AT&T Inc. has a problem: The iPhone has a wandering eye, and it might not stick exclusively with the carrier for very much longer. AT&T is ready to take its guns to town to avoid losing customers or potential customers, by beefing up its network (and its competitive advantage). But that might not be enough.
The carrier is teetering on the brink of losing its exclusivity for the device to ...drumroll ... its most ancient of enemies, Verizon Wireless. If reports are correct, that is. But even if Apple doesn’t announce a CDMA version of the gadget this summer, it’s likely that AT&T would lose exclusive rights to the device anyway. The term of AT&T’s exclusivity is up after this year, and Apple has made the iPhone available to multiple carriers in almost every other market in the world rather than renewing similar contracts.
That loss presents a couple of issues for AT&T. For one, when exclusivity is lost, the traffic stemming from that device becomes that much more difficult to monetize, because the carrier can no longer charge a premium if there’s a motivated competitor to contend with. And monetizing heavy data traffic is hard enough as it is. Two, AT&T has been slammed by negative press for its (perceived) lack of 3G coverage, network congestion and dropped calls. If it has to compete with another network for the same device, it might not win.
AT&T has been contending with the latter issue by beefing up spectrum in major markets with its 800MHz holdings, and by pouring investment into upgrades. It plans to spend $2 billion more than last year on wireless networks and backhaul, up from $17.3 billion spent in capex last year. New York City and San Francisco, where iPhone penetration has skyrocketed, will be particular targets of the upgrade, according to John Stankey, CEO of AT&T Operations. He said that the carrier will double what AT&T did in 2009 in terms of increasing capacity, with 2,000 additional cell sites and 400,000 more square miles of 3G coverage.
But despite the vouching of Luke Wilson as to the superiority of AT&T’s network speeds (and subsequent verification by curious third-party testing outfits), customers still complain. And in a survey of 12,000 wireless subscribers from JD Power and Associates, AT&T came in at an underperforming 730 points out of 1,000 for customer satisfaction. That’s against an industry average of 735. Leaders were Alltel/Verizon Wireless and T-Mobile USA, which all tied at 747.
