Is AT&T just a drag for Apple?

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Opinion – I just hate saying “told you so”. But it seems that even Apple’s patience with AT&Ts willingness to keep pace with mobile devices innovation is coming to an end, if I take the liberty to interpret the dramatic omission of the carrier from yesterday’s keynote in this way. AT&T and Apple have been in a love and hate relationship from the very beginning, but as the pain factor climbs, Apple may be weighing its options and simply ditch Apple. It may be time to start looking elsewhere.

Almost two years ago I came to the conclusion that AT&T may be stuck in the old days of telecommunications and was, at the time, simply incapable of understanding the potential of the iPhone and what the device really is. Back then, AT&T treated the iPhone as an early-adopter cash-machine, as a phone that may attract geeks and convince them to shell out lots of extra dough for the convenience of Internet access anytime and anywhere. In my personal opinion, the company entirely missed the mainstream need and appeal of the device through its pricing strategy, and it missed that the quality, and bandwidth of its cellular network was simply not a match for the huge demand for data communications the iPhone would create. Little has changed until today.

I can criticize AT&T all day long and it isn’t particularly difficult to question AT&T’s ability to keep pace with the innovation in mobile devices, which seems to be accelerating every month. And we haven’t even seen Intel’s next-generation Atom platform, which may spur an even greater demand for data communications than we are seeing already today. Think about the fact that AT&T restricts the innovation and usage of data intensive applications on its network by stating it puts a strain on the overall capacity it can deliver. Some would say that for users who typically pay more than $100 per month in service charges, twice as much as average phone users, should not be held back by such restrictions and AT&T better shapes up to improve its network. That circumstance, of course, trickles down to the developer landscape and directly affects the sex appeal of the iPhone, which will more and more depend on the available applications for the device.

Sure, AT&T needs to cash in on its iPhone customers as it has to recoup the actual cost of the iPhone itself, and no one blames the carrier for earning as much money as it possibly can with the device. But, in the end, AT&T may be too restrictive, even for Apple’s taste. A tethering capability has been longs expected for the device, and it is actually offered for some smartphones by some carriers through additional nose-bleed service charges. Apple announced tethering will be coming or the iPhone, but AT&T was not mentioned as an initial carrier to offer such a service. The reason is somewhat obvious: AT&T in fact does not have the capacity to support the data traffic today’s applications really need. So why would it be able to support tethering then? Aren’t we even told that AT&T can’t even support VoIP because of network constraints (well, we all know the real reasons why VoIP is not supported, right?). And I am not even talking about the reasonable price a mainstream tethering service would require.    

Sure, AT&T proudly told us that its data network would be upgraded to HSPA 7.2. But it won’t be widely available until 2011. Is AT&T actually seeing the massive capacity upgrade a faster broadband connection would need? I doubt the carrier is willing to add additional bandwidth to allow consumers to actually take advantage of the technology in the device and the expensive data plan they are subscribing to. Add everything up and AT&T suddenly looks like a partner that may have helped Apple to get the iPhone off the ground, but not as a partner that can move fast enough to remain the partner of choice for the iPhone. At this time, it simply looks like Apple is watching, but already planning with other options. This seems especially likely since we know that Apple ditches partners when it feels the time is right. We know that Apple does not care about deadlines other than its own and even breaks embargos if it can get an advantage out of it. In some way, Apple is widely considered as the big bully in today’s tech industry and it is widely accepted, because Apple is in a position it can afford to be a bully. Everyone loves Apple these days, you know.   

In that view, the relationship with AT&T is rather interesting. Apple needs a large carrier and it prefers a GSM-based technology due to the fact that this standard makes the device a true world phone. AT&T needs Apple and its iPhone and loyal users for its revenue and profit base. But if one of the two were to break the relationship, it certainly would be Apple. The more AT&T is falling behind and the more other carriers are catching up, the more critical the situation may get for AT&T. Especially if Apple compares the situation and business environment in other nations around the world.      

No doubt, AT&T is a drag for Apple at this time. AT&T just got a warning shot. It better shapes up, if it wants to remain the exclusive carrier for the iPhone.    


Wolfgang Gruener is the founder of TG Daily. The opinions expressed in this commentary are solely those of the author.