress should accept a back-room deal on how an iPhone should be designed,” Shapiro said. “We think consumers should choose and companies should choose.”
For decades, the National Association of Broadcasters has been fighting a music industry proposal that would require radio stations to pay music royalties to recording labels and performers for the right to play their songs on the air.
Current law requires broadcast radio stations to pay royalties to songwriters, but not recording labels or artists. Broadcasters argue that the existing arrangement makes sense because radio airplay provides free promotion and drives music purchases and concert ticket sales.
But compact disc sales have dropped off, and sales of digital albums hasn’t made up the difference, prompting labels and artists — represented by a group called musicFirst — to step up their push to start collecting royalties, too.
Successors to over-the-air radio, such as satellite radio, Internet radio and cable TV music channels, are required to pay performance royalties, noted Marty Machowsky, a spokesman for musicFirst, which is backed by the Recording Industry Association of America and the Recording Academy. Broadcast radio stations, he said, get a “free ride” — paying nothing for “musical performance which is the foundation of their business.”
Both the House and Senate Judiciary Committees have passed bills that would give recording labels and artists a cut of advertising revenue that radio stations generate by playing their songs, but neither contains an FM mandate. Both bills have stalled due to fierce broadcaster resistance. Faced with a stalemate, lawmakers have asked NAB and musicFirst to try to negotiate a compromise.
The proposed settlement would establish a tiered system of royalty payments that would bring in a total of roughly $100 million for the music industry. Commercial radio stations with more than $1.25 million in annual revenue would pay royalties totaling 1 percent of revenue. The smallest commercial and nonprofit stations would pay either 1 percent of revenue or $100 annually, whichever is less.
As this battle has dragged on, new rivals to broadcast radio have grown stronger and drawn more listeners as digital music players and streaming Internet radio have flourished. If Congress approves the compromise with the FM radio mandate, it would be a victory for NAB, which is seeking to expand radio station audiences.
Both the recording industry and the broadcasters trumpet the clause as a win for consumers. Machowsky said FM radio on cell phones “would give consumers more ways to listen to and enjoy music.”
And Dennis Wharton, executive vice president of the National Association of Broadcasters, which represents over-the-air radio stations, said such a requirement would provide a valuable public service — particularly in emergencies, when consumers often tune into local stations seeking critical public safety information.
But Jot Carpenter, vice president of government affairs for CTIA-The Wireless Association, which represents wireless carriers, insists that while consumers do like to listen to streaming Internet radio and music downloads on their wireless devices, there is “not a huge desire to listen to over-the-air, ad-laden radio” on mobile handsets. Phones with FM radio chips are not in high demand, he noted.
At this point, NAB and musicFirst are pushing ahead. They are taking the potential agreement back to their members to try to get buy-in on a deal that they can take to lawmakers after the summer recess. And they hope that Congress will act in the fall.
“Nothing is locked down just yet,” said Mitch Bainwol, chief executive of the Recording Industry Association, “but we’re on the precipice of an historic breakthrough.”
Claire Courtney, Forbes.com
How to stay on top of the dangers for kids with constant connectivity.
SAN FRANCISCO — Colorado mother Sharon Hamilton thought she had a close eye on her son’s technology use. The 15-year-old turned in his cellphone every night at 10 p.m. One evening, Hamilton became suspicious when he frantically deleted text messages before giving over his phone. Her worst fears were soon confirmed.
When she turned on his phone, a text message from an unrecognizable, out-of-state number appeared. “Good night Babe,” it read.
“I am a watchful Mom,” she said, ” and this bypassed my watch.”
Her son told her that the text came from a 30-year-old female friend he met while playing “World of Warcraft,” a popular online multiplayer videogame. Hamilton, unconvinced of the innocence of this friendship, investigated the woman further. She ended up paying a company to discover that her son had spent three months communicating with an adult male.
For tweens and teens, cellphones are the perfect tool for being constantly connected to the outside world. Texting use has skyrocketed. Three years ago a teen sent and received an average of 435 texts per month; as of late 2009 that total jumped to 3,186 texts, according to Nielsen Mobile. That’s a ripe opportunity for predators who seek to make close, frequent connections with kids.
With the tremendous growth in technology over the past decade comes a discernible generational gap between kids and their parents. A study by the Pew Internet Research Center states that 72% of cellphone owners ages 12 to 17 are texters while only 18% of cellphone owners ages 40 to 49 are texters.
