Report: Apple Considered Dropping AT&T Many Times

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Apple considered dropping AT&T as the exclusive carrier for the iPhone in the U.S. shortly after the first iPhone was released, according to a report from Wired magazine, and Apple CEO Steve Jobs has since discussed the issue, “at least half a dozen times.”

Citing unidentified sources within Apple and T&T, Wired said that Apple has been frustrated with AT&T’s approach to managing the increased data demands the iPhone has placed on the company’s network. For instance, AT&T came to Apple to request that the company limit the YouTube app that shipped on the iPhone, or to make other changes that would artificially limit the amount of data customers were consuming, but Apple refused to limit the customer experience.

On the other hand, AT&T execs have been frustrated with Apple for not being true partners when it came to managing the issues involved with carrying the iPhone. AT&T has also been frustrated with Apple for bugs in the baseband software that manages the way the iPhone communicates with the network, and for other design decisions in the iPhone that are better suited for European networks than AT&T’s U.S. network.

One AT&T source told Wired that his company would say to Apple, “‘Let’s resolve these issues together,’ and they’d say, ‘No, you resolve them. They’re not our problem. They’re your problem.’”

The article paints a picture of often acrimonious relations between the company, though a relationship that has left Apple getting its way more often than not. This is particularly important in that AT&T ceded unprecedented levels of control over the iPhone to Apple, control that a device manufacturer has never known in this market.

Therein lies an important changing dynamic brought about by smartphones in the U.S., where device manufacturers like Apple, Palm (now HP), and Google (via its own OEM vendors) want to make devices that customers want to use rather than devices that carriers want to carry. Apple’s success with the iPhone has already led to changes in the marketplace with Google and its Android licensees able to exert similar levels of control as AT&T’s competitors worried about losing customers to the iPhone juggernaut.

Another interesting anecdote presented by Wired centered around Apple’s Silicon Valley-oriented informality. An AT&T representative suggested to his Apple counterpart that Mr. Jobs wear a suit to meet with AT&T’s board of directors. Apple’s awesome response was, “We’re Apple. We don’t wear suits. We don’t even own suits.”

One other tidbit confirmed by the article was that Apple looked into moving to Verizon shortly after AT&T asked Apple to gimp the YouTube app. A team led by Scott Forstall determined that differences in the chips needed for use on Verizon’s networks would necessitate a complete redesign of the iPhone, a a process that was deemed impractical. Accordingly, Apple has remained married to AT&T, which has spent US$37.5 billion upgrading its network since the iPhone was released.

There is much more information in the full article at Wired.

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15 Comments Leave Your Own

Tiger

AT&T seems to be married to a business model of 30 years ago, when they were Ma Bell and needs to realize, this is 2010. Reach around, remove the stick, and get with it. The US mobile industry is about 10 years behind the rest of the world in innovation. Of course Apple is going to push the envelope. That’s how they make money. But there are plenty of other carriers out there and this monopoly could easily end. Early. With $42 billion in cash, Apple can afford to get out of just about any contract…...

popbunka

I’m living in Japan and it always makes me wonder about those in the US who say that their “market based system” is best. Japan’s mobile networks are far and away better than those in the US. Cheaper too. My iPhone experience here has been, I think, what Apple envisions for their iPhone.

Ronin

The design of the iPhone must be pretty screwy not to be able to swap around chip sets to work with different networks.

Lee Dronick

The design of the iPhone must be pretty screwy not to be able to swap around chip sets to work with different networks.

Different dimensions for the chips? I imagine that there isn’t a lot of “white space” inside the iPhone. I am just guessing about that.

jbruni

The design of the iPhone must be pretty screwy not to be able to swap around chip sets to work with different networks.

Apple would probably need to add additional chips to prevent data access while on a voice call.

Albert Vetch

?or Apple realized that Verizon is a retroverted System in a global Market. In fact it was hard enough to find carriers that support EDGE in Europe.

OldGuy

The GSM system and the CDMA system are very different. But, there are processors & radio chips for phones that can handle both. However, it does take more space.

Tiger - I doubt that there is much old style Ma Bell thinking at AT&T wireless these days since it is really the old Cingular, bought by AT&T, which was really SBCGlobal, which bought the AT&T name.

