ATT Wireless, Network Management & Capacity, & the iPhone

Recently, I wrote this post regarding the general nature of ineffectual management at the old ATT and, for that matter, the bulk of its old-style telephony competitors, now the surviving Bell System companies Verizon and (new) ATT (old SBC).


One of the passages I wrote reflected my overall sense of the type of managerial skills and qualities bred by the old telephony companies,

"In all of this, however, there loomed large a business and financial fact. Old-style circuit-switched telephony depended upon regulatory tariffs. These were set, as with most utilities, like power companies, based upon assets.

In effect, those portions of your telephone service which were subject to regulation were priced to provide the telephone company a target rate of return on assets. That's why the old Western Electric built gold-plated, everlasting switchgear. That's why the telephone companies capitalized unbelievably large amounts of labor to install said switchgear as asset value.

In 1983, the average line management talent of ATT was basically involved in internal allocation fights, regulatory affairs management, and some small but ineffective amount of competitive activity. The truth was that what ATT and its units did was take a regulatory-provided pot of money and divide it up, using somewhat initially arbitrary, but thereafter consistent rules, among the various operating companies, Long Lines and Western Electric. From that pot of gold, funding for Bell Laboratories was also provided.

My point in relating this history is to provide some background for the world of then-middle and -senior ATT and operating company management. Folks like, well, Ed Whitacre. And some of my former colleagues who hung in at ATT and gradually moved up the ranks amidst the ongoing confusion as the newly-deregulated firm went through amazing changes."

Now comes word from ATT that they are seeking ways to incent iPhone customers to actually use their phones less for data and various other bandwidth-hogging applications.

This spoof, one of the "fake Steve Jobs" series, sent to me by a colleague, couldn't be more topical, nor accurate.

Of all the passages in the piece, perhaps these two best distills the point of "Jobs' " rant,

"So let’s talk traffic. We’ve got people who love this goddamn phone so much that they’re living on it. Yes, that’s crushing your network. Yes, 3% of your users are taking up 40% of your bandwidth. You see this as a bad thing. It’s not. It’s a good thing. It’s a blessing. It’s an indication that people love what we’re doing, which means you now have a reason to go out and double or triple or quadruple your damn network capacity. Jesus! I can’t believe I’m explaining this to you. You’re in the business of selling bandwidth. That pipe is what you sell. Right now what the market is telling you is that you can sell even more! Lots more! Good Lord. The world is changing, and you’re right in the sweet spot.

And now here we are. Right here in your own backyard, an American company creates a brilliant phone, and that company hands it to you, and gives you an exclusive deal to carry it — and all you guys can do is complain about how much people want to use it. You, Randall Stephenson, and your lazy stupid company — you are the problem. You are what’s wrong with this country."

But ATT can't really seem to shake that old regulatory mindset. Yes, they sell bandwidth. But it's not like they're going to actually raise capital to build a lot more cellular towers and figure out how to increase wireless network capacity.

No, they're happy with the old 'busy hour' mindset. The mindset that equates busy signals with a contentedly fully-used network. Why overbuild?

It is ludicrous to see a vendor mis-price a service, then, when stimulating demand, react by trying to cut usage, when the demand is habit-forming. If ATT were really intelligent, they'd address pricing with subsequent contracts, but, in the meantime, build out or lease capacity to satisfy demand and retain all those iPhone customers.

But I think that's like asking a leopard to change its spots. This is, after all, a unit of a telephone company.

Not some cutting-edge technology services firm.

No, it's only ATT.