The iPhone's Carrier Problem

[strunke]

It's one thing to get your hands on an iPhone, as folks camped out in front of Apple stores around the country will do by the weekend. But there's no choice about the carrier: you only get AT&T (formerly Cingular) on an iPhone. And so far, the early reviews have not been kind to the mobile service and especially its cellular data network ("Pokey," says the Wall Street Journal; "excruciatingly slow," says the New York Times. A spokesman for AT&T said the company disagreed with those characterizations). Before the reviews emerged, AT&T tried to play down the speed issue and play up the new experience provided by Apple's so-far well-received iPhone software. "It's not just the speed of the uplink," says Carlton Hill, an AT&T Vice-President. "It's about the processor speed on a device and the application design that enhance the customer experience. There are a lot of ways to have an optimized data experience." And the iPhone's web capacities are said to improve dramatically when it can sync up with local Wi-Fi networks — if so, it would be a juxtaposition that may make the AT&T connection feel even slower.

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Nevertheless, analysts expect that millions of consumers will eventually switch away from their current carrier to buy into Apple's offering — and that says a lot about how frustrated people are with the wireless carriers. Forrester Research has found that the percentage of consumers who are happy with their carrier has fallen steadily year after year, and more than 80% of those surveyed by Measuredup.com, a customer service rating site, aren't satisfied with their carrier's service. Measuredup.com founder Marc Karasu says consumers are tired of carriers burning through hundreds of millions on ads while ignoring major service problems. "Customers are screaming for better service," he says, "and if it doesn't come from the carriers, it will come from someone else."

Here's a look at what frustrates consumers most (some solved on the iPhone, others not):

ONE: VOICE MAIL
Consumers are tired of wading through eight messages to hear the one they need (an inconvenience the iPhone is said to solve). And they are frustrated that carriers erase old messages and tightly cap your inbox. With data storage costs dropping, why can't you keep your messages, or download them to your computer? Imagine if Yahoo! let you keep just 30 or 40 email messages at a time. (Instead they offer unlimited, free email storage). "People treat voice mail like toxic waste," says Craig Walker, CEO and founder of GrandCentral, a startup that offers unlimited voice-mail storage. "They feel like they have to delete every single message. But what if they want to save something?" says Walker. "I have 10,000 emails in my inbox, which is incredibly valuable. I can go back and find an old message. People should be able to do the same thing with voice mail." Consumers have long been able to save e-mails, forward them at will and access them in whatever order they want, so why is voice-mail stuck in the dark ages? The carriers haven't improved voice-mail because it's harder to market service features than, say, sexy phones that work exclusively on one network.

TWO: FEE CREEP
After shelling out $40 or $50 a month for a basic calling plan, carriers pinch consumers for additional bucks over and over again. Starting with an activation fee and ending with a cancellation fee if you decide to switch carriers or want to cancel your service, consumers are squeezed for dozens of add-on charges. For ring tones, video services, text messages, and just about any specialty service that comes along to provide a convenience, dollars are tacked on to your bill. Apple and AT&T are taking a step away from that fee-squeezing model by offering all-in packages that include data, video and text messaging. They start at $60 a month, though, and climb to $100 for 1,350 monthly minutes of calling. That means that if you get the $600 model and choose the top minutes package, you're going to shell out more than $3000 over the course of the required two-year contract. Oh, and you'll still have to pay $36 for activation.

THREE: WALLED GARDENS
The carriers continue to block access to their networks by mobile startups even as these innovators offer new ways to watch and share video, trade pictures, and use phones in new ways. "They control the industry but strangle innovation," says mobile industry consultant Chetan Sharma. They limit the things you can do with your phone. They want you to pay them for picture messaging, so they restrict independent providers of that type of service. They want you to buy ringtones from them, so they cut off growth and innovation in that mini-industry. They would prefer you to buy music and video from them as well, and they would rather you not call internationally without using their high rates. All of this means that consumers are consistently cut off from inventive startups. The carriers control billing for add-ons, and service providers selling ringtones, music, video, etc are so new that they need the carriers' help to gain a foothold. When the carriers do open up to partners, they often demand a 50% of revenue, far exceeding the below 20% share carriers get in other countries.