The cellular industry in the U.S. is one of the odder industries around, extremely unfriendly to its customers, gets away with pricing schemes that would not be tolerated in other businesses, run by MBAs who do their typical fubar job of “managing” a business. 

Verizon’s CEO passed on the iPhone, so Apple went to Cingular. Verizon probably would have refused to let Apple run its interface, and would not have supported the visual voicemail. 

Verizon overwrites the native OS and interface in almost every regular phone it provides. That is why the Motorola Razr from Verizon did not sync both calendar and contacts via iSync with the Mac, but other versions of the Razr did. It makes it easier for Verizon to support, but because the interface designers there are not end-user oriented, the product is substandard.

Ronin

OldGuy,

One certainly has to hope that the exclusivity arrangements between handset manufacturers and cell phone service providers are “busted” in the ongoing investigations. It would benefit us all to open the market to a little more competition. My remark is not aimed at Apple as such. It applies to all of the companies, although the Apple/AT&T policy of NEVER unlocking an iPhone, not even upon the completion of your contract, is particularly egregious.

JMallinson

popbunka, I’m guessing that by saying that Japan’s wireless services are not “market-based”, you mean that some portion of the Japanese government’s massive debt is attributable to paying for the wireless infrastructure.  I doubt that the next generation of Japanese citizens (all six of them) will appreciate paying the bill so that you could download “Angry Birds” 30 seconds faster than I can.

popbunka

JMallinson, of course Japan’s mobile networks are owned and run by private companies. The BIG difference is that the government has played a strong role in providing guidance and selecting standards. Basically, they have allowed private firms to offer competing proposals then selected a standard by which everyone operates. The government doesn’t take a ‘hands off’ approach. They have done this across many industries with some great successes and it also eliminates the wasteful use of resources. Of course there is more to this than just the government side. Docomo had a great chance to create a worldwide standard for mobile communications a few years ago but dropped the ball in execution. Another point is that dominate market players do not automatically win the day (eg. Microsoft in the software market). I think this topic is a little too big for these threads. And by the way, you should know that the Japanese debt problem, while clearly something to worry about, has the advantage of being domestically owned. That is, most of Japans debt is owned by Japanese. It’s much better to argue credit payments with your grandma than say a mafioso. The same cannot be said of the US debt which has large foreign ownership. I couldn’t understand your ‘6 people in Japan’ comment; There are about 120 million Japanese people… and I am very happy to download “angry birds” 30 seconds faster than you. That’s a very long time in this modern world…. although I don’t know what ‘angry birds’ is.

Ronin

popbunka,

I have long believed that the U.S. should have a single national technical standard for cell phones, much as there is for land lines. It makes no sense to be in the middle of company A’s coverage area and not be able to make a call because you are with company B. I do not believe that consumers want anything other than to hear a voice when someone answers at the other end. The rest is merely a detail for the government and companies to work out so that it is transparent to the user.

Regards

jbruni

I have long believed that the U.S. should have a single national technical standard for cell phones, much as there is for land lines.

Because we can see how well that has worked out with cable.

popbunka

jbruni, you quote one bad example in the US cable industry. Have you looked at similar industries in other countries? Britain has a fairly well liked standardized cable system. The Japanese are pretty happy with theirs. Both of these countries have government guided policies and regulations in cable TV. This is the American attitude that I can’t understand. Why is ‘government’ automatically a bad thing in the US? Haven’t unregulated companies effed things up equally as often? If not more often? Do you really think that governments can do no good? And if you believe that, then how do you explain the successes in other countries? Why do most Asian countries have faster, cheaper internet and mobile networks? Why?

Ronin

jbruni,

The problem with cable is that it is a MONOPOLY! If you don’t like the ABC cable company you can not sign up for the DEF cable company. I actually have the cable for a second provider running along the fence of my back yard and yet they are prohibited from offering me service.

It is not surprising that a monopoly has poor customer service. Hell, their own people don’t know who is in charge. It is an organizational disaster.

popbunka

Ronin… Great point… and we should probably understand that the CABLE COMPANIES are quite happy with it this way.

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