The Mac Sucks!

We’ve discussed before how Apple’s tendency to speak in “absolutes” (e.g., “the nation’s fastest”, “the world’s most advanced”) will come back to bite it eventually. There’s nothing wrong with being proud of what you produce, but Apple seems to arrogantly proclaim that any product it produces is always the “ultimate” at something.

When it comes to its iPhone, Apple often touts that AT&T’s network is “the nation’s fastest 3G network“. PCWorld recently decided to test the 3G networks of AT&T, Verizon, and Sprint in 13 different U.S. cities. What it found was that, depending on your definition, AT&T does not have the “nation’s fastest” 3G network.

The AT&T network’s download speed tested at 812 kbps, which is worse than Verizon (951 kbps) and virtually identical to Sprint (808 kbps). Sprint and Verizon are better for reliability, however, than AT&T. PCWorld’s testers found that they were able to make a connection at a reasonable, uninterrupted speed on AT&T’s network in only 68% of their tests. Sprint’s network delivered a fast connection in 90.5% of tests, and performed “especially well” in terms of speed and reliability in the western U.S. cities tested. Verizon was available in 89.8% of the tests.

In other words, if you look at upload speed, you might argue that AT&T is “the nation’s fastest” 3G network. If, however, you look at download speed (which is probably what most iPhone customers would really care about), AT&T is at best “middle of the road” among the major cellular data providers… hardly “the nation’s fastest”.

Although it’s interesting to see that an independent source has confirmed that Apple’s “nation’s fastest” claim doesn’t quite hold up, one has to wonder if this isn’t just another part of an Apple conspiracy to discredit AT&T so that it can break its iPhone agreement early and start selling the device through other carriers.

According to a post on The Register, four U.S. Senators have asked the acting FCC chairman to review whether mobile phone makers should be allowed to enter into exclusive contracts with wireless service providers. The senators’ thinking is that exclusivity agreements may “unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace.”

Even though The Register reports that this is “a direct shot across Apple and AT&T’s shared bow”, I have to wonder if Apple itself isn’t behind this. At the recent Apple Worldwide Developer Conference (WWDC), Apple indicated that it was AT&T’s fault that they wouldn’t have MMS support in the iPhone until late in the summer, and that tethering support was not likely to be coming from AT&T soon. It’s even said that “AT&T’s network has been commonly regarded as the iPhone’s weakest link for as long as there have been iPhones (especially 3G ones).”

There was talk a couple of months ago about Apple inking a deal in the U.S. with Verizon to distribute the iPhone. The problem with those rumors is that it would imply that Apple had a way out of its deal with AT&T. But sources in the USA Today article linked above indicate that the Apple/AT&T agreement is good until some time in 2010. To get out of that deal early, it’s likely that Apple would have to pay through the proverbial nose to get AT&T to let go.

But let’s imagine a completely hypothetical scenario. Let’s assume that Apple really is fed up with AT&T, and wants out of its agreement now. And let’s assume AT&T is unwilling to play along. At the same time, Apple would really like to hurt the Palm Pre and Sprint, arguably its closest iPhone competitor right now. How might it do that? In this entirely hypothetical scenario, Apple could approach some lobbyists to pressure the FCC into ruling that handset exclusivity deals are anti-competitive. How does this accomplish all of Apple’s goals?

If such deals were ruled illegal, suddenly the Apple/AT&T agreement is null and void. Apple wins. It can start selling iPhones to any carrier whose networks its device supports. AT&T might be hopping mad about this, but Apple would be free to sell the iPhone through any carrier, just like it theoretically wants to do. Not entirely coincidentally (I suspect) that DOESN’T include Sprint with its CDMA based network. Having dealt with carriers on multiple continents, Apple already has experience adjusting the iPhone to work with carriers other than AT&T, so adapting it for other U.S. carriers would probably be relatively trivial.

At the same time, killing handset exclusivity deals in general also kills the deal between Palm and Sprint. Instead of focusing its development resources on improving the Pre and making it more competitive with the iPhone, Palm will have to expend effort adjusting the Pre to work with other carriers (something it would have done eventually, but is now being forced to do sooner). This would be an unplanned change to Palm’s Pre business plan. This sudden shift in focus would likely set the development of new features for the Pre back by several months, giving Apple even more time to improve the iPhone (relative to itself and the Palm Pre) and market the iPhone to other carriers. Given that many feel the Palm Pre is what will save Sprint as a company, the timing of this senatorial interest in handset exclusivity certainly seems very suspicious. It would potentially leave Sprint with a handset stuck at today’s functionality level (which, while quite good, is not yet superior to the iPhone in many areas) and a handset which is no longer exclusively a Sprint offering.

