A Few Reasons Why AT&T/iPhone Won't Live Up to The Hype

On the eve regarding AT&T's big launch, I thought I'd give you my opinion why the iPhone can't possibly live up to the hype for AT&T.  However, before I do, let me give you readers a little background on my favorite subject me, so you don't think I'm some blithering idiot blogger who doesn't know anything about wireless.  If you already know, feel free to skip the next paragraph.

From 1995 through 1999, I was part AT&T's Wireless Bundling Marketing team that was charged with marketing AT&T Wireless Service to AT&T's Long Distance customer base.  My group was charged with running the direct marketing (yes Direct Mail and Telemarketing), working with AT&T Wireless to generate wireless offers, developing bundled offers (free phones, 30 free minutes of LD minutes per month, bundling the bills), and other marketing functions.  Back in Basking Ridge NJ people among other less flattering names, used to call me Bundle Boy and my marketing plans dropped millions of millions of direct mail per year and made millions and millions of outbound telemarketing calls.  It was quite an operation until AT&T Wireless built their own capabilities and we all moved on.  I signed (not my real signature) almost every direct mail piece that was dropped and you can see the picture on the right from the original mailing in 1995.

 My Top Reasons Why AT&T/iPhone Can't Live Up to The Hype:

1. $499 price point:  That's a non-starter for a tremendous amount of people (consumers).  18 months ago I shelled out $500 for the Treo 700W because I could expense otherwise, I never would have paid that much for it.
2. Monthly Fees:  You need to get a voice and data monthly plan and that costs more money per month.
3. It's The Network Stupid:  No matter how great the hardware, it has to connect to the wireless and data network.  I dropped AT&T Wireless about 6 years ago because it couldn't hold my signal on Route 78 while I drove past Newark NJ.
4. The other wireless companies aren't going to sit around watching their customer fly out the door.  See this article from Walter Mossberg at the WSJ.  They have a smaller window of opportunity than past years.
5. Wireless is a complicated business to switch carriers.  You have contracts, phones, calling plans, data plans, call quality, and etc.  Back in the day, AT&T Wireless thought that "antenna chasing" was too difficult a process and it still is. Besides, it isn't like a large % of these 1 million inquiries that AT&T is promoting will turn into customers; it doesn't work that way off of requests for more information.
6. Apple is almost in a no-lose scenario, but AT&T looks like it can be the big loser here.  Apple is entering a market it isn't in today so even if it doesn't live up to the hype it can still boost its earnings.  Meanwhile, AT&T can take it on the chin because they are:
   1. Paying for the TV commercials (it appears that way)
   2. Has customers in place that will migrate
   3. Gets stuck servicing them because you have to figure out is it a network problem or a phone problem
7. The customer migration issue is a problem because in the wireless business you need NEW customers to help pay for the price of the phone; re-upping existing customers on plans, while good for customer service, has less of an impact on the income statement
8. I thought the world has moved away from one hit wonders into more of a Long Tail of Marketing?  I believe in the Long Tail and with all of the reasons above, I think they have an uphill battle to please an enormous base of customers.
9. How many IT departments out there will allow them on their platform?

Anyway, my prediction goes like this.  The iPhone is an absolute home run, heck a grand slam for Apple.  They get into the market and provide a great product; so they are starting virtually from scratch and have nowhere to go but up.  Demand too large, they say "oh sorry" and the hype builds more.  Meanwhile, AT&T takes it on the chin for building too much demand with TV ads, internet ads, radio ads, stores, direct mail, print, heck anything else they can stick a message on.  Plus, too much of the base migrates which adds pressure to their numbers or worse yet, the base gets pissed off because they can't get a phone.

In the end, Apple WINS BIG and AT&T BARELY SURVIVES until a cheaper phone shows up.

PardonMyFrench,

Eric

Comments

[patrick]

sucks to be wrong, doesn't it?

apple delivered.

[PardonMyFrench]

Nah - I'm not wrong yet. I always thought Apple would deliver; AT&T is another story. From my post:

In the end, Apple WINS BIG and AT&T BARELY SURVIVES until a cheaper phone shows up.

Eric

[Paul]

I just bought an iPhone...I got the 8GB model. I showed 2 people in the office, who told others and I've gotten non-stop people stopping by. 3 people just left to go to the Apple store to buy phones of their own. Yeah, AT&T's network is slow, but this phone ROCKS! "Amazing" is the only word that describes it.

People will find the $500 to buy one. I'll bet the price comes down a bit right before Christmas when all of the kids will get one. 2 years ago I spent $1200 on 4 iPods with accessories for the family. Yesterday I spent $1200 on 2 iPhones. The iPhones are WAY better! The only other phone that comes close is the Blackberry, but the iPhone blows it away.

I think I need a Mac now.

[PardonMyFrench]

Paul,

Nicely done. I'm glad everything is working for you. A fellow co-worker bought one but it doesn't work yet because of AT&T. I'm happy with my Treo right now, plus it works with Outlook...

Eric