Daniel Eran Dilger
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Reality Check: Seth Weintraub and the AT&T Android Mystery

Daniel Eran Dilger

Seth Weintraub is concerned an “Apple effect” may be interfering with AT&T in its bid to join other US mobile providers in selling an Android-based iPhone runner up, apparently without realizing that AT&T has the actual iPhone.

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I’m not making this up.

Weintraub talks about how all the carriers in the US, apart from AT&T, are selling lots of different Android phones; Sprint has three, Verizon offers five, and T-Mobile has ten different Android models including the Nexus One.

But AT&T only has one placeholder: an outdated Motorola Backflip that ships with Android OS 1.5. He also notes that AT&T has plans to sell a Dell phone also running the now ancient version 1.5, at some point in the future.

To Weintraub, this is a mystery. “I imagine,” he writes for Fortune, “that companies that use Google Apps would be very interested in Android phones, especially ones that get updated to the latest Froyo OS which got 22 new business and enterprise features like remote wipe and full native Exchange support.”

Yes, that sounds exciting for AT&T’s business users, were they likely to want to jump on Google’s first release of Exchange Support–in software–for a hardware platform that still doesn’t support the default Exchange security policies and therefore isn’t going to be supported by the vast majority of Exchange shops. And no doubt there are tons of businesses using Google Apps that would somehow benefit from using an Android phone, given that Google makes a paltry $50 million a year from its Docs business. It pays more than that to subsidize the development of Firefox.

Is Apple holding Android back on AT&T? – Google 24/7 – Fortune
AppleInsider | iWork suite for iPad projected to earn Apple $40M a year

A puzzle: Why doesn’t AT&T have an iPhone competitor?

“So why the big delay [in offering a variety of Android phones to its subscribers]?” Weintraub asks. “Maybe AT&T was just late to the Android game. They were also the third carrier to pick up the Palm Pre. But it’s hard to overlook the ‘Apple effect’.”

What is this “Apple effect”? Is it that the iPhone is the most attractive phone model in the world, and that AT&T is the exclusive provider for it in the US? That AT&T is reducing churn and maintaining more smartphone subscribers than any other American provider, even the slightly larger Verizon, because of the iPhone?

No, Weintraub writes, “I personally think the problem is Apple. AT&T has wanted to keep Apple’s exclusivity in iPhones and iPad 3G devices and the best way they know how is to avoid high-end Android phones that can compete and even, in some ways surpass the iPhone 3GS. I’m not insinuating that Apple and AT&T have some sort of deal to block solid Android devices, I’m just saying it is in AT&T’s best interest to remain iPhone focussed on the very high end.”

So AT&T is refusing to sell Android phones because they “can compete”? Is that also why AT&T is prominently advertising RIM’s BlackBerry phones and other competing devices such as Windows Mobile? Because they can’t compete?

AT&T is happy to offer the iPhone and iPad because they sell themselves from Apple retail stores and Apple markets them itself. Android’s big Droid push last fall was paid for by Verizon, not Google. And Verizon had to eat significant expenses to push Android phones to users with Buy On Get One offers, just to maintain smartphone volume to sell those lucrative data contracts. AT&T has no incentive to try to cannibalize its golden iPhone deal in order to desperately ship an alternative smartphone.

Does Weintraub think Verizon and Sprint aren’t desperate? Why did Sprint sign up on an expensive and risky deal to exclusively carry the Palm Pre, a deal that ultimately failed? And why was Verizon trying to sell the awful BlackBerry Storm with a straight face? Android is the closest thing non-AT&T carriers in the US have to an iPhone competitor. Both Verizon and Sprint have publicly talked about wanting to sell the iPhone.

It’s not a matter of AT&T holding Android back as part of a conspiracy theory with an evil finger pointed accusingly at Apple; it’s a matter of 3/4 of the carriers in the US desperately trying to stuff the channel with something that will sell data contracts, and settling on Android as a potential candidate behind BlackBerry but ahead of Windows Mobile and Palm.

Is Apple holding Android back on AT&T? – Google 24/7 – Fortune

Can Android compete?

Fortunately, for the rational and scientific minds among us, there is a control group for our experiment: the rest of the world. Outside of the US, Apple sells iPhones through a variety of carriers in nations where there is often no artificial technical boundary that prevents users from switching carriers or phones as there is in the US.

