Technology

Why Did AT&T Cut Off New York City iPhone Sales?

AT&T isn't letting New Yorkers purchase iPhones, drawing wide speculation

By John Hudson
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Who knew being the exclusive carrier of the iPhone would be such a curse? Over the past 12 months, AT&T's 3G network has been overwhelmed by its many iPhone users, causing poor coverage, organized customer revolts and a contentious attempt to curtail individuals' phone use. Now AT&T's online store has stopped selling the iPhone to buyers in New York City and tech bloggers are scrambling to determine the company's rationale.

The news broke Sunday when an AT&T customer service representative told a tech reporter "New York is not ready for the iPhone" because it dosen't have enough cell phone towers to "handle the phone." And sure enough shoppers trying to purchase the phone online were rejected after entering a zip code from anywhere inside the city. However, the company later contradicted that claim saying they were simply modifying their "promotions and distribution channels." So why is AT&T cutting off New Yorkers? Tech bloggers mull over the latest theories:


  • Not Enough Cell Towers  Eric Schonfeld at TechCrunch says it's feasible: "Given AT&T’s history of bandwidth problems, especially with the iPhone, the idea that AT&T’s network can’t handle the iPhone is not entirely outlandish." On the other hand, Rosa Golijan at Gizmodo doubts that AT&T would go that route. "We know that AT&T's aware that it sucks in NY, but is the solution to a localized network strain from heavy data usage to stop online sales of a particular phone? Doesn't exactly seem like the most sensible of ideas, especially since there are plenty of iPhones in AT&T's brick-and-mortar New York stores."
  • Online Fraud  Giving a third (and entirely different) reason for blocking out New York, an AT&T representative told tech reporter Peter Kafka that "There’s actually been a problem in that area with fraud for the iPhone. It’s kind of a high-risk area.” But the rep didn't offer any further details. This led Digital Daily’s John Paczkowski to cast doubt on the excuse: " this answer also doesn’t make a lot of sense. If New York really is beset by a plague of scammers, why is AT&T selling other expensive smartphones, like Research In Motion’s (RIMM) BlackBerry line, over the Web?"Steven Musil also voiced skepticism, wondering why they just targeted New York: "Isn't online fraud as likely to happen in Dallas, Seattle, or San Francisco?" he reasoned.
  • AT&T's House Is Not In Order  Others have suggested that AT&T is simply having communication problems. Mike Masnick at TechDirt says "On the whole this sounds like some sort of inventory management issue that will probably be worked out pretty quickly, rather than some attempt to limit usage of iPhones in New York." On a similar note, Peter Kafka at All Things Digital says "My hunch: This is a decision that didn’t get run all the way up the chain of command. And it’s one that’s going to get reversed sooner than later."
  • Update: AT&T has resumed selling iPhones online but the reasoning is still a mystery. BusinessWeek's Arik Hesseldahl offers another hypothesis: "One explanation might be that a sudden surge in orders for iPhones to be delivered to a small number of addresses in the New York area triggered AT&T's response out of concern that those phones might then be unlocked and shipped overseas to a country where the iPhone isn't yet offered. In that scenario, AT&T would be losing out on subscription revenue for phones it is selling at a subsidized price ranging from $199 to $299. The move may have been meant as a temporary measure."
This article is from the archive of our partner The Wire.