Outside the U.S., the proposed FCC ruling would not affect Apple (since the FCC has no control outside the U.S.). Apple can continue having exclusive deals with foreign carriers as long as it likes, at least where such deals are legal. Again, Apple wins.

There really isn’t a down-side for Apple in this scenario… at least none that I can see. If the agreements stand, Apple keeps selling iPhones through AT&T until the agreement runs out next year. If they’re struck down, Apple can sell iPhones through any carrier it wants to work with, and the Palm Pre (and Sprint – who couldn’t sell the iPhone anyway) takes a hit in the process.

Remember, the scenario I’m describing above is entirely fictional as far as I know. I have absolutely no knowledge or evidence that Apple has anything to do with this sudden interest by the U.S. Senate in cellphone handset exclusivity. This is entirely speculation on my part… it just happens to be speculation that meshes well with known facts and observations.

According to Macworld, Apple and AT&T are being sued for “over-promising and under-delivering on their claims of fast Internet access of the iPhone 3G.” Plaintiff Damone Dickerson claims that Apple misrepresented the speed, strength, and performance of the 3G network. Dickerson claims he could only connect to the 3G network a fraction of the time and that it didn’t provide “full and continual service”. He says that most of the time he receives no 3G connectivity at all. He is seeking to force Apple and AT&T to correct iPhone 3G labeling and advertising in addition to paying financial damages.

As Macworld reports, “This isn’t the first lawsuit claiming Apple and AT&T misrepresented the speed of the 3G network. The companies were sued in San Jose, San Diego, Alabama, Florida, and Texas. Apple has asked that a similar case in New York be dismissed.”

The popularity of the iPhone appears to be something of a double-edged sword for Apple. On the one hand, they’re gaining lots of new customers who previously hadn’t owned an Apple product, which is no doubt good for their bottom line and sales of other Apple products. On the other hand, many of these people are unfamiliar with Apple and how it tends to advertise its products, which leads to misinterpretation and disappointment. Apple likes to describe its products using “absolutes” like these:

“The first…”

“The most powerful…”

“The most advanced…”

“The fastest…”

While all companies tout the benefits of their products in their advertising and downplay the negatives, Apple has a tendency to deliver the positives as “absolutes” (as evidenced above, the “fastest” or “most powerful” or “most advanced”) and ignore the negatives completely. This sets the company up for lawsuits from people who are new to Apple’s way of advertising its products.

Apple fans tend to take these somewhat-arrogant phrases as typical Apple “spin” and don’t get too upset if they prove not to be true 100% of the time, in all circumstances. For example, an Apple fan won’t get too bent out of shape when they travel from New York City to a tiny Midwestern town and don’t find 3G network access there. They’ll be disappointed, of course, but they won’t likely rush to find an attorney.

Consider the following statement taken directly from Apple’s web site for the iPhone (as of this writing on March 21, 2009):

A person unfamiliar with Apple could easily read the above blurb and interpret it to say “Wherever I go in the world, I will have 3G speed available to my iPhone 3G.” After all, that’s exactly what Apple says, and there aren’t any phrases qualifying where and how that access is affected. If you look on the same page, way down at the bottom, in very small type, in a very light color against a white background, you’ll see Apple has a little more to say about the subject:

(Highlighting provided to make the text easier to read.)

It’s not that Apple hasn’t warned consumers that iPhone 3G speed “depends on the cellular network, location, signal strength, 3G/EDGE connectivity, feature configuration, usage, the Internet, and many other factors” and that “actual results may vary”. Clearly, they have. But how many consumers will read that first statement “3G speed. Worldwide.” and decide that’s just what they need, without bothering to scroll way down the page and pick out that hard-to-read type implying that the speed and availability aren’t always available everywhere under all conditions?

