Several of my Kellogg colleagues (including my collaborator on this blog) are iPhine enthusiasts. Much like smack addicts are fans of opiates. And like addicts, they use these toys — I mean productivity tools — a lot. Turns out that on least this dimension my colleagues are not particularly special. The New York Times (Customers Angered as iPhones Overload AT&T) reports that iPhone users as a tribe use much more data intensive services than your typical smart phone users (never mind those with plain vanilla cellphones).
Slim and sleek as it is, the iPhone is really the Hummer of cellphones. It’s a data guzzler. Owners use them like minicomputers, which they are, and use them a lot. Not only do iPhone owners download applications, stream music and videos and browse the Web at higher rates than the average smartphone user, but the average iPhone owner can also use 10 times the network capacity used by the average smartphone user.
All of this complicates life for AT&T (the only firm selling the iPhone in the US). The growth in demand has overwhelmed AT&T’s ability (or willingness) to install new capacity. As a consequence, iPhone users see dropped calls, slow downloads and generally crappy service. And AT&T risks developing a reputation for, well, generally crappy service.
A few points to note here. First, as noted in the article, this is not per se an AT&T problem. Any carrier that with the good fortune to launch a Jesus Phone risks having demand swamp its ability to provide. Second, this is not an unheard of phenomenon in technology and communications. A little over a decade ago AOL (remember when AOL was relevant?), switched from hourly charges to a fixed monthly fee with unlimited access. Here is a description of what happened (from 20 Years of AOL Annoyances and Foul-Ups, PC World April 28, 2009):
Customers who were used to carefully monitoring their consumption began simply dialing in and staying on, maxing out the service’s inadequate capacity and leaving other subscribers with busy signals rather than the squeal of a successful dial-up connection. It was a little like a restaurant instituting an all-you-can-eat policy and then running out of food on a regular basis.
This being America, lawsuits ensued. That brings up a third point: AT&T is inviting some sort of regulation. As Gady posted the other day, California is now regulating how quickly HMO’s must provide a variety of services. The concern being that firms have an incentive to sign up patients then under-provide capacity, which is to say to act like AT&T.