AT&T's latest iPhone outrage

Can't get a decent connection in your home? AT&T has a fix, but it will cost you up to $150 to improve service you already paid for

AT&T has stunned me again. Faced with widespread consumer anger over its poor wireless data and voice services, the reincarnated Ma Bell is going to offer its customers a fix: a mini cell repeater in their home, using femtocell technology. Here's the astonishing catch: You'll have to pay for it.

That's right. AT&T is admitting that its mobile service is subpar (I'd use the word "stinks") in many areas, so it will charge its customers as much as $150 to buy a so-called MicroCell that will give them what they expected in the first place: decent connectivity.

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I'm struggling to think of an analogy. Is there any other business that would have the chutzpah to do something similar? Microsoft sells seriously flawed software, but at least the company has the decency to offer its never-ending stream of Windows patches for free. How would you like to pay $5 every time someone finds yet another security hole in Vista? AT&T may have invented the mother of all "gotcha" fees.

AT&T fears Verizon
AT&T has been promising iPhone customers better service for some time and says it expects to spend $2 billion more on improvements to its wireless network this year and add twice as much capacity as it did in 2009. If that's the case, why do dissatisfied customers have to shoulder the load? I think I have a one-word answer to that question: Verizon.

AT&T knows that should there be truth to the long-running rumor that Apple will end its exclusive iPhone deal with Ma Bell and add Verizon as a partner. If that happens, a wave of customer defections will surely follow. There's nothing the company can do to stop that churn, but there may be a few ways the femtocells will help reduce it.

I'd expect AT&T to sell the femtocells at a substantial discount to customers who agree to a multiyear service plan -- especially since it appears that the femtocells might reduce the load on AT&T's primary network infrastructure. That's because calls would be connected to AT&T's network via your existing broadband Internet service such as DSL or cable, the company says. So it makes sense that the cost were picked up by the carrier, instead of the customer. Such a strategy would likely help retain some percentage of the customers who would otherwise run into the waiting arms of Verizon.

Sprint and Verizon are already selling femtocells; Sprint charges $99 for the Airave, while Verizon's goes for $250. But don't think that Sprint is offering a great deal. Along with the hardware charge, customers have to cough up an extra $4.99 a month for the privilege of using a piece of hardware that is designed to patch holes in the service they already pay for. I call that a sneaky fee, and it really ticks me off. (The telecom industry is not at all shy about looking ways to charge you more for less, as my colleague Galen Gruman recently outlined.)

Femotocell technology is unproven
Femtocell technology is just starting to gain traction. Last year, there were only 380,000 femtocells shipped worldwide, says In-Stat analyst Allen Nogee. But he estimates that some 2 million units will be delivered to customers this year.

Typically, the devices can cover about 5,000 square feet and serve several mobile phone users in a household. The owner of the femtocell can create a whitelist of phones allowed on the device. But making a femtocell talk to the handsets consumers already have and work with the carrier's back-end mechanisms for billing and other functions has presented challenges.

"Getting femtocells to work with existing sets of mobile phones was a huge task -- much bigger than we expected," said Will Franks, founder and chief technology officer at Ubiquisys, which supplies femtocell technology to carriers, including Softbank in Japan and SFR in France.

There may also be a health question. I have never been convinced that cell phone and other radio-type frequencies pose a health hazard, but responsible people have raised questions about a possible link to cancer. How safe is it to have a femtocell transmitter in your living room? I don't know, but it's worth some thought.

There you have it. Instead of biting the bullet and repairing its network, AT&T is passing the burden on to its customers by selling a piece of hardware that may or may not fix the problem and may or may not be safe. What do you make of that business plan?

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This article, "AT&T's latest iPhone outrage," originally appeared at Read more of Bill Snyder's Tech's Bottom Line blog at


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