Why AT&T Is the Biggest Loser of 2009

By Mike Schuster  DEC 10, 2009 11:50 AM

Blaming the customers for the company's poor service is the last straw.


The tape's been broken and the race is over. With second place off in the distance, it's not even close. Squeaking one last indiscretion in before the end of the year, AT&T (T) has clinched the series and boldly stands as the year's most reprehensible company.

Speaking with investors on Wednesday, Ralph de la Vega, head of AT&T’s mobile division, did the unthinkable: He actually acknowledged the performance issues with the provider. He didn't go so far as to address the Consumer Reports survey that ranked his company last overall in cellular customer satisfaction, but he did note that coverage in New York City and San Francisco are "performing below our standards." Case in point, New York City has a 30% dropped-call rate for the iPhone, which Apple (AAPL) deemed acceptable, according to tech site Gizmodo.

Just as everyone was beginning to wonder if we're seeing a more lucid AT&T -- one that recognizes issues and actually does something about them -- de la Vega shifted blame onto customers.

Yes. The CEO of a lackluster provider just blamed the increasingly dissatisfied user base for being the source of the problem.

"We need to educate the customer," de la Vega smugly said. "We've got to get them to understand what represents a megabyte of data."

De la Vega trotted out a statistic -- largely targeting iPhone users -- that 3% of smartphone customers on AT&T comprise 40% of data usage, namely high-bandwidth activity like streaming video and audio. He added, "The amount of growth and data that we are seeing in wireless data is unprecedented," and described that the US is unique in such exponential usage increases.

Without specifying what changes would need to be made, de la Vega mentioned certain measures that would need to be addressed to decrease traffic "in a way that's consistent with net-neutrality and FCC regulations." In other words, goodbye unlimited data plans. Hello, tier-based data plans.

The shift from a flat rate for unlimited data to pay-per-megabyte would be devastating for smartphone customers used to the casual access of the mobile web. If such a change in contract terms voids existing phone plans and allows customers to walk away free and clear, this could be the start of The Great AT&T Mass Exodus. And if Apple has an iota of marketing forethought and opens its iPhone onto other providers, it won't be pretty.

De la Vega's comments are the topper for a year filled with AT&T's egregious behavior: Whining over Verizon's (VZ) ads but not disputing the facts; influencing Apple to drop Google (GOOG) apps from the iTunes Store which spawned an FCC investigation; announcing MMS capability but delaying the roll-out; having bugs that prevented voicemail delivery for weeks; and releasing an iPhone app to record bad coverage points -- which fails itself. (See AT&T's Lawsuit Only Magnifies Spotty Service and Economic Snapshot: AT&T Still iPhone's Biggest Flaw.)

And now, citing poor performance and blaming customers while still producing attack ads which denigrate Verizon's coverage and boast its own, it reaches the absolute zenith of hypocrisy and hubris.

The facts remain: Apple's iPhone exclusivity contract with AT&T ends soon. Customers are unhappy with poor service. Motorola (MOT), Samsung, and Nokia (NOK) have released some very attractive Android phones on Verizon, Sprint Nextel (S), and T-Mobile (DT) with more on the way.

The very last thing AT&T should be doing now is criticizing its users with itchy early-termination fingers.
No positions in stocks mentioned.