So parents are unfamiliar with the medium their kids are conversing in. They are also likely to have different boundaries, certainly when it comes to “sexting,” or sending sexually explicit messages, sometimes to friends.
Dr. Michael Rich, director of the Center on Media and Child Health at Harvard University, believes that kids aren’t ready for the freedoms their parents are giving them. “We have basically let kids be in an environment where they have free rein but don’t have the brain development to manage that in ways that are safe and healthy.”
This can be especially dangerous since kids are given cellphones at increasingly younger ages. A little over half of all kids between the ages of 8 and 12 will have cellphones by 2013, according to market research firm Yankee Group.
With this new risk comes an opportunity to prevent it. Several firms are selling software tools for parents to monitor and limit cellphone use. The Colorado mom, Hamilton, was so horrified by her son’s experience that she launched KidPhone Advocate, a technology service providing parental controls for cellphones.
The software downloads directly onto a phone, and has a bevy of danger-curbing options. Parents can view all incoming and outgoing texts and phone calls, deactivate the phone while it is in transit to prevent texting while driving (except for 911 and two emergency numbers), locate the phone at all times using GPS technology, and record the speed of travel.
KidPhone Advocate also has a list of constantly evolving tween and teen lingo. Parents can choose to be alerted if taboo words are exchanged. KidPhone Advocate costs between $2.99 and $11.99 per month per phone, depending on the options purchased.
Another product on the market is My Mobile Watchdog. This software has services including the ability to access anything that goes in or out of the phone (including applications, texts, e-mail, and pictures), the option to program in a list of authorized contacts, an activity calendar that will send text reminders, and application blocking, which can even block Web browsers.
Parents can opt in to get alerts when their kids receive calls from unknown numbers. The cost is $9.95 per month for up to five phones.
But is restricting kids the best way to keep them safe? Even the most well-intentioned curfews get broken. Kids are always ahead of parents on the latest slang and innuendo. And cellphone technology is evolving so rapidly that chances are, kids will find workarounds–or worse, rebel.
A good first step is to educate kids and establish a basis of understanding. Stay involved in their cellphone usage by forming a nonthreatening, non-intrusive relationship that promotes communication rather than secrecy.
Interesting information about the AT&T / Apple backstory regarding the evolution of the iPhone / AT&T partnership.
By Fred Vogelstein, Wired August 2010
For iPhone fans, it really was too good to be true. A pair of Apple executives had just described the latest model of the iPhone — the 3GS — onstage at the company’s Worldwide Developers Conference in June 2009. The audience loved it. The 3GS was twice as fast as its predecessor, it included a camera that shot video, and the updated iPhone operating system enabled multimedia messaging and tethering — the ability to use the phone as a modem. Just one problem: While many customers in Europe and Asia could enjoy all those features, AT&T, the iPhone’s sole US carrier, wouldn’t allow video messaging or tethering at launch. In other words, the most advanced features wouldn’t be available to AT&T customers. What’s more, some current iPhone users who wanted to upgrade wouldn’t get the subsidies that new customers enjoyed. Incensed iPhone fanatics vented their fury on Twitter. “AT&T has been one disappointment after another.” “Is AT&T trying to squeeze more money from us poor suckers?” And they punctuated their complaints with a hashtag — the Twitter convention for grouping conversations — that became an eight-character protest slogan: #attfail.
The iPhone contributed to AT&T’s income — but it required the company to spend billions on network upgrades.
About a week later, AT&T backed down and agreed to extend the subsidy to some existing iPhone users, but that didn’t appease its many critics. In the following months, the #attfail tag would serve as a kind of primal-scream therapy, a chance to rage against every perceived indignity that AT&T had forced upon them. Dropped call? #attfail. Data service unavailable? #attfail. Bad customer service? #attfail. The hashtag popped up on Twitter more than 5,000 times over the next six months, according to research firm Trendrr. In an attempt to assuage its critics, AT&T produced a video featuring its online spokesperson, Seth the Blogger Guy, to explain that the company was facing “an astounding amount of data demand” and to detail the “time-consuming process” involved in enabling video messaging. But Seth didn’t seem to win many converts. “AT&T LIES to consumers! Seth is not a REAL Blogger Guy!” one tweeter wrote in response. “#AT&T #FAIL miserably.”
