Apple and AT&T: A Match Made in Hell

Inside the fraught corporate marriage

This month's issue of Wired magazine has a behind-the-scenes exposé on the flawed partnership between Apple and AT&T. The piece chronicles the disagreements the two companies have had over the iPhone and AT&T's network performance. Writer Fred Vogelstein details meetings in which AT&T tried to get Apple to limit the iPhone's capabilities:

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.”

The article has spurred on a number of discussions around the web:

• Great Article, writes John Brownlee at Geek.com: "The whole piece by Fred Vogelstein is worth both a read and re-read, but essentially, Apple and AT&T’s relationship couldn’t possibly be worse. From the very day the iPhone was released, Apple has hated working with AT&T. They want the iPhone, which they feel is the best smartphone on earth, to also have the best coverage on Earth: instead, they got some of the worse."

• Don't Scapegoat AT&T, writes George Ou at Digital Society: "AT&T has to spend nearly 16 times more on capital expenditures (17.3 billion in 2009) versus Apple’s 1.1 billion in 2009 doing the upgrades to keep the iPhone afloat.  Furthermore, a significant portion of the monthly fee that consumers pay to AT&T goes to Apple which makes AT&T look like the bad guy.  AT&T has to do the dirty work of collecting the money and being accused of being “greedy” when Apple is the one getting the bigger chunk of the profits."
  

• AT&T Deserves It, counters MG Siegler at TechCrunch:
  

Yes, AT&T is spending a lot on network upgrades. But every carrier does this (Verizon has spent about $20 billion in the past three years, for example). And AT&T would be even if they didn’t have the iPhone. Are they spending more because of the data demands of the iPhone? No doubt. But as one chart in the story shows, AT&T is actually spending far less than they did in 2008 on network upgrades. This is despite income rising each year — and data usage rising each year.

It may be hard to fault AT&T for wanting to squeeze out more profit. But by not pouring every dime that they can into upgrading their network, they’re sealing their own fate when it comes time for the iPhone to move on.

• I'll Spare My Pity for Either Company, writes Karl Bode at DSL Reports: "The Wired article almost makes you feel bad for both companies -- and it shouldn't. Millions of iPhones have been sold, and AT&T's network has seen a 40% jump in subscribers -- with the lowest subscriber churn in the industry thanks largely to the iPhone (though ETFs and long-term contracts help that too). If Apple and AT&T's marriage gets too stressful, they can always comfort themselves sipping mojitos and lounging about on massive sacks of money."

• Nice Insights on a Potential Verizon iPhone, writes Jason O'Grady at ZDNet: "Apple also heavily considered switching to Verizon numerous times. Around the end of 2007, at Jobs’ behest, Apple engineers (including Scott Forstall) visited the headquarters of Qualcomm - the primary supplier of the chips in Verizon’s phones. It concluded that switching to Verizon would be too complicated and expensive because the chips were different sizes and would necessitate rebuilding the iPhone from scratch. Apple also wasn’t convinced that Verizon’s network would fare much better and let’s not forget the nasty lawsuit that voiding its exclusive pact with AT&T would invite."
  

• Here's the Best Part, writes Jay Yarrow at Business Insider:
  

In addition to technical problems, there were cultural problems. An AT&T rep asked Steve Jobs to wear a suit to meet with AT&T's board. One of Steve's deputies responded: "We’re Apple. We don’t wear suits. We don’t even own suits."

• The Takeaway  Engadget's Ross Miller says the story taps into a "fundamental issue of the mobile industry going forward: as smartphone makers continue to push their devices' capabilities, bandwidth concerns will continue to grow and carriers are likely to take the majority of the blame."