FOUR: SLOW INNOVATION
The mobile carriers have maintained unchallenged dominance over their markets — and their customers. That's allowed them to preserve their potpourri of fees and to go slow on innovation, thus the stale approach to voice-mail and other services. Google recently proposed an auction system that would enable new players to buy into the wireless spectrum, an idea that could open the door to the sort of competition in the mobile world that enabled the high-speed access offered by better Internet Service Providers to topple AOL's old stranglehold on its customers. The carriers argue that they have continued to innovate: "Over the last five years," says Verizon Wireless spokeswoman Brenda Raney, "wireless phones have gone from simple calling devices to multifaceted device entertainment and productivity tools, because of broadband-like technology." But American carriers have a long way to go. Phone service in the U.S. remains several steps behind Europe and Asia.

FIVE: SERVICE FAILURES
The leading Web merchants have set a high standard for quick response times and satisfaction guarantees. Consumers want to be listened to when they e-mail or call customer service. They hate waiting for 20 minutes on hold and they despise droning voice-mail menus with seven options, none of which is a real human on the other end of the line. If the carriers don't step up their service, Google and other Web giants may find alternative routes for getting mobile services into the hands of consumers. Daniel Doutol, co-founder of SpinVox, an innovative voice-messaging startup, says it's just a matter of time before companies like Google and Yahoo! compete more directly with the carriers. Both portals, like Apple, have fiercely loyal fans. About 55% of those asked in a survey by Equs Group, a market research firm, said they would happily buy a Google or Yahoo-branded phone. It's a lucrative market: by 2010, about as many people will have a cell phone as a toothbrush.

The iPhone's Carrier Problem - TIME

[RadioRaiders]

Originally Posted by strunke

And so far, the early reviews have not been kind to the mobile service and especially its cellular data network ("Pokey," says the Wall Street Journal; "excruciatingly slow," says the New York Times. A spokesman for AT&T said the company disagreed with those characterizations). Before the reviews emerged, AT&T tried to play down the speed issue and play up the new experience provided by Apple's so-far well-received iPhone software. "It's not just the speed of the uplink," says Carlton Hill, an AT&T Vice-President. "It's about the processor speed on a device and the application design that enhance the customer experience. There are a lot of ways to have an optimized data experience." And the iPhone's web capacities are said to improve dramatically when it can sync up with local Wi-Fi networks — if so, it would be a juxtaposition that may make the AT&T connection feel even slower.

It's not a 3G phone It's accessing the internet over "2.75G" GPRS/EDGE (ie: "poor man's 3G ).

I have no idea why Apple would launch a phone meant to be data intensive, and then not have a 3G data connection available on it I guess thats what happens when you blow all your $ on cool software...you have nothing left for wireless technology

[Fire14]

Originally Posted by esto

It's not a 3G phone It's accessing the internet over "2.75G" GPRS/EDGE (ie: "poor man's 3G ).

I have no idea why Apple would launch a phone meant to be data intensive, and then not have a 3G data connection available on it I guess thats what happens when you blow all your $ on cool software...you have nothing left for wireless technology

It could also be that AT&T hasn't finished rolling out their 3G & it has enough holes in it, it would be a poor addition at this time. I heard the next generation will have it & by then AT&T is suppose to have 3G heavily deployed, time will tell.

[bobolito]

Originally Posted by strunke

THREE: WALLED GARDENS
The carriers continue to block access to their networks by mobile startups even as these innovators offer new ways to watch and share video, trade pictures, and use phones in new ways. "They control the industry but strangle innovation," says mobile industry consultant Chetan Sharma. They limit the things you can do with your phone. They want you to pay them for picture messaging, so they restrict independent providers of that type of service. They want you to buy ringtones from them, so they cut off growth and innovation in that mini-industry. They would prefer you to buy music and video from them as well, and they would rather you not call internationally without using their high rates. All of this means that consumers are consistently cut off from inventive startups. The carriers control billing for add-ons, and service providers selling ringtones, music, video, etc are so new that they need the carriers' help to gain a foothold. When the carriers do open up to partners, they often demand a 50% of revenue, far exceeding the below 20% share carriers get in other countries.

