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Verizon and the iPhone…why AT&T must be scared

Jonathan Cagan Posted by Jonathan Cagan.

Jonathan Cagan is the George Tallman and Florence Barrett Ladd Professor in Engineering, with appointments in the School of Design and Computer Science, at Carnegie Mellon University.

Everyone knows that the rumors are true.
Everyone knows that the rumors are true.  They have to be, for Verizon is now selling the iPad.  In just months if not sooner, Verizon will offer the iPhone, ending the 5-year exclusive relationship between Apple and AT&T.  The iPhone was the first broad-reaching smartphone, and many feel is still by far the best smartphone on the market because it brings a bit of joy into routine tasks and makes accessible the world of the internet…anywhere there is coverage. AT&T had their chance, the chance to endear themselves to a growing customer base of iPhone owners by providing service on par with the handset.  AT&T had five years to live up to the expectations that the iPhone delivers – to grow and advance their capabilities and to become the leading network.
AT&T has not only failed to become part of the infatuation, but they have even failed to be a behind-the-scenes enabler of the romance.   Instead they find themselves with unhappy customers eager to leave the network…as long as the iPhone comes with them.  TMobile has even run ads that jeer at the iPhone-AT&T partnership where, taking a cue from the popular Apple ads, TMobile and Apple phones are personified by individuals who banter back and forth. But there’s a heavyset man being carried on the back of the iPhone4 guy, “the ol’ AT&T network.”
Now that iPhone users have built up such strongly held negative emotions towards their service provider, AT&T will be severely challenged to reverse course.  Yet, even if AT&T is reborn overnight with an entirely refreshed approach, at this point it is probably too late for iPhone users. Once customers have strongly held emotions, customers are no longer objective about what a company does anymore, for better or for worse for the company.  For many, Apple can do no wrong; consider the equity granted them even though the iPhone4 dropped calls because of the antenna issue – a design flaw.  On the other hand, AT&T can no longer do anything right.  One friend of ours has both an iPhone on AT&T and a Blackberry on Verizon, carrying both with him at all times so that he will always have service.  He recognizes that he is no longer able to be objective about AT&T.  When recently activating service on both phones for international travel, he wasn’t sure if the AT&T representative was truly worse than the Verizon representative, or if he just noticed every problem with AT&T and was more forgiving with Verizon.  In the end, from the customer’s viewpoint, their perception of AT&T is all that matters. So for every dropped call, customers’ never think to blame the Apple iPhone but only the AT&T service, consoling themselves that AT&T’s days are numbered.