How well is Android competing in these countries? According to Google’s own AdMob statistics, not very well. Overall, Apple’s slight lead in smartphones and more than 2x lead in the iPhone OS platform over Android in the US is dwarfed by a more than double the installed base in smartphones globally and 3.5x larger total platform installed base worldwide.

A full 75% of Android phones are being sold in the US. Is that because Google has no name recognition outside the US? No, it’s because the iPhone is widely available outside the US but inside the US 3 of the 4 major carriers can’t sell it! They have to sell Android phones. That’s not “competing well against the iPhone,” it’s not having to compete at all. That’s why they sell it! They have no other option.

The more pathetic the carrier, the more phone models they have to throw at the wall to see what sticks. T-Mobile, the other US GSM carrier apart from AT&T, has ten models. Clearly, there is no shortage of Android phones that could be sold worldwide to GSM markets. So Android isn’t stuck on CDMA networks as an American phenomenon as the Palm Pre originally was. It’s mostly selling here in the States because 3/4 of the carriers can only sell Android phones against AT&T’s exclusive sales of the iPhone.

If the iPhone were being sold across technical boundaries from multiple carriers, it would very likely have a similar installed base and market share as the UK, where the iPhone makes up 64% of the ad requests AdMob reports. About 28% of Apple’s iPhones (as counted by AdMob) are showing up in Western Europe, but only 11% of Android phones are. That’s because Europe is able to buy the iPhone. There’s no CDMA barrier that pushes rivals to find a close alternative. There’s also an installed base of Symbian phones that serve the market for nearly-as-good devices. If Android were really competitive, it would be competing in Europe and Japan (where the iPhone has a 72% share of the smartphone market). It isn’t.

Outside the US, the only place where Android is really competing against the iPhone is in Communist China, where a flood of knock off hardware is increasingly using Android software to bring the devices to market due to a complete lack of respect for copyright and patents in the copycat country. There too, the iPhone is only available on one official carrier (although Apple’s Chinese carrier is much smaller, whereas AT&T is nearly tied for first place among subscribers in the US), and like the US, there is a network technology barrier that limits who can buy it and where they can use it.

Rather than expecting Android to do well on AT&T once the company begins offering it, it would be interesting to see how well Android maintains its ground were Verizon and Sprint able to offer the iPhone, and there was some real competition in the US.

  • elppa

    I’ve been thinking this for a while now:

    2 for 1 on smart phones is not sustainable.

    People seem to think it is a case of when not if Android will overtake iPhone, but I don’t think it is a foregone conclusion.

    Apple has some things to fix (cloud, US carrier choice) but that list is both shorter and potentially easier than Google’s list (UI, entertainment, enterprise, retail, OS upgrades, fragmentation, marketing etc. etc.)

    Apple also has a lot of cards to play and if they really want share they have deep pockets to place iPhone at price points way *too* good to refuse. This is assuming Apple wants share as a major priority (I’m not convinced, I think they could settle for a 10-20% figure. Google can’t do that, because 1) they don’t set the prices, their partners do and 2) they’ve spent too many years flittering their money away on other stuff.

  • martimus

    What is really amazing in all this back and forth about Apple and Flash/CDMA/iPad/whatever is that most of the points you bring up are relatively easy to grasp. You’d think these guys could read and think together a few sentences, but I reckon not.

    I think we ought to inform them that “a man’s got to know his limitations” so that they won’t try to think and therefore hurt themselves. Nice piece as usual, by the way.

  • stormj

    Oy gevalt.

    (1) Tech bloggers showed that they were not lawyers when the Gawker scandal broke, and now they are showing that they are not businesspeople, either.

    Does Weintraub really think that Google is going to facilitate Apple getting on to Verizon? Is it only unfair to press a business advantage when Apple does it?

    All of these guys seem to have a very John Hughes-moviesque vision of how the world should work and it has nothing to do with the law or how to do business.

    (2) So what if there are more Android phones? AAPL is a business. As long as iPhone is more profitable, then Apple wins. Just like with the computer hardware.

    (3) Finally, all of these Apple haters can say whatever they want, but it’s the largest tech company in the world at this moment.

  • Mark Hernandez

    It’s great we have Daniel and other smart people helping us understand the complex dynamics of the [mobile] marketplace and technologies. As humans we have difficulty with complexity and usually oversimplify in order to cope.

