New iPad comes as AT&T wages quiet war on Apple

Gregg Re Editor
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Hunched over a computer at a corporate AT&T store on Wilshire Boulevard Wednesday afternoon, a salesperson named Pedro asked a customer whether Apple had announced the successor to the iPad 2 tablet yet.

“Yep. It’s the iPad, in high definition,” a man in line responded.

“It’s got a retina display,” he said, referring to the tablet’s new ultra-high-resolution display.

The man continued, rattling off some of the other announced features of the next-generation tablet: voice dictation, a better camera, better tools for photo editing.

For AT&T, though, Apple’s inclusion of LTE connectivity in its newest iPad may be the biggest Apple news since the tech giant signed an exclusivity deal with AT&T back in 2007. And it might just be the ticket to stopping the company’s silent all-out war on Apple, which has intensified in recent months.

A Daily Caller tour of 10 AT&T stores — both corporate stores and authorized retail stores — in the week before Apple’s new iPad announcement showed just how far Apple’s stock had fallen in AT&T’s estimation since the launch of the iPhone 4S in October 2011.

“I wouldn’t really recommend the [iPhone] 4S,” said an AT&T representative at a Hollywood store when I asked him what phone I should purchase as an upgrade. “Apple hasn’t really done anything new since the iPhone [3G],” the representative added, before recommending the LG Nitro HD, a Google Android-powered phone, as an alternative.

The iPhone 4S, unlike the Nitro, runs only on 3G and HSPA+ (“4G”) networks and is not compatible with AT&T’s faster 4G LTE system, which promises larger-than-life download speeds.

When asked whether the iPhone had any advantages of any kind over the Nitro HD, the rep was flummoxed.

“Well, actually, it has the screen,” he began. “Well, no, nevermind, you were asking about advantages of the iPhone, right? No, the Nitro has higher pixels. It’s got a higher pixel density.”

Not quite: the Nitro HD sports a pixel density of 326 pixels per inch — an impressive figure, to be sure, but it’s no better than the pixel density of either the iPhone 4 or 4S.

The iPhone hate didn’t stop there. A salesman at a nearby store claimed that the Nitro’s ability to run Adobe’s mobile Flash Player would allow me to watch Netflix movies on the go, which he said was impossible on the iPhone. (In fact, Netflix has a dedicated app on the iPhone that enables users to watch Netflix movies over Wifi or 3G.)

“I was really expecting the iPhone 4S to be something new,” he explained, noting that he had switched to an Android phone in the wake of the 4S announcement. “I wanted a 4G LTE iPhone 4S, but I guess I’ll have to wait for [the iPhone] 5.”

After a bit of prodding, the rep finally thought of a positive for the iPhone 4S: Facetime, a video-chatting feature. He promptly added that it “kind of sucks” that the feature is useless without a Wifi connection, which he said wasn’t required by competing Android apps.

All across Los Angeles, the story was the same. Guy goes into an AT&T store asking about an upgrade, hears various horror stories about Apple’s iOS operating system, and emerges with the distinct impression that AT&T — Apple’s former partner in the smartphone wars — had soured on Cupertino’s flagship device. All of the representatives I spoke with said they were personal converts to the Android operating system, and some even pulled out their phones to prove it.

In another Hollywood AT&T store, a salesman named Bill from phone manufacturer LG approached me within seconds of hearing that I was interested in an upgrade. The two AT&T reps stood by as Bill tried to work his magic.

“iPhones are trendy,” he told me. “But they’re just not the best option anymore.” He eventually offered me a $50 Visa gift card to convince me to make the switch to Android, a tactic not dissimilar to Verizon’s efforts to pay users to dump 3G devices like the iPhone.

When I stopped by the store the next day, Bill was gone, but his penchant for creating Android converts had clearly left its mark on AT&T staff.

“He said he’s one of the top two reps in this region,” a clerk at the store said. “That man moves ‘droids.’ Doesn’t matter what you wanted when you walked in. He moves Android.”

Even AT&T’s online sales representatives, who work late into the night, tried to steer me away from staying with Apple’s smartphone.

“A great phone that I’d recommend for upgrading from the iPhone 4S is the Galaxy Note,” said a representative calling himself Frankie S. — nevermind the fact that the iPhone 4S is less than four months old, meaning an upgrade on that particular line would cost $629. “The Android market is very extensive, and it’s a Google operating system. It’s no surprise that it’s actually more extensive than the apps through iTunes.”

Again, not quite: Apple’s App Store boasts over 50,000 more applications than Google’s equivalent market, now called Google Play. By Google’s estimation, Google Play does offer a whopping 450,000 apps for download, but the service is still missing some staples of the App Store, including popular games like Scramble with Friends.

It’s possible the rep meant to say that Google Play has more useful free apps than the App Store, a line I heard at four of the stores I visited. That much might be true, if only because App Store developers more often take the time to create premium ad-free versions of their apps on the iOS platform. The majority of games you’ll find on Google Play are ad-supported.

But no amount of charity can excuse the online representative’s decision to double down when I asked a no-brainer: “Does the selection of movies/TV shows on Android about equal the amount on iTunes?” I typed.

“Yes,” Frankie responded, after again assuring me enthusiastically that I had asked a “very good question.”

Say what you will about Apple’s iTunes Store, but there’s no way its selection of books, music, or movies is bested by the nascent Google Play. Regardless of whether you’re talking about the latest pop songs or a new episode of your favorite television show, odds are Apple’s iTunes Store has it and Google Play simply does not.

