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The rough ride of Apple's iPhone is exciting Verizon and others, but Apple fans are unmoved

Apple's iPhone went 3G and was met with great enthusiasm from Apple's fans.  Within a week of its launch, it had hit a million units sold.  The frantic pace of sales, began to slow, but still Apple managed to reach the 2 million mark, not long after, according to analysts.

Since, complaints about call quality, dropped calls, and defects have created somewhat of a public relations nightmare for AT&T and Apple.  For the signal related problems, Apple and AT&T have rolled out a fix, the details of which were finally leaked by an AT&T employee.  However, that has not stopped Verizon from seizing on public ill-will towards the iPhone and running new advertising campaigns specifically attacking it.

"A phone is only as good as the network it’s on," Verizon's ad blasts, and in an email to Wall Street analysts, a Verizon executive chided, "So much for a ‘new’ way of doing business at the old AT&T — your father’s phone company."

Part of what has left Apple and AT&T so vulnerable to such attacks is that they have done little to explain what is causing the problems.  This has created an air of uncertainty around the iPhone that is perhaps unjustified, but largely the fault of the pair's silence.

Aside from the technical details of the problem, one additional aspect may simply be logistics.  AT&T's 3G network covers only 310 cities of 100,000 people or more, though it plans to add 40 more cities by the end of 2008. 

Phil Marshall, of the research firm the Yankee Group, believes this lack of network coverage and the pair's corporate tendencies are wreaking havoc on the iPhone.  He states, "It’s hard to launch an iconic device like the iPhone on a network that it is not yet fully deployed.  As they build these networks they will need to make more improvements or the complaints will persist.  Both companies are accustomed to controlling all aspects of the delivery of its products.  It illustrates the culture clash, when you create an environment where you share the responsibilities between them. Then you have problems."

Marshall is equally sick of the almost daily emails from Verizon's management blasting the iPhone.  He bemoans, "I get almost one a day.  It’s almost like, hey, quit spamming me."

However, for all the bad news for Apple and AT&T, one piece of good news is that reports are indicating that through thick and thin Apple's fans are staying loyal to the company.  Peter Fader, a marketing professor at the Wharton School of the University of Pennsylvania describes the phenomena stating, "The objective reality is that Apple does plenty of wrong.  Very few companies have this kind of iconic status where anything they do, even if it is mediocre, will automatically have a halo around it."

Kern Bruce, a 25-year-old Web designer in Boston, Massachusetts, was among those die-hard Apple fans who waited all night in line to be among the first to receive a 3G iPhone.  He's had lots of problems with it since -- overheating, program crashes, and such poor 3G that he has turned the feature off.  It's not his first problem with an Apple product either.  He had to return an overheating MacBook Air and his Apple cinema display monitor is failing, having image burn-in.  Still he says he would never turn his back on Apple.

He states, "They're skimping on materials, on testing things to gain market share, but they're kind of pushing away people who have been with the brand even when [it was] struggling.  (However, Macs are) a lot better than the alternative in terms of stability, viruses, being able to do high-end graphics work.  I wouldn't tell people to stop getting Apple products. They make very good products."

Baba Shiv, a professor of marketing at the Stanford Graduate School of Business says that such business phenomena are not unusual.  He argues that most Harley Davidson bikes are inferior to their Asian competitors in terms of price and quality, but they still sell well in America.  He states, "In the public domain, the coolness factor matters.  (Once loyalty forms) the transgression has to be so egregious for someone to completely change the narrative.  If something like this had happened to Microsoft, the long-term impact would be much more for Microsoft than for Apple."

Apple and partner AT&T have their fingers crossed that Apple's fans stick with it, through thick and thin as they silently try to resolve the iPhone's problems.

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Bloom coming off the apple tree
By Bucky Beaver on 8/31/2008 10:30:52 AM , Rating: 5
I don't think even Apple fans will stay loyal forever if Apple keeps screwing up new releases or doesn't fix the problems on the existing stuff. Mystique will only get you so far before you become a joke. Just a few cracks on Leno, etc and the downhill slide will start..

Why they chose AT&T is beyond me - guess they got a better kickback deal from them. Apple would have done much better with Verizon. I went through hell trying to dump AT&T about 4 years ago, finally had to sic the FCC on them before they stopped trying to bill me on an expired contract, despite numerous written notices and phone calls.

RE: Bloom coming off the apple tree
By michael2k on 8/31/2008 10:49:27 AM , Rating: 3
Uh, that's easy.
AT&T has the same network infrastructure as most of the world. If Apple had chosen Verizon, they STILL would have had to develop an AT&T compatible phone in order to sell to Japan, Europe, et al.

