Unable to keep up with its own success, AT&T blames customers for poor service

Carrier signs up record number of users, then complains too many are using its network

AT&T is scrambling to defend itself against criticism that its policy of covertly throttling the bandwidth of particularly heavy wireless-data users among its customers – mainly by blaming the customers.

Demand for wireless data on AT&T's network grew 20,000 percent over the past five years, doubling each of the past two years, most of it due to the exponentially greater thirst iPhones have for data than dumb phones that can just barely send texts.

That demand has so far outpaced the ability of carriers to keep up that any company selling iPhones would be swamped, especially one with the high standards for service that characterized the five-year monopoly AT&T had on sales of the iPhone, according to a blog posted yesterday by an AT&T exec explaining that customers, not vendors, are responsible for an inability to deliver popular products or services.

John Donovan, AT&T SVP of AT&T technology and network operations, explained in his post that customers are so eager to use the company's service and so inconsiderate in doing so that AT&T has no choice but to cut some of them off, even if they are, technically, staying within the terms of the contracts they signed with AT&T.

The issue, as I mentioned earlier this week, is the unlimited data plan both Verizon and AT&T used to entice customers to try iPhones and, to a lesser extent, Android smartphones, both of which use exponentially more data and bandwidth than non-smart "feature" phones.

Verizon quickly grabbed double-digit shares of the iPhone market after its version became available Feb. 10 last year, but the competition seemed to actually spur more iPhone sales at AT&T, not fewer.

Verizon, which said from the beginning it wouldn't keep the unlimited data plan around beyond a promotional period, switched to a tiered payment plan less than six months after it began selling iPhones.

AT&T launched a tiered plan, but allowed existing customers to keep the unlimited version, unless they abused the privilege.

Then it started changing what it meant to abuse the privilege.

The result is an interesting example of denial: AT&T consistently ranks last in polls measuring the quality of its wireless service.

Just as consistently, AT&T claims to rank highest among its competitors in customer satisfaction – because it measurews how much customers like its help-desk operators and online self-support systems, not the quality of its cell service.

Even the best help desker can't do anything to increase customer satisfaction with a network that made the dropped call a clichéd joke among late-night talk shows and introduced the world to the device addict – a customer so in love with a device that he or she will put up with almost any number of lost calls and No Service notices rather than switch to a more reliable carrier.

AT&T: 'Customers love us too much for us to be successful' (still ranks last in customer satisfaction)

Donovan and AT&T don't see it that way.

During the past five years, AT&T has done plenty to keep up with a demand for data that doubles every quarter, Donovan wrote.

During the past five years, AT&T:

  • Spent more than $95 billion on network upgrades and expansion (though that includes both wired and wireless nets and averages out to $19 billion per year.
  • Spent the whole $20 billion on the wireless net in 2011 and expects to do the same this year, though upgrading to 4G LTE deployment is part of the cost.
  • Rolled out WiFi hotspots in "key venues across the U.S.," with plans for more (though the impact of WiFi hotspots are a minor factor in contributing to the global availability of a cell net).

"It's a global phenomenon," Donovan wrote of the out-of-hand data demand. "The growth is now driven primarily by smartphones.  Add to that new customer additions and the continuing trend of upgrades from feature phones to smartphones, and you have a wireless data tsunami."

If you know a tsunami is coming months ahead and don't build prepare for it, is destruction still the tsunami's fault?

Despite five years of seeing demand for wireless data double and failing to keep up with it every year of those five, AT&T was helpless to do anything about the explosion of demand during the past two years, according to Donovan.

No one could be expected to expect or prepare for that volume of growth, so AT&T is the victim in this whole bandwidth thing, not the customers. Customers are the ones taking advantage of AT&T, not the other way around.

It's possible to make that a legitimate argument, but only with different statistics, different excuses and, preferably, a different company to defend.

In its one concession to customers, AT&T kept its unlimited data plan in place when Verizon switched.

Of course, it needed a way to differentiate itself from a more-successful new competitor in the iPhone market and the data plan was its only real alternative. So maybe that wasn't so revolutionary.

What was new was the promise to keep unlimited data in place for existing customers, introduce tiered pricing for new customers and manage overburdened networks by throttling back the available bandwidth for the very small percentage of the worst data hogs to discourage customers from abusing AT&T's network.

Except, AT&T shifted pretty quickly from hunting out the most egregious abusers to penalizing almost anyone whose data-usage numbers were in the top five percent for their own particular area. That led to bandwidth penalties on even those using a modest 2GB/month to 4 GB/month of data, which fall into the lowest two tiers of Verizon's plans.

Even if growth in demand is unreasonably high, providers are still responsible for keeping up

It's trite to say overburdened networks are the fault of the carriers because they didn't spend enough on expansion, but only because people keep saying it.

They keep saying it because it's true.

Yes, the smartphone growth and explosion of demand for wireless data is an extraordinary stressor, but providing high-volume, highly reliable, universally accessible network service is what carriers do. That's their core competency.

If you can't expand the capacity of the thing you do best, how well do you actually do it?

If growth in demand is so high there's no realistic way you could keep up, shouldn't you slow things down by throttling back the number of new subscribers you sign up?

Isn't continuing to sign people up as fast as possible for two-year smartphone contracts to use an already overburdened network the same as selling 400 seats on a 200-seat passenger plane and then complaining that it's too crowded?

Yah, it is.

The financial statement AT&T posted Jan. 26 shows no hesitation to sell as many phones and as many subscriptions as possible, but hardly mentions service levels or the need to upgrade a network that's already swamped.

During the fourth quarter of 2011, for example, while it was already competing for iPhone customers with Verizon, AT&T sold 9.4 million smartphones, 7.6 million of which were iPhones.

That makes the situation worse? More phones more problems?

During the fourth quarter alone, revenue from wireless data rose 19.4 percent; revenue from all wireless services rose 10 percent. It was the 12 th consecutive quarter wireless revenue went up.

That makes the demand for data a mandate from customers, but hardly an unfunded mandate.

The funding was there, it was the performance that was missing.

Other tidbits:

  • Fourth-quarter smartphone sales beat AT&T's previous record by 50 percent.
  • AT&T sold twice as many smartphones in 4Q 2011 as it did during 3Q 2011.
  • During the fourth quarter alone AT&T added a total of 2.5 million wireless subscribers.
  • AT&T sold 570,000 non-phone devices – aircards and tablets – bringing its non-phone subscriber base to a record 5.1 million, up 70 percent compared to the year before.

None of that sounds as if AT&T was left helpless and penniless in from the success of its iPhone monopoly; it just sounds as if it managed the growth badly, continues to do so and has to struggle to find a way to blame someone other than itself for the problems of its customers.

Who else is there to blame?

Customers. Given the number of them who signed up in response to AT&T's promotions, stuck to the terms AT&T wrote into its contracts and used the phones and service in exactly the way AT&T promised they could, how could you blame AT&T if the level of service dropped with every new iPhone on the network?

And how could AT&T respond in any way other than by punishing those customers for the temerity to expect from AT&T what AT&T had promised they would receive?

Some people just have an unrealistic view of how technology works, how well it's supposed to reward the people who sell it and how much work has to go in to satisfying the unreasonable demands of customers who believe what the vendor tells them.

Who could blame AT&T for wanting to punish them?

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