AT&T had seen something like this coming. Almost as soon as the first iPhone was introduced in 2007, the carrier realized it might run short of bandwidth. Within just a few months, the first wave of iPhone customers was already sucking down about 15 times more data than the average smartphone customer and 50 percent more than AT&T had itself projected. In a bid to avert the looming problem, a team headed by senior vice president Kris Rinne met with Apple to ask for help. Of course AT&T was planning to upgrade its network to handle the increased demand, Rinne’s team told Apple executives, but that was going to take years. In the meantime, would Apple take measures to help throttle back the traffic? Perhaps Apple could restrict its YouTube app to run only over Wi-Fi. Maybe the iPhone could feature a smaller, lower-resolution videostream or cut off YouTube videos after one minute. Rinne, who had already met with Apple’s iPhone team at least half a dozen times, fully expected the company to play along. After all, manufacturers agreed to such restrictions all the time. It didn’t make sense to build phones and offer features that carriers couldn’t support.
But in meetings with Apple engineers and marketers over the subsequent year, Rinne and other AT&T executives discovered that Apple wasn’t playing by traditional wireless rules. It wasn’t interested in cooperating, especially if it meant hobbling what had quickly become its marquee product. For Apple, the idea of restricting the iPhone was akin to asking Steve Jobs to ditch the black turtleneck. “They tried to have that conversation with us a number of times,” says someone from Apple who was in the meetings. “We consistently said ‘No, we are not going to mess up the consumer experience on the iPhone to make your network tenable.’ They’d always end up saying, ‘We’re going to have to escalate this to senior AT&T executives,’ and we always said, ‘Fine, we’ll escalate it to Steve and see who wins.’ I think history has demonstrated how that turned out.”
Indeed it has. Just as Rinne and her colleagues predicted, AT&T’s network proved unable to cope with the deluge of data traffic generated by the iPhone, particularly in cities like San Francisco and New York. Even as the #attfail meme burned up Twitter, AT&T accelerated its network upgrades — it has spent nearly $37 billion on new equipment and capacity since the iPhone launch and expects to invest around $13.5 billion in 2010. The effort may have already boosted performance, with at least some independent studies showing that the carrier’s network has improved. And yet AT&T’s image remains deeply damaged, and the body slams keep coming — including insults from mischievous blogger Fake Steve Jobs, The Daily Show’s Jon Stewart, and Facebook’s Mark Zuckerberg.
Meanwhile, the groundbreaking alliance has deteriorated into a loveless celebrity marriage. Each company has publicly described the other as the ideal partner (and neither would comment for this story beyond reiterating that talking point), but behind the scenes both have jockeyed for position while consumers have lashed out, looking for someone to blame.
The #ATTFAIL Uprising
Over the past year, nearly every time AT&T has made an announcement regarding its 3G network, furious customers have taken to Twitter to express their frustration with the company’s service. It’s all chronicled under the now-famous hashtag #attfail. Here are some key AT&T moves and the savage tweets they provoked. — Angela Watercutter
JUNE 8, 2009 Apple unveils the iPhone 3GS; AT&T stalls on multimedia messaging and offers weak perks for existing users.
- Wow, #attfail you really did it this time … Good job. At Failing.
- After crazy MMS delay, if there’s going to eventually be an extra fee for it, it had BETTER be free for 6-12 months. #attfail
November, 2009 A new AT&T ad campaign debuts, with Luke Wilson touting the carrier’s coverage and service.
- #att stop paying Luke Wilson, stop bugging me, fix your #attfail network.
- A VM my dad left @ 4:56PM just now appeared on my phone @ 11:36PM. Luke Wilson will pay 4 this shit service! #ATTFAIL
- Another shining example of how AT&T just doesn’t get it. Their plan? Get customers to use their service less. #ATTFail
- Maybe De la Vega didn’t understand what an iPhone does? #attfail #sueatt
January 27, 2010 Apple reveals the iPad and announces that AT&T will provide its 3G service.
- #ATTFAIL for 3G on the #iPad? I can’t get AT&T service on iPhone at home. Does that mean no service for iPad either? Verizon, take me away
- New form of #attfail. 4 bars 3G but no Internet. The iPad’s gonna rock.