This paragraph screams "Verizon Wireless" left and right!: control... cut off.... block access.... restrict.... limit.... That's why Apple didn't reach an agreement with them for the iPhone.

[RadioFoneGuy]

it wouldnt be and Apple with the ole red screen o doom.

[lennyj17]

Boy I cant wait for VZW-Sprint-T/MO to Laugh their A--es off about the SH-- Storm ATT and APPL are going to have on their hands.....When the following happens.

-Malfunctioning UI's
-ATT doesnt work as good were the other's do.
-Really find out "Internet" does move as fast as the commercial make it seem.
-Faulty Batteries / Short Battery Life then what was expected.
-Everything being onscreeen including the keyboard- So far they only show one finger use, what about us who use thumbs, Not good.
-Syncing Problem.
-Email Issues
-Loss of Music or Contact when or if Phone malfunctions.

Boy this is gonna be fun....Either this phone is going to revolutionize or bomb big....There will be no middle ground here.

[nKrypteD1]

Originally Posted by lennyj17

Boy I cant wait for VZW-Sprint-T/MO to Laugh their A--es off about the SH-- Storm ATT and APPL are going to have on their hands.....When the following happens.

-Malfunctioning UI's
-ATT doesnt work as good were the other's do.
-Really find out "Internet" does move as fast as the commercial make it seem.
-Faulty Batteries / Short Battery Life then what was expected.
-Everything being onscreeen including the keyboard- So far they only show one finger use, what about us who use thumbs, Not good.
-Syncing Problem.
-Email Issues
-Loss of Music or Contact when or if Phone malfunctions.

Boy this is gonna be fun....Either this phone is going to revolutionize or bomb big....There will be no middle ground here.

Personally I agree, there will be no middle ground. Where I disagree, however, is the fact that I think it will do both bomb big and revolutionize. First of all the thing will most likely sell out in it's first offering tomorrow, but over the next 4 months I think the sales will dwindle to nothing and the headaches and frustrations of those who already own the phone will increase as the novelty wears off. This "phone" does raise the bar for other media companies as well as Smartphone / PPC makers as it gives a far better interface to features that PPC users already enjoy, I think we'll be seeing some visual enhancements to WIndows Mobile 7 (which is due out next year.)

[WumpusVA]

I'm thinking they stayed away from 3G because a 3G radio eats the hell out of a battery. While EDGE isn't that fast... it's certainly not as slow as some people make it out to be. But, no matter how fast the speed of the network the browser speed and processor speed play a major role on how fast this thing can 'surf' the web. Guess we'll have to wait and see!

[scotsboyuk]

@nKrypteD1

I agree with you old boy. The novelty factor is fine for the moment, but when it wears off, as it will, the iPhone has to compete on its own merits, which I don't believe are going to be strong enough to really keep the competition at bay. The one good thing it will do though, in my opinion, is what you have already mentioned; improve the interface side of things across the market.

[TeleTips Network]

I've read that AT&T and Apple agreed to 5 year exclusivity in America. If that is so it must be what Steve Jobs was willing to give up in order to get all the other things he wanted: no subsidies, no AT&T logo on the hardware, control over the user experience, access to the user.

But having said that, I wonder if there is a performance-related, get out of jail clause in the contract for Apple. Maybe if the 2.5g/2.25G/2.999999G network of AT&T blows so bad Apple becomes free to cozy up to another American carrier?

[nKrypteD1]

Originally Posted by TeleTips Network

I've read that AT&T and Apple agreed to 5 year exclusivity in America. If that is so it must be what Steve Jobs was willing to give up in order to get all the other things he wanted: no subsidies, no AT&T logo on the hardware, control over the user experience, access to the user.

But having said that, I wonder if there is a performance-related, get out of jail clause in the contract for Apple. Maybe if the 2.5g/2.25G/2.999999G network of AT&T blows so bad Apple becomes free to cozy up to another American carrier?

Considering it's GSM, the only other carrier would be T-Mobile, in which case the fastest network they have available currently is again EDGE. T-Mobile will be rolling out UMTS in the near future but they are far behind AT&T in this aspect.

