Brilliant partnerships occasionally end in tears, and there's starting to be some loud whining by Apple ( AAPL) customers unhappy with AT&T ( T) -- the exclusive network service provider for the iPhone. During the introduction Monday of Apple's new iPhone and in the days following, grumpy legions of Apple fans have aired their complaints about AT&T. Chief among the complaints are network quality issues like dropped calls, poor signal coverage, slow data speeds and the most recent insult: AT&T can't or won't support a few new features on the iPhone S.
One service Apple highlighted in its presentation is tethering, or connecting a notebook to the iPhone for wireless data access. Another is multimedia service or MMS, a messaging technology that lets users quickly send songs, pictures or video to other iPhone or smartphone users. To tech watchers, the lagging feature support sends troubling signals about AT&T's ability to keep up with the wireless data boom that the iPhone and other smartphones have created. These concerns come as AT&T's hopes to renew its exclusive pact with Apple, which expires in one year. Meanwhile, lurking in the background is Verizon ( VZ), which would love a new Apple device to help launch its upcoming 4G network. An AT&T representative says tethering is coming but couldn't provide a time frame. And he said the MMS service will be available in "late summer" as the company makes some "final system upgrades." The concerns about an underpowered network in an overpowered phone market come as AT&T has been pinching pennies this year. Ma Bell slashed $2.5 billion from its 2009 capital spending budget, and is on track to spend about 15% less on network maintenance and upgrades than the $20 billion it spent last year.
"Money isn't the only problem, there's also a lot of indecision" says Telecom Pragmatics analyst Sam Greenholtz, who talks to the technology decision makers at all the major phone companies. "They don't know what to do with the money they been given to spend," says Greenholtz. "They are doing upgrades here and there, but overall they are split with some wanting more 3G spending and others saying a quicker move to 4G should be the priority. The AT&T rep disputes any claims that the network isn't top notch. "We have activated 5.9 million iPhones, our churn is the lowest in the industry," says the rep, adding "we couldn't achieve those results without an absolutely first-class network." Wireless networks, as users well know, have always had flaws. But in AT&T's case, it's hard to tell if there is a real service quality problem or if the company has simply taken on a lot of tech-adept gadget fans who bring oversized expectations. Either way, as millions more iPhones come on the network, the rising complaints could drive a wedge between Apple and AT&T. Other players like Verizon, Sprint ( S) and Deutsche Telekom's ( DT) T-Mobile are no doubt eager to come off the bench and enter the Apple game.