    But we gotta understand the complexity in order to be successful, and we depend on people like you, Dan, and Gruber, Drance, Ihnatko, and too few others that together to help us “get it” when the vast majority of writers in blogs and magazines don’t, and what a long list that is! And they don’t really care to understand things either. For them, it’s all about click bait for pageviews and busy, riled comment sections.

    And when the big whigs of the industry say things that don’t make sense, we know they probably do know what’s going on, but they’re playing politics (ACHOOO-adobe :-). Kinda like John Boehner… neither other politicians, the media or thinking people believe a word he says and know it’s pure BS, and the only people he might be influencing are those listening to the TV out of the corner of their brain while in the kitchen making dinner. Unfortunately the political BS can be effective, just like yesterday when the box boy at Costco saw the iPhone in my hand and made a really uninformed comment about the lack of Flash on it.

    I’m sorry I have nothing to add about this topic in particular, other than appreciation of being thankful you’ve furthered MY understanding of the marketplace in a lurch, rather than not at all after reading too many other sites and blogs. Thanks Dan!

    Mark Hernandez
    Information Workshop

  • gus2000

    I went to the Mercedes dealership today, demanding to know why they wouldn’t sell me a Ford Taurus. It’s a popular car, and it would increase their sales figures. They claimed that they didn’t need it, and that they made more profit per car on their own vehicles anyway.

    What a load of crap. They think they’ve fooled us, but I’ve figured out who’s behind this whole whole conspiracy to kill the Taurus: it’s the oil companies…

  • http://www.van-garde.com adobephile

    I have a friend who is an inventor, and he has several really great inventions he’s trying to sell to one or more companies in a particular industry. Besides the complications brought about by the economy, this industry has been literally asleep for six or seven decades at least. They’ve just been making the same old product for years, dropping the same out-dated guts into snazzier-looking boxes as the years go by. These good ‘ol boys are a really tough sell. Wonder why. . .

    So along comes Apple and invents a unique smartphone. A smartphone of smartphones, and the mobile phone industry’s jaws still haven’t returned to closed positions. They’re so damn stupid they don’t recognize fully what Apple has done, much less know at all what to do in answer.

    They’re churning out new plastic, alright, ’cause that’s one thing they know how to do, but if anyone thinks Android OS is “better” than iPhone OS, they’ve got another thing coming. But being chronically stupid they are also clueless about anything at all resembling “customer experience” and the level of system integration that Apple has achieved.

    It’s actually quite a sad indictment of the current state of Western culture.

  • seth

    Hey Dan,

    Almost as good as Rebrickulous! AT&T will release a high end Android phone called the HTC Aria right around WWDC that proves us both wrong.

    Keep on keeping on.

  • http://www.sistudio.net studiodave

    For the same reason Apple will not port/allow the Mac OS on $200 PC boxes Apple should not be on Verizon.

    Cheap PC box = poor user experience.
    Verizon network/mindset = POOR USER EXPERIENCE!

  • shadash

    “If the iPhone were being sold across technical boundaries from multiple carriers, it would very likely have a similar installed base and market share as the UK, where the iPhone makes up 64% of the ad requests AdMob reports.”

    Remind me again why it is a good idea for Apple to stick with Verizon.

    studiodave –
    What world are you living in? AT&T has defined “POOR USER EXPERIENCE” on the iPhone.

    elppa –
    If you think Steve Jobs is going to be satisfied with Mac-like market share numbers for the iPhone, you’re wrong. They have been very aggressive on price and features in a way that late 80s/early 90s Apple was not. Jobs is aiming for iPod numbers – not 10-20%.

  • http://www.sistudio.net studiodave

    shadash –
    I am living in a world of reality. Being on Verizon since they bought out Aitrouch had nothing but trouble with dropped calls, no service and support personnel telling me that all my troubles would be resolved if I signed up for another two. Since I switched to ATT a year ago November great service friendly personnel when I had questions and never without service. I also get to keep my unused minutes. I am in Los Angeles area and both Verizon and ATT should have great service but even two days ago I was trying to connect to someone on Verizon and kept getting dropped even from my landline.
    ATT service may have been bad in the past but I would say they are better than Verizon now, Real Life Experience.

  • maxijazz@poczta.fm

    @seth
    Unbelievable, you still did not get the point….