[llockejr]

So it's going to take over 5 years for a CDMA version to be released?

That's all fine and dandy for people that don't live places where your only option for cell service is Verizon. Oh well, the price I pay for living in the gorgeous mountains I guess is that we get the latest gadgets when they're a few years old

AT&T's coverage ends around 50 miles from our location with plans for expansion any time soon. This leaves Verizon with a nice solid little death grip on the area.

[TeleTips Network]

Originally Posted by nKrypteD1

Considering it's GSM, the only other carrier would be T-Mobile, in which case the fastest network they have available currently is again EDGE. T-Mobile will be rolling out UMTS in the near future but they are far behind AT&T in this aspect.

If such an escape clause existed in the contract, and if it became exercisable, I expect Apple would want to add a CDMA-capable phone to the family. But this is all just fun speculation.

[llockejr]

Originally Posted by TeleTips Network

If such an escape clause existed in the contract, and if it became exercisable, I expect Apple would want to add a CDMA-capable phone to the family. But this is all just fun speculation.

That'd be the only way I'd ever see an iPhone anyway as Verizon is the only reliable provider in my area of the United States.

One would think they would want both a GSM and CDMA version available to take advantage of multiple carrier options. I'm kinda surprised they locked in with AT&T for FIVE years as it is.

[TeleTips Network]

Originally Posted by llockejr

One would think they would want both a GSM and CDMA version available to take advantage of multiple carrier options. I'm kinda surprised they locked in with AT&T for FIVE years as it is.

Exclusivity is such a valuble item that its presence in the contract is what tells us that Apple must have gotten so much of what it wanted from the deal.

And a 5 year term is so long as to be almost unthinkable. 5 years is >2 generations in the handset market. This is why I speculate that Apple would have negotiated performance-related escapes from the exclusivity clause.

I wrote earlier that network speed might be a performance criteria. Sales volume is likely another: AT&T probably had to agree to buy a minimum number of iPhones each year.

There probably are other outs for Apple; probably some for AT&T, too. Thoughts?

I'll bet there are precisely two chances that exclusivity will survive the entire 5-year term of the deal. And Slim just left town.

[Bill Clinton]

Originally Posted by lennyj17

Boy I cant wait for VZW-Sprint-T/MO to Laugh their A--es off about the SH-- Storm ATT and APPL are going to have on their hands.....When the following happens.

-Malfunctioning UI's
-ATT doesnt work as good were the other's do.
-Really find out "Internet" does move as fast as the commercial make it seem.
-Faulty Batteries / Short Battery Life then what was expected.
-Everything being onscreeen including the keyboard- So far they only show one finger use, what about us who use thumbs, Not good.
-Syncing Problem.
-Email Issues
-Loss of Music or Contact when or if Phone malfunctions.

I have a 2nd gen Nano and that freezes occasionally. That isn't a big deal because it is just an mp3 player but when something goes wrong with your iPhone you are without a phone and without your mp3 player along with w/e you use the iPhone for. I hope they have the bugs entirely worked out of this thing because there are going to be some people complaining big time with their expensive device decides to stop working.

[SteveW]

Originally Posted by lennyj17

Boy this is gonna be fun....Either this phone is going to revolutionize or bomb big....There will be no middle ground here.

Originally Posted by nKrypteD1

Personally I agree, there will be no middle ground. Where I disagree, however, is the fact that I think it will do both bomb big and revolutionize.

With around 23 hours of experience and 21 Phonescoop "reviews" (if you accept that all of the posters are actual owners), it appears that nKrypteD1 is onto something. Lots of 5 (highest) and 0 ratings, making the average a 3.0, which usually signals a mediocre device. There is even a review entitled "Let's not ruin this resource" arguing for use of logic in rating the phone (novel concept! ) and another entitled "An Actual iPhone Owner" which observes that some of the 21 reviews contain very little user experience but lots of strong opinion.


SW

[nKrypteD1]

Originally Posted by SteveW

With around 23 hours of experience and 21 Phonescoop "reviews" (if you accept that all of the posters are actual owners), it appea