So this way they only need to develop a single architecture first, as opposed to dual architectures. Imagine how much WORSE the problems would be if Apple had to deal with problems on two networks instead of one!

RE: Bloom coming off the apple tree
By cocoviper on 8/31/2008 11:04:23 AM , Rating: 4
That's not why they chose AT&T although it's a secondary benefit.

Apple came to Verizon and then Sprint first; both carriers turned them down because their management wasn't willing to give up as much control as Apple wanted (with the device launch, software, pricing, etc.) AT&T was willing and in a lot of ways it payed off for them. But I can guarentee you a GSM network was not the primary reason Apple went AT&T- I mean the company does not care about targeting the largest demographic, that has never been their strategy. Apple's biggest concern is being able to have control over every aspect of their product, that's always been the company's primary philosophy.

If it wasn't, then why not simply release MacOS to anyone who wants to pay $500 to install it on their PC? Because they know they would suddenly be faced with a support nightmare of having to maintain quality on millions of hardware combinations, and they would quickly loose their Teflon status.

RE: Bloom coming off the apple tree
By EntreHoras on 8/31/2008 11:45:00 AM , Rating: 1
It's not about demographics, It's about availability. Of course Apple could design an iPhone for Verizon or Sprint, but that particular model would only work in the US and Canada. If you want to SELL your phone in the rest of the world (except Japan) you must go GSM, and GSM is AT&T.

RE: Bloom coming off the apple tree
By weskurtz0081 on 8/31/2008 1:10:02 PM , Rating: 3
If you actually do some research on the subject, you will find the person who you are responding to is absolutely correct. Apple tried to release the phone to Verizon first and was turned down because Verizon wasn't willing to bend over to Apple like AT&T did. Maybe, before you respond to something as if you know what you are talking about, you should try doing a bit of research first....

By FITCamaro on 8/31/2008 1:44:50 PM , Rating: 3
Not only were Verizon and Sprint not willing to give up control, they weren't willing to give Apple a cut of the monthly service fees as AT&T did.

The guy is correct. AT&T was Apple's third choice.

RE: Bloom coming off the apple tree
By EntreHoras on 8/31/2008 2:01:34 PM , Rating: 1
I humbly ask for your forgiveness.

I'm really sorry to comment in a subject so important like this without a profound research on the matter.

I'm terribly sorry that the logic that Apple used for choosing carriers had nothing to do with global sales.

By weskurtz0081 on 8/31/2008 2:06:44 PM , Rating: 2
I might be able to forgive you..... but I must consult the Flying Spaghetti Monster for guidance before I can forgive you (he hates Apple products).

By Solandri on 8/31/2008 4:41:11 PM , Rating: 2
It's not that difficult to make GSM and CDMA versions of a phone. It's even easier for a 3G phone since 3G on GSM and its successor (HDSPA and UMTS) are based on CDMA and wideband CDMA respectively.

The reason Apple went to Verizon and Sprint first is probably because their 3G service was mature. CDMA networks switched to 3G first because the way CDMA shares bandwidth makes 3G speeds trivial - just handle data the same way you do voice. GSM's underlying technology (TDMA) relies on timeslices so by definition can't share bandwidth. They had to graft on a CDMA standard (HDSPA) to attain 3G speeds. It took them several years longer than the CDMA carriers, and they're still trying to work all the kinks out.

Also T-Mobile also provides GSM service in the U.S. (T-Mobile is actually Deutsche Telecom.) And Korea and China are CDMA. Basically, CDMA won the wireless transmission standard war because of its bandwidth sharing advantage. GSM's successor (UMTS) is based on CDMA (but they're keeping the SIM card, which I think is a really smart thing).

By sprockkets on 8/31/2008 6:55:53 PM , Rating: 3
Yeah, like having OSX work on my old AMD Athlon 64 nforce4 board with nvidia graphics. I had to add an intel network card to finalize the setup. Talk about support nightmares. When's the last time you called Microsoft for support anyhow?

Apple does not was OSX to be a commodity, working on cheap PCs, so they can charge you tooth and nail for style on their equipment, plain and simple.

Saying its the network is BS. You don't talk on EVDO, you talk on CDMA; its not a fair comparison. Likewise, if AT&T/Apple was smart, they would set the phone to use GSM for voice and 3G for data by default. Switching from 3G to GSM for calls is the most common problem facing AT&T now.

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