June 7, 2010 AT&T ends unlimited data plan, rolling out new, tiered pricing. Tethering costs extra.
- AT&T? You totally suck. Dropping iPhone unlimited data plan? Pure greed. #attsucks #attfail
- Thanks ATT for sealing the deal. Charging for data plans and 20 MORE dollars for tethering, no thanks. #att #fail
- #attfail in Tampa, haven’t been able to make a call or send a txt msg since 4pm
- Visual Voicemail on AT&T not working. Bad when EDGE Internet doesn’t work, but not being able to listen to voicemail is some major #attfail
The two corporations have argued about almost everything. Jobs has been apoplectic about the state of AT&T’s network and what he views as its slow-footed upgrade efforts almost since launch day three years ago. One Apple source says that Jobs has discussed dropping AT&T at least half a dozen times.
AT&T executives aren’t so crazy about Jobs, either. They complain that Apple hasn’t accepted its fair share of the blame. They say — and Apple sources confirm — that the software running the iPhone’s main radio, known as the baseband, was full of bugs and contributed to the much-decried dropped calls. What’s more, Apple had chosen to source the radio from Infineon, whose hardware was used widely in Europe but rarely in the US, where cell towers are placed farther apart and reception is therefore less forgiving.
Even more irksome to AT&T, though, has been Apple’s relative silence in the face of thousands of frustrated customers. “AT&T went in thinking the deal was a true partnership: ‘We’re in this together, and we defend each other throughout.’ That wasn’t the way Apple did things at all,” says someone who worked on the project for AT&T. “We’d say, ‘Let’s resolve these issues together,’ and they’d say, ‘No, you resolve them. They’re not our problem. They’re your problem.’”
The true cost to AT&T of this exhausting relationship will be debated for years. If the short-term bottom line is the only yardstick, it will be deemed one of the most lucrative business partnerships ever conceived. For its part, Apple has seen the iPhone become its largest and most profitable business generator almost overnight. It now represents more than $13 billion in annual revenue and has been a huge factor in Apple’s recent success. The company’s profit has doubled since 2007, and its stock price has nearly tripled since the end of 2006. (Indeed, Apple surpassed Microsoft in May to become the world’s most valuable technology company.) The iPhone has also been very, very good for AT&T’s wireless division — helping to generate record revenue, customer growth, and profit — despite the unprecedented amount of control it surrendered in exchange for the exclusive right to sell the device. Since early 2007, AT&T’s wireless revenue is up 43 percent, profit has risen roughly 200 percent, and the number of subscribers has grown 40 percent.
But for AT&T, the question is whether participating in such a spectacularly successful partnership outweighs the damage to its reputation and the aggravation it has suffered at the hands of Apple. Much of AT&T’s growth can be attributed to its exclusive arrangement with Apple — if customers want an iPhone, they have no choice but to sign up with AT&T. But someday, when that agreement ends, iPhone customers will have the opportunity to jump to a rival network. If a significant number defect, it will be hard for AT&T to argue that its iPhone experiment was worth it.
Even if the iPhone continues to be a lucrative business for AT&T, some executives will be disappointed forever with how the relationship evolved. Back in 2007, when AT&T (then Cingular) and Apple executives disclosed the deal publicly, they spoke of a radical collaboration — one based on trust and respect as opposed to the usual dynamics of control and fear — that could serve as a new model for the wireless industry. And it succeeded, to an extent, leading companies like Google to exercise greater control over phone and software design and other carriers to allow new products like the Droid and the ill-fated Palm Pre.
But the partnership also exposed a fundamental disconnect between phone makers — who want to make indispensable devices that customers use constantly to their fullest capabilities — and carriers, who want to limit the data demands on their networks. This dysfunctional relationship is not unique to Apple and AT&T; the tensions that have undercut the iPhone will likely bedevil every manufacturer and carrier. And what that means is, at some point, everyone with a smartphone will probably experience the same frustration as AT&T customers. Get ready for a lot more angry hashtags.