  • Maniac

    @elppa – “2 for 1 on smart phones is not sustainable.”

    It is for the cell providers. The cell providers only care about selling expensive voice and data plans. Two for one isn’t two phones on the same plan. It’s two phones on two plans. Two 2-year contracts from one single sale.

    Sucks for the handset makers. If they get a cut of the monthly contract fee, that helps. But the initial sale revenue is cut in half. So yeah, it dropping prices is a way of building market share. But they’re paying for it. It’s probably sustainable but it’s not as good as selling each handset at full price. Like Apple does. No fire sales (unless you check Apple’s online store’s refurb page often…)

  • SkyTree

    Dan, glad you brought up “the rest of the world” as the control for English-centric commentards who think the rest of the world is just like the US but more colourful. The fact is, the rest of the world uses languages and writing systems that are different or sometimes completely different from English.

    As I posted to a different subject: Just had a friend show me “the first Android phone in Japan”, from NTT DoCoMo. He kept switching it on and off, because the battery life is so short. He said it has taken years off his life, if he gets frustrated with it one more time he will smash it and get an iPhone.

    More importantly, the Mac OS X has developed language capability over many years that makes using an iPhone for Japanese-language text input, via a touch screen, easier than most other phones and even easier than computers, Mac or Windows.

    Localising a phone for a non-English speaking (and non-single-byte script) country means you have to change everything, make it all work in the target language and then bring back in all the functions that depend on the English-language capability of the OS. That’s where they start cutting corners ……………..

  • berult

    Layer upon layer, freebie upon freebie, glittering spec upon glittering spec, and beneath it all, where the probing buck stops, a syphon mole, so… suck the tradable seep out of pandering props.

    Do no Evil to Odysseus’s Soul;
    Lip sync Ethos, hum for Gold!

  • http://www.fieldsutton.com FieldSutton

    Great article, as always Dan.

    Don’t mean to nitpick, but there’s no need to have a black eye on an otherwise superb piece. I believe your reverence to Verizon selling the “awful BlackBerry Bold” should actually be the Storm(2).

  • ChuckO

    Seth had another beauty a couple of months back where he concocted this story where Intel was punishing Apple for not using Intel in their mobile devices. I just can’t believe Intel would try to punish the hottest computer maker in the world. There’s just no sense in it. “We have our parts in the coolest, most popular computers out there. A company that is one of the few bright spots in terms of computer sales. Let’s throw a wedge in that relationship over what we ourselves know is the right decision in regard to mobile processors.” Yea, right.
    But like the metaphor someone else used in a comment earlier he turned it into a John Hughes drama.

  • ericgen

    @ChuckO

    I remember the post that you referenced. I believe it was a comment on that post that pointed out the more likely reason for the delay of the processor updates: Apple switches entire lines to a new processor at once.

    A company like Dell or HP just add a new option or model for whatever the new processor is. However few, or many, they can get is how many they try to sell for that model. If they can’t get a large enough quantity, they’ll just sell you the older model or part. They get the marketing benefit of being able to say they have machines with the latest processors, whether or not you can actually get one from them.

    Apple will not switch until the quantities available are large enough that they can sell hundreds of thousands or even millions of a model with the new processor. It does mean Apple’s customers sometimes have to wait a bit longer for a new processor. But, once it’s announced, the machines are usually actually available and not just advertisements for the latest and greatest.

  • ChuckO

    My sense is Seth has a lot going on and the logic of his posts is the least of his concerns. Did he just switch to Fortune magazine? I thought I read a post on Money\CNN a week or two ago.

    I think like a lot of guys working at his level it’s about producing columns and page hits and the actual content is more about satisfying an audience than producing coherent thought with any basis in sensible business strategy. Or in other words it’s about making money not sense (cents).

  • ericgen

    Yea, besides 9to5mac, Seth used to do a somewhat weekly column at Computerworld. Now he seems to be a Fortune, on the side. Jonny Evans used to be at 9to5mac and then disappeared with no explanation (at least not one that I could ever find). About the time Seth moved from Computerworld to Fortune, Jonny resurfaced at 9to5mac but suddenly also has a column at Computerworld.

    I suspect that a lot of it is related, but I’ve never come across an explanation for any of it.

  • ChuckO

    I noticed the same thing.

    I suspect the explanation is money and more of it. Maybe Seth is outsourcing the ComputerWorld job in a way.