AT&T Whines About Bandwidth Usage For Poor Network Performance; Drops Hints On Data Caps For iPhone Users While Verizon Patiently Waits In the Wings

AT&T is finding itself in an increasingly untenable position when it comes to its most valued commidity - Apple's iPhone. Ever since the release of the newest incarnation of the iPhone, the 3Gs, AT&T has been under fire for its networks poor performance. The telco has even gone as far as to offer the 3G MicroCell, a femtocell device that plugs into your existing high-speed Internet connection and then broadcasts a cell phone signal throughout your house (or office or mountain lair, etc.). You then make and receive calls on your phone as usual, but the femtocell actually routes your calls over the Internet to your wireless carrier's network. The goal being to provide solid coverage in buildings where coverage is currently limited or non-existent. Recently, AT&T also started requiring customers to use a data plan with their iPhones.

Now comes the news that, during a speech to wireless industry professionals, AT&T CEO Ralph de la Vega complained vociferously about the disproportionately ludicrous amount of bandwidth used by iPhone enthusiasts. He then went on to drop subtle hints about AT&T's intentions on dealing with the problem. Whle not saying exactly what those measures might be, most are postulating the telco may be planning on imposing data usage caps on iPhone users.

Victim of own success? Or lack of foresight?

There is no doubt that the iPhone is the most successful cellphone in the known universe. It's hot. It's sexy. It has cute, artsy commercials with catchy tunes. Everybody wants one. AT&T has known this ever since the 1st gen of the now iconic device. You'd think some brainiac exec over at AT&T would, after some celebratory mimosas, begin to wonder if the telcos network would be able to handle the sheer numbers of iPhone users and the bandwidth they would surely be eating up with the Internet browsing, SMS, MMS, and, of course, all those little fun apps available from the Apple App Store. Indeed, one would think the well paid executives would surely ponder the obvious: We're gonna need a bigger network (to paraphrase a well known movie quote).

Conceivably, if Apple continues to choose to let AT&T be the exclusive beneficiary of its genius (another questionable business strategy, but we'll discuss that a bit later on), the telco could do what Pinky and the Brain have been trying to do for years - take over the (telco) world. That is if AT&T had had the foresight to build its network up and out properly. Unfortunately for the iPhone fans, the telco has, in this case, difinitively dropped the ball? Or is that the call? Well, actually, it looks like both.

Sure, you can argue AT&T is a victim of its (or is that Apple's?) success. Maybe you can make the excuse that noone saw this coming upon the iPhone's release. But after the initial numbers were in, the arguement became moot. It was obvious more was needed by AT&T's network. AT&T's failure to bolster its network in the wake of the iPhone's runaway success is syptomatic of the state of the telco itself. Requiring data plans is really not such a surprising move. In fact, in my humble opinion AT&T should have done this from the very beginning. It was obvious users would be using the phone to its fullest capabilities. And every other telco requires a data plan for almost all smartphones. And almost all other telcos have data caps on those plans. It would not have been a dirty or underhanded thing to do if AT&T had done what every other major carrier does from the beginning. I can understand the grumblings if customers for AT&T's "springing" these things on them out of the blue though.

The MicroCell is a band-aid for sure though. It means AT&T realizes that its network and coverage is inadequate to begin with, let alone the networks ability to handle the glut of usage coming from iPhone users. Yes, femtocells are the wave of the future... maybe. If they catch on. But deploying them in order to cover your obvious inadequacies is a move of desperation. Perhaps the most telling is the fact that AT&T scores worst in customer satisfaction among smartphone users.

Verizon to the rescue?

Verizon has recently unleashed a series of commercials aimed at disgruntled AT&T users. Some believe Verizon - who may very well end up with the iPhone in 2010 - is preparing to lure iPhone lovers away from AT&T. After all, there are so many disgruntled AT&T customers who are moving on to other devices such as the Palm Pre and even the HTC Hero with Sprint. Some believe that the Verizon iPhone is nothing but hype since it would cost Apple a lot of money to build their device on CDMA platform, rather than GSM. But given the current conditions of AT&T's network and its handling of the iPhone, Apple investing in making that change so the iPhone can run n Verizons network is a small investment with almost guaranteed huge returns. A recent study says that Apple could at least double its market share by ending exclusivity with AT&T:

"In the top six iPhone markets that are still exclusive, we believe that Apple’s market share could rise to 10%, on average, in a multiple carrier distribution model from 4% today. These six markets represented almost 70% percent of iPhone shipments in C2Q09."

AT&T's bumbling and refusal to spend the money to build out its network using the latest technology is going to cost them its cashcow. The joy ride with the iPhone is coming to an end, due in part to Apple ceding to consumer demand for the company to make the iPhone avalable to a wider audience (and, frankly, Apple would be dumb not to), but also to the arrogance and short-sightedness of AT&T. Verizon is developing LTE (4G) at a rapid pace. Its network is mor suited to handle the bandwidth glut. Granted. a Verizon iPhone will from the beginning require a data plan and have bandwidth caps imposed... but that is no surprise since that is Verizon's policy anyway. And I guarantee a Verizon iPhone will not drop any where as many calls as AT&T's pathetic network.

The bottom line here is that AT&T has proven inadequate both in service and network capabilities to keep up with consumer demand when it comes to the iPhone. No amount of whining by the upper echelon of AT&T will change this. AT&T has failed, and failed miserably in its responsibility to the consumer. It's time Apple realizes this, and takes the obvious and necessary steps to not only bring the iPhone to the rest of the masses, but do so on a network that can handle the responsibility and load.