AT&T CEO: Unlimited iPhone Data Was A Big Mistake, I Lose Sleep Over iMessage

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Randall Stephenson playing the world's saddest song on the world's smallest violin.
Randall Stephenson is playing the world's saddest song on the world's smallest violin.

AT&T CEO Randall Stephenson made some interesting comments relating to Apple and the iPhone at the Milken Institute’s Global Conference earlier this week. In particular, Stephenson remarked that he wished his company would have never offered unlimited data for iPhone customers, citing the capital AT&T had to invest up front to strengthen its network.

Stephenson also said that he loses sleep over iMessage, because Apple’s messaging service cuts directly into AT&T’s SMS/MMS revenue.

Every early adopter knows the story of how AT&T buckled under the extreme weight of data-hungry Jesus phone owners. Apple was an exclusive partner with AT&T for the iPhone until Verizon jumped on the bandwagon in 2010. iPhone exclusivity made AT&T the hot carrier in town, and Apple undoubtedly kept AT&T afloat for several years. While people were flocking to AT&T in droves for the iPhone, the carrier’s network was also experiencing incredible strain from the enormous growth. AT&T is just now starting to recover and mature into a formidable network after Verizon, Sprint, and others have been added to the mix.

According to The New York Times, Stephenson made the following comment on AT&T’s decision to offer unlimited data to iPhone owners out of the gate:

“My only regret was how we introduced pricing in the beginning, because how did we introduce pricing? Thirty dollars and you get all you can eat,” he said in the on-stage interview at the Milken Institute’s Global Conference on Wednesday. “And it’s a variable cost model. Every additional megabyte you use in this network, I have to invest capital.”

AT&T has since canned its unlimited plan, pushing Verizon to do the same. Sprint is the only major iPhone partner in the U.S. that still offers unlimited data, and it plans to keep doing so for the foreseeable future.

Considering unlimited data helped score AT&T boatloads of iPhone customers in the first place, Stephenson’s comments seem to be biting the hand that feeds.

Apple introduced its own messaging service, iMessage, alongside iOS 5 last year. The solution bypasses the carriers entirely by using data instead of the typical SMS/MMS protocols. Apple didn’t let the carriers know about iMessage until it was unveiled to the public, and it turns out that AT&T has been worried about iMessage’s encroachment on its territory ever since:

“You lie awake at night worrying about what is that which will disrupt your business model,” he said. “Apple iMessage is a classic example. If you’re using iMessage, you’re not using one of our messaging services, right? That’s disruptive to our messaging revenue stream.”

No kidding. Who wants to pay 20 cents per text when you can send messages for free to other iOS users? All of Stephenson’s comments sound like the bitter musings of a carrier executive who’s upset because Apple has been dictating the terms of the relationship. Why not innovate as a carrier instead of waiting for companies like Apple to beat you at your own game?

Stephenson also recalled when Steve Jobs approached AT&T (then Cingular) about partnering for the original iPhone launch:

Mr. Stephenson was chairman of Cingular’s board at the time, and he said Mr. Jobs had met with Stan Sigman, who was chief executive of Cingular. After the meeting, Mr. Sigman approached the board to talk about a “unique opportunity.” He hadn’t even seen a picture of the iPhone, but he described a device with a touchscreen that one would use to make calls, do e-mail and run apps.

The board was nervous about the Apple smartphone because it was aware that it would transform its business model, Mr. Stephenson said.

Source: The New York Times

Image: Spencer Platt/Getty Images