I’m not saying this is entirely Apple’s fault. It isn’t. After all, they ARE explaining on the page where the claim is made that it depends on a lot of factors. If consumers don’t read that text, well, it’s their mistake to assume that all the marketing speak is absolutely true, in all cases. On the other hand, a little wordsmithing to Apple’s “3G speed. Worldwide.” blurb above would clarify the situation without taking anything away from the phone or AT&T’s service. For example, it could have read:

3G speed. Worldwide.
When you travel around the world with your iPhone 3G, you’ll have Internet access wherever compatible 3G networks exist, and it will be as fast as circumstances allow. iPhone 3G also makes it possible…

Potential iPhone 3G customers would have a harder time misinterpreting that blurb to mean that 3G access is always available, everywhere, at full speed. Sure, this version doesn’t deliver the punch of “fast access to the Internet… around the world” but it’s more truthful, more accurate, and less likely to result in a lawsuit. Can you imagine trying to convince a judge or jury that the above blurb convinced you that your iPhone would always deliver fast access everywhere you went? Try it again with Apple’s version. It’s easy to imagine an attorney saying to the judge and/or jury, “Apple tells you that you’ll have 3G speed, worldwide, right there in the big bold type. Right below it, they reiterate that the iPhone 3G has ‘fast access to the Internet and email over cellular networks around the world.’ It’s only far down the page, in tiny little type, in a color that almost blends into the background, that they bother to say that access isn’t really worldwide and isn’t always fast. This kind of ‘deception’ is why you should award my client $X in damages.” Would a judge or jury buy it? Maybe. Maybe not.

The problem with claims like “the most powerful operating system” is that they’re really subjective. There is no way to conclusively prove that Mac OS X is (or isn’t) the most “powerful” operating system because there is no single definition of “powerful” that we can universally agree on. Maybe “powerful” to me implies the ability to run on the largest set of hardware available in the marketplace (i.e., I have the “power” to run it anywhere). If that’s my definition, then Windows is more powerful than OS X (since OS X only runs on a specific set of Apple hardware and Windows runs on a lot more), and Linux is probably more powerful than both. Your definition might focus on something else, like how fast it renders video or copies files. And you know what? We’re both right… because we both define “more powerful” differently.

I respect and admire the fact that Apple is proud of its products. I respect that they go to great lengths to make their products fast, easy to use, and attractive to look at. I respect the fact that many people around the world (including me, once upon a time) covet their Apple products and believe that they’re the best at whatever it is that they do. It’s good that Apple and its customers take that kind of pride in the products (at least, I think it is). But absolutes like “the fastest”, “the best”, “the most powerful”, “the best looking”, etc., are subjective, hard to prove, and tend to come across as arrogant. Apple could save itself a lot of trouble, and probably not affect its sales a bit, by just dialing back on the absolutes a little (e.g., calling OS X “one of the most powerful operating systems” or just “a powerful operating system”). But as Dennis Miller often says, “that’s my opinion… I could be wrong.”

According to The Guardian, AT&T reports that sales of the iPhone have given it a boost in subscribers, but those additional subscribers are coming at a cost that its investors don’t like. As The Guardian reports, “Because AT&T offers subsidies to make the iPhone more affordable in exchange for a commitment to monthly payments, strong sales lift its revenue but hurt profit margins. That weighed on the company’s third-quarter results and drove its shares down 4 percent by midday on Wednesday.” An analyst with Stifel Nicolaus said that “They’ll need to hold on to these customers for at least three years to make it worthwhile.” While Apple customers are certainly loyal to its products, they are in many cases early adopters who like to upgrade to the latest releases, which could mean that AT&T is looking at a potential long-term profit margin problem. Could this lead them to want out of their exclusive agreement with Apple?

The My San Antonio news site carried an article about the iPhone
entitled “iPhone
a draw for AT&T” in which they talk about 40% of the
inquiries for the iPhone coming from people who aren’t current
AT&T customers, implying that the phone may draw customers to the
carrier.

As we’ve noted earlier on the site, though, the
cost of switching to the iPhone from a competing carrier might be
prohibitive. If a customer’s contract is a long way from expiration,
they penalties they’ll have to pay to get out of it may not make the
switch to AT&T worthwhile. The article included a quote from Gerry
Purdy, a wireless analyst for Frost & Sullivan: “A lot of them
will end up waiting until their current plan is up so they don’t
have to pay a penalty fee for leaving early.”

Interestingly, AT&T launched a new live video sharing service for
cell phones on Tuesday. This new service will not “at least
initially” be available for the iPhone, which “operates on an
older AT&T network”. So much for the iPhone being a cutting
edge product.