Alarmingly, Frankie went on to echo some more of the misinformation I had heard in-person at AT&T corporate stores. Take a look at this exchange:

GREGG: One other thing I noticed is that I can’t access Netflix or Hulu on my iPhone. Is that a limitation of iOS and do you think Android (which can run flash) would help with that?

Frankie J.: … You are actually right on the money. Since the Androids can run Flash player, that would let you use [Hulu Plus] and Netflix right from your phone.

In reality, both Netflix and Hulu have dedicated apps available on the App Store. My reported inability to run either service on my iPhone was my fault, not Apple’s. But it had become apparent that Frankie J. — much like his in-store counterparts — wasn’t about to stand up for the iPhone 4S any time soon. Only after speaking with another online rep did I finally hear that the iPhone could, in fact, display Netflix movies.

The launch of the iPhone 4S led to a record number of zero-day activation on AT&T’s network. Despite a lukewarm critical reception and few cosmetic improvements over its predecessor, the 4S remains popular with consumers, recently taking its place as the second most popular cameraphone on photo-sharing site Flickr. So why would AT&T’s foot soldiers universally recommend less popular phones while occasionally misrepresenting the iPhone’s capabilities?

For carriers, it’s no secret that too much iPhone can be a bad thing. Sprint, for example, has borrowed almost as much as it’s currently worth in order to bring the popular handset to its customers. The move, which helped off set Sprint’s quarterly losses and provided a dramatic boost to its subscriber numbers, nonetheless risks bankrupting the company at the end of the day.

By all accounts, AT&T also gambled big on the iPhone back when it signed its exclusivity deal with Apple in 2007. The costs continue for AT&T: Anyone who purchases an iPhone as an upgrade buys a phone subsidized by the carrier. And AT&T pays far more to subsidize an iPhone than it does some competing phones, according to analysts.

Philip Cusik, an analyst at J.P. Morgan, estimated that AT&T pays a whopping subsidy of $375 for each iPhone 4S sold. Contrast that with the $150 to $250 he says the carrier pays for comparable Android phones like the Samsung Skyrocket II.

Now that the iPhone is no longer an AT&T exclusive, paying out those high subsidies makes less sense. Before Verizon and Sprint carried Cupertino’s gadget, the high cost of the subsidy was justified because the wildly popular iPhone successfully drew in hordes of new users while helping to keep existing users on AT&T’s network. In carrier-speak, the iPhone was AT&T’s secret weapon for reducing “churn”: the percentage of customers who leave one carrier for another.

iPads, unlike iPhones, aren’t subsidized by carriers. But, until now, they were still a headache for AT&T because they served only to increase 3G network congestion. AT&T has been forced to spend billions of dollars to relieve that congestion and, along with Verizon, even eliminated unlimited data plans in recent years largely due to overuse of their 3G networks. Shuffling customers away from 3G smartphones like the iPhone 4S and towards 4G LTE phones like the Galaxy Note is one way of relieving the pressure on the 3G network in major markets, where video playback has brought existing 3G networks to their knees.

Can my experiences with AT&T’s representatives be chalked up to a coordinated attempt to reduce network bandwidth issues? AT&T’s blogging and online contacts declined to comment for this story, but one representative I spoke to at the carrier’s corporate store in Glendale said that wasn’t the case. Instead, he blamed poor training among some sales staff for the misleading information I heard about the iPhone’s capabilities.

“Employees at the corporate stores, the bigger stores, are more experienced,” said a representative identifying himself as Jon. “We’re more tenured here. We know the products better. You won’t find anyone here who hasn’t worked here for at least a year, probably more.”

Just 24 hours earlier, though, Jon had told me I was making a “mistake” by attempting to return an Android-powered Galaxy Note for an iPhone 4S. “If I were you, I’d stick with the Galaxy Note,” he said.

To be sure, ditching the iPhone sales pitch is a good way to build up some buzz as a next-generation carrier. AT&T, for example, is so self-conscious about selling a premier smartphone that works on its outdated 3G network that it recently lobbied Apple to change the “3G” symbol that appears in the status bar of AT&T iPhones to read “4G.” Even though there’s no speed enhancement and no real difference between 3G and non-LTE 4G that AT&T now says runs on the iPhone, the carrier reportedly spent weeks on the phone with Apple, trying to get the company to agree to the switch.

Imagine that — a carrier on hold for you. But, judging by its recent public frustrations with Apple’s iPhone upgrade pricing, AT&T may have finally reached the limit of its patience with the company. Rival phone manufactures like Samsung and LG have long allowed AT&T to print its branding on their phones, determine customers’ upgrade eligibility, and even decide when to release operating-specific updates for their devices. They even allow AT&T to load intrusive AT&T apps on their phones, including AT&T Navigator, the Yellow Pages, and other services run by the carrier. Those apps generate brand awareness and revenue that Apple denies to the carrier.

There are signs that all might be forgiven, though, once the iPhone 5 joins its tablet cousin and jumps on the LTE bandwagon. On the AT&T corporate website, the first image that loads is a prominent banner advertising “the New iPad” and its “ultrafast” 4G LTE connectivity.

And at the Apple Store on Wilshire Boulevard, where gigantic “4G” logos blanket the walls, Pedro was relieved as he looked up details about the new iPad’s features.

“It’s about time,” he said.

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