Looking back, it’s clear that the cracks in the Apple-AT&T relationship began forming as soon as Jobs announced the iPhone in January 2007. It was the first time the public got to see the long-rumored device — and, shockingly, the first time AT&T’s board of directors saw it as well. (Apple refused to show the phone to all but a handful of top AT&T execs before the launch.) The split only deepened from there. Apple and AT&T have bickered about how the iPhone was to be displayed in AT&T’s stores: Apple insisted the phone be presented on its own display stand, away from other models. They have even fought about wardrobe: When an AT&T representative suggested to one of Jobs’ deputies that the Apple CEO wear a suit to meet with AT&T’s board of directors, he was told, “We’re Apple. We don’t wear suits. We don’t even own suits.”
The two companies were simply unable to overlook their differences, even when banding together would have helped both of them. In fall 2009, Verizon was pummeling AT&T with a series of “map” ads, claiming that AT&T’s spotty 3G network was to blame for poor service. But rather than respond with advertisements trumpeting the iPhone — AT&T’s key strategic asset — the company sued Verizon, a move that made it look petty and defensive while seeming to concede the overall argument. Even if AT&T had wanted to respond with iPhone ads, Apple would have refused. “Put yourself in Apple’s shoes,” says an Apple executive involved in those conversations. “The reason the Verizon ads were so effective wasn’t because of the iPhone. It was because of AT&T’s network. We would have been letting them use the iPhone to put lipstick on a pig.”
And on it went. They argued over whether to allow tethering — using the iPhone as a wireless modem. Carriers around the world offer this feature to cell phone customers, but Apple and AT&T were at an impasse over it for at least two years. AT&T wouldn’t allow it without tacking on another monthly charge. Apple believed that it should be included in AT&T’s flat-rate data plan. The two were still wrestling with the problem at the end of 2008, when AT&T wireless boss Ralph de la Vega told Web 2.0 Summit attendees in San Francisco that tethering would be coming to the iPhone “soon.” Even though Apple had been pushing for tethering, Jobs was furious that De la Vega would make such a momentous announcement before a deal was in place — and without consulting Apple. He even ended a high-level meeting days later with a rant about it. Jobs “was absolutely livid,” a witness says. “He paced around the room for five minutes talking about what an incredibly stupid company AT&T was and how frustrating it was to do business with them. Then, when he was done, he said, ‘I’m going to go call Ralph and yell at him.’” (AT&T announced in June that it would allow tethering for an additional fee.)
Indeed, Jobs actively considered splitting with AT&T early in the partnership. Just months after the iPhone launched, and not long after Rinne asked Apple to limit YouTube usage, Jobs was investigating another possible solution: dropping AT&T and striking a deal with Verizon. But because Verizon’s network ran on a different transmission technology, making the move would require an entirely new chipset. So around the end of 2007, when the iPhone was only a few months old, Jobs asked a team of executives and engineers to look into it.
The group — which included iPhone software boss Scott Forstall — took the job seriously, even visiting the San Diego headquarters of Qualcomm, the company that supplies the chips for Verizon phones. But in the end, switching to Verizon would have been just too complicated and expensive. The new chips were a different size, which would require Apple basically to rebuild the iPhone from scratch. Meanwhile, changing carriers could mean voiding AT&T’s exclusivity agreement and inviting a nasty lawsuit. And it wasn’t clear that Verizon would be an improvement; at the time, it wasn’t any better equipped than AT&T to deal with the iPhone’s bandwidth demands.
Jobs and his team would continue to discuss switching to Verizon, but these were always short conversations. “Every time the issue of switching came up, it always seemed to cause as many problems as it solved,” according to a source who attended some of these meetings.
Meanwhile, no matter how frustrated AT&T got with Jobs, it had little choice but to stand by him. It would have been devastating to lose the iPhone after investing billions of dollars and endless reputational capital. And so the relationship carried on, dysfunctional and loveless though it was. Divorce, at least for the time being, was not an option.
For a while, it looked like Apple and AT&T, resigned to their codependency, had learned to live with each other. AT&T’s multibillion-dollar revamp of its wireless network was difficult and time-consuming. It involved adding or upgrading cell-tower radios and increasing the capacity of the wires that connect those towers to the Internet. As recently as May, AT&T’s De la Vega acknowledged that he was still not satisfied with the network’s performance in San Francisco. But Apple has publicly supported its partner, with COO Tim Cook going out of his way to praise the company and its aggressive network improvements shortly before AT&T was announced as the carrier for the iPad.
