The secret is out: the most innovative abilities of the new iPhone OS 3.0 are hamstrung by AT&T's idiotic inability to keep pace with Apple. And people are pissed.
Once, that knowledge was the purview of the few, the obsessed, the technorati. "Why is the iPhone not subsidized?" they asked after the first iPhone in 2007. Customers flocked to buy it anyway. "Why is the new plan so expensive?" they asked of the iPhone 3G last summer. Again, customers smiled through the criticisms.
But this time is different: as I wrote yesterday , iPhone lovers--a rubric under which I proudly put myself--are sick of getting taxed for their enthusiasm by stiff upgrade costs, and they're no longer willing to exhibit the grace (or willful ignorance) they once did. It's not just that the new iPhones will cost more all around (but in a national economy where everything else is getting cheaper, that's one locus of outrage). But the real fury stems from the fantastic parts of the iPhone OS upgrade that are held back by stupid technological obstinacy on the part of the carrier.
The blogs are the bellwether groan of public opinion. TUAW, a popular Apple blog, ran a post entitled, "The dying goodwill toward AT&T." TechCrunch led with "AT&T Fails Users Once Again." DigitalTrends published a piece entitled, "iPhone Fans Grate Over AT&T Pricing, Features." Does AT&T have a PR department? Or have they all jumped in to the Atlantic by now?
First, the cost issue: upgrading to the new iPhone will cost $400 or $500 if you're a current AT&T customer with more than 6 months left on your contract. That burns, yes; but as Gizmodo  rightfully points out, these things are still heavily subsidized, and you don't really need the new iPhone 3G S anyway. Even still, why inflict the most loyal customers with the highest cost? That smacks of punishment for early adoption. At least offer existing customers the same incentives as you do new ones, Ma Bell.
But it's not the price of the upgrade that's most infuriating. It's the fact that AT&T has been caught totally unprepared for this upgrade, and can't back up the feature set that Apple's promising. MMS, which is available on most of the other phones that AT&T offers, won't be available until an undisclosed date this summer. Why? Because they have to remove a stupid opt-out option  leftover from when iPhone 3.0 was in beta.
And there's no word when tethering will be available, either, but some outlets  expect that it will add as much as $70 to the cost of an iPhone data plan. I'm betting it's closer to $30. That's an exciting option, given that AT&T was recently ranked by Engadget  as the fastest mobile broadband provider. But how is anyone supposed to make an informed decision about buying the device without knowing about a crucial surcharge like that?
When the first two iPhones were released, Apple and AT&T kept up appearances like a couple making the best of an arranged marriage. At this point, the two giants are obviously sleeping in separate beds. No AT&T brass appeared on stage yesterday, and Apple clearly went ahead with its upgrade announcements even though AT&T wasn't ready. During the keynote, Apple trumpeted the 29 carriers worldwide that were ready for the MMS and the 22 ready for tethering, conspicuously leaving out AT&T as though to humiliate it for its delinquency. And rightfully so. As Jason Kincaid of TechCrunch said of AT&T's tardiness, "This is ridiculous, plain and simple."
AT&T's only route out of ignominy might be the release of a fully-subsidized, free iPhone 3G with a new contract. As The New York Times points out , a free iPhone is both financially feasible for the two companies, and increasingly likely "within a year." Yet with AT&T's network already struggling under the weight of millions of iPhone owners' heavy data usage, they may be loath to add more iPhones to the morass. That will leave customers paying more for their phones as a result of the carrier's inadequate capacity. That's not only a barrier to innovation--the more iPhones sold, the more apps made--it's just bad business.