Can AT&T Handle The iPhone?

nicholson-thumbYou almost have to admire AT&T’s consistency. They are consistently finding new ways to screw up almost daily now.

The latest issue involves the story we covered yesterday about apps using the Google Voice service getting pulled from Apple’s App Store. In a follow-up post, we didn’t exactly go out on a limb suggesting that it was AT&T and not Apple, that was responsible for the app being pulled. After all, word is that Apple VP Phil Schiller personally ushered one of those apps, GV Mobile, through the approval process initially. And today brings word that the apps were indeed removed at AT&T’s request. Daring Fireball’s John Gruber cites a “reliable little birdie” on the news, and we’ve just heard the same thing from a source as well.

While some found it very hard to believe that AT&T would be the ones behind something like this, given that it allows Google Voice apps on other phones on its network, those kind of contradictions are nothing new when it comes to AT&T with the iPhone. It’s the same contradiction that prevents the SlingPlayer iPhone app from working on AT&T’s network, while it works just fine on other AT&T devices. And the same one that is likely to cripple a Hulu app, if it ever gets released.

It’s well known that iPhone users consume a lot more data than other smartphone users, and so all of this seems to be a case of AT&T getting more than it bargained for when it signed the exclusive deal to be the iPhone carrier in the U.S. And while you might think that it would be a nice problem to have, a number of sources have indicated to us that the iPhone’s rapid growth is what is responsible for AT&T’s network degradation over the past several months, particularly in places like San Francisco, where iPhone usage is very high.

Now just imagine the service nightmares if AT&T permitted high-use/high-bandwidth services on the device. While it has been laughably slow to roll out its official tethering option for the iPhone, I shudder to think of what it will do to the network when it does become available later this year. Of course, AT&T is expected to charge and arm and a leg for the option, in a move that is undoubtedly, at least in part, to limit the number of users who will sign up.

And that’s what it has come to for AT&T with regards to the iPhone: Restrictions, restrictions, restrictions.

code_redAT&T is constantly promising that network upgrades are coming, but Apple keeps selling more and more iPhones. While it would never admit it, I think it’s beyond time to wonder if AT&T can handle the exclusive iPhone partnership anymore. I’m not saying that the situation would be different had it been Verizon who got the exclusive deal, I’m simply stating what is on everyone’s mind: AT&T is simply not working the way it should be for customers who are paying close to, or in excess of, $100 a month.

Certainly, losing the exclusivity would hurt the company’s bottom line, and would hit the customer base pretty hard, but losing the iPhone exclusivity may end up being a good thing for AT&T. Good in that it’s network may finally work again.

Of course, AT&T is said to be working hard to extend the exclusive deal with Apple beyond next year. But that will be a nightmare for everyone involved. We have no shortage of sources, some very close to Apple, now telling us that as mad as all of us (the customers) are with AT&T, Apple is just as mad, if not more so. Apple can speak in platitudes all it wants during earnings calls about its partnership with AT&T — behind the scenes, trust me, they hear our complaints loud and clear.

But the one hot new wireless partner that is always mentioned, Verizon (since it is the biggest network and generally considered to be more reliable), looks like it is still playing hardball. This morning it officially announced that it would be getting the Palm Pre in early 2010, and it’s playing up its RIM partnership and its own app store. That’s what you call leverage in negotiating with Apple, which it is.

Still, even the iPhone on another, smaller GSM carrier, like T-Mobile, would undoubtedly help ease some of the strain on AT&T’s network. Again, AT&T would never admit it, but the era of iPhone exclusivity may have to be ended over sheer strain. And when that happens, we may just see AT&T approving of Google Voice apps and SlingPlayer apps on the iPhone again. AT&T has painted itself into a corner, and it’s fighting hard to keep itself there, but it’s simply not a viable option anymore for any of the parties involved (Apple, the customers, and even AT&T).

When I asked for a comment from AT&T on this latest fiasco, here’s what I got:

Nope – Apple is the one who can talk about their App Store.

That would seem to suggest that AT&T is saying Apple is in complete control over all of this. But we know that’s simply not the case. Is AT&T in denial? No, I think that they think we just can’t handle the truth. And I think that truth is that they can’t handle the iPhone, anymore.