Yet it’s clear that tensions are still bubbling beneath the surface. Jobs was not nearly so supportive of AT&T when he addressed the All Things Digital conference in June. “They are doing pretty well, actually, in some ways, and they have some work to do in other ways,” he said. “They have the fastest 3G network, and it’s improving. I wish I could say ‘rapidly,’ but I think it’s moderate-rate improvement.” When Jobs was asked whether there might be an advantage in having more than one US carrier offer the iPhone, he responded, “There might be.”
Most troubling for AT&T is that the restrictions that have prevented Apple from courting other suitors are starting to fall away, one by one. iPhone watchers have made a parlor game of guessing when AT&T’s exclusivity agreement will expire; most expect it to happen within the next several months. And last year, Qualcomm began working with Apple on a chip that could allow the iPhone to operate on both the AT&T and Verizon networks; The Wall Street Journal has reported that Apple should have a Verizon-ready phone in the fall.
But AT&T isn’t satisfied with the status quo either. In June, the company announced that it would no longer allow new customers to sign up for unlimited data plans, a key element of Jobs’s vision for the iPhone and iPad. Instead, AT&T will offer tiered plans that let customers download up to 2 gigabytes a month. (Particularly heavy users can pay extra for even more data, but AT&T pointed out that only 2 percent of its customers currently use more than 2 gigs.) For AT&T it is an important step in resetting customer expectations. If they want to suck down apps, music, and high-quality video, they are going to have to pay for it.
But even this new model is likely not sustainable. Two gigabytes may seem like a lot of data now, but it won’t for very long; witness the recent release of the iPad 3G, with its data-rich apps, and the iPhone 4, with its video chat. As consumers’ appetite for data grows, they will be asked to pay more and more for service that is not likely to be much more dependable than it is today. If AT&T’s customers are this angry when they are paying $30 a month for data, imagine their reaction when the bill tops $100.
Carriers are doing what they can to fend off this deluge. They have successfully lobbied the FCC to begin the process of opening up new spectrum — radio frequencies that can carry wireless data — over the next five years. They have rolled out technology like femtocell base stations that allow cell phone customers to route calls through home broadband connections. And in the next few years, they will switch to new wireless transmission standards like LTE that can relay more than twice as much data over the same amount of spectrum. But even these measures aren’t likely to be enough.
AT&T still seems to get surprised by how quickly the demand for wireless data is growing. When the iPad was unveiled, the company announced that it would provide unlimited 3G access for $30 a month — a price point it had to rescind about five months later when it stopped offering all-you-can-eat data plans. Meanwhile, CEO Randall Stephenson has shrugged off the potential impact of the iPad, arguing that most users will access the Internet via Wi-Fi, not his company’s 3G network.
What is clear is that AT&T’s role will always be that of parsimonious gatekeeper, dictating to its customers how much data they can have and how much they’ll pay for it. It is precisely the role the company hoped to avoid, the reason that carriers long refused to give phone manufacturers and software developers the kind of influence that Apple now wields. In a fate that will soon befall the rest of the wireless carriers, AT&T has become a mere toll-taker on the digital highway, an operator of dumb pipes that cost a fortune to maintain but garner no credit for innovation or customer service. Meanwhile, the likes of Apple and Google will continue to pump out products that push the limits of what the carriers can provide, training customers to use more and more data. The carriers will be locked into a grim series of adjustments — continually raising prices or invoking ever more stringent data usage caps.
And every time they do, they can expect to be the targets of customer rage. That’s what happened to AT&T when it did away with its unlimited data plan in June. Once again, Twitter erupted. “AT&T? You totally suck. Dropping iPhone unlimited data plan? Pure greed,” a user with the handle @mdenyse wrote. “#attfail.”
Largest quantity of a Sprint phone ever sold in a single day
by Sprint Nextel Corporation, June 7, 2010
Friday sales of HTC EVO 4G marked the largest quantity of a single phone sold in one day ever for Sprint, the record was previously held by both Samsung InstinctTM and Palm PreTM. In addition, the total number of HTC EVO 4G devices sold on launch day was three times the number of Samsung Instinct and Palm Pre devices sold over their first three days on the market combined.
The record pace of HTC EVO 4G sales led to temporary shortages of the device at some of the 22,000 sales locations across the United States, including Sprint retail stores, national retail partners including RadioShack, Best Buy and Walmart, and indirect dealers. Additional shipments are arriving in retail stores on a regular basis with many stores seeing daily deliveries.