iPhone Curveball Thrown at AT&T

Friday, March 26th, 2010

Since its introduction in 2007, Apple’s iPhone has been the driving force behind AT&T’s domination of the smart phone business in the United States. If a consumer wanted an iPhone, he or she had to sign up with AT&T.

The success of the combined effort has been somewhat marred by constant consumer complaints about the poor quality of AT&T’s service in a number of major metropolitan areas, most notably New York City.

With the pending release of its iPad seeming to dominate the media attention, stories suddenly began leaking that Apple will soon be offering a version of the popular mobile communications device that works on CDMA networks, like that which is used by Verizon. The news has to have been a disturbing curveball for AT&T.

For AT&T, the Apple relationship has been crucial, helping to make the carrier the U.S. leader in lucrative smart-phone market share. According to comScore Inc., AT&T has over 43% of all U.S. smart-phone customers, compared with 23% for Verizon. These customers are especially attractive because they generally pay higher monthly rates for data plans.

For several quarters, AT&T’s growth has come almost single-handedly from the iPhone. In the fourth quarter of 2009, the carrier said it activated 3.1 million new iPhones. In comparison, it counted only a net total of 2.7 million new subscribers as some customers moved from other phones to iPhones.

“You’re not going to lose the iPhone [exclusivity] and make up growth somewhere else without bearing the cost,” said Sanford C. Bernstein & Co. research analyst Craig Moffett.

—The Wall Street Journal, New iPhone Could End AT&T’s U.S. Monopoly

It will be interesting to see how AT&T responds to this curveball. According to reports it has been working overtime to improve its service to be a in a better position to compete when its exclusive deal with Apple runs out.

In mid-December, AT&T executives set up a 100-day plan to dramatically improve the company’s network in densely-populated cities, according to people familiar with the plan. Since then, AT&T has added new network spectrum to better handle traffic, repositioned antennas to improve reception in office towers and wired more neighborhood cell towers with faster connections.

—The Wall Street Journal, AT&T Prepares Network For Battle

But as AT&T prepares its response to the looming curveball, its competitors might do well to watch out for curveballs of their own.

AT&T “is managing volumes that no one else has experienced,” said John Donovan, the company’s chief technology officer. It has improved service in big-city markets and expects “continued improvement in those markets in the coming months,” he said.

For example, AT&T said when iPhone customers started checking their email and surfing the Web from their high-rise offices, AT&T repositioned its cellular antennas to point up, instead of down. Rivals will start the process of making the same changes only after the phones hit their networks, it said.

The iPhone taught AT&T other lessons its rivals will discover through customer trial-and-error. Before the iPhone, it used to be able to accurately forecast to the minute the type of phone usage each new customer would add to its network based on basic demographics such as age and income levels. The forecast always held true across cities and towns.

—The Wall Street Journal, AT&T Prepares Network For Battle

With the increasing pace of change and the consumer’s ever growing demand for more and better features as well as performance, the smart phone business looks like it will be the scene for many years’ worth of unexpected changes.

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Rebounding with a Second Curveball

Friday, March 19th, 2010

It would be tough to find any organization that has been thrown more dramatic curveballs in the month of March than Cornell University. This unprecedented month of unexpected changes is also proof that curveballs have the potential for positive change, not just trauma.

It was in early March that the Cornell community was stunned by the third apparent suicide of a student in less than a month—the second and third coming in successive days. The string of tragedies landed the Ivy League university on the front page of The New York Times and a place on almost every national news broadcast. The stories reopened the urban legend stories of Cornell as a suicide school, which has stung the school for generations.

Between 2000 and 2005, there were 10 confirmed suicides, Dr. Marchell said, and from the beginning of 2006 through the beginning of this academic year, there were none.

Dr. Marchell said he was “well acquainted with the perception of Cornell as a suicide school,” having grown up in Ithaca and graduated from Cornell. But it is an urban legend, he said, largely fueled by the fact that suicides there are often shockingly public.

“When someone dies by suicide in a gorge, it’s a very visible public act,” he said.

— The New York Times, After 3 Suspected Suicides, Cornell Reaches Out

Still reeling from this series of tragic curveballs, Cornell was suddenly thrown another curveball, one which was no less shocking, albeit in a positive way. Before the ink was dry on the suicide stories Cornell found itself a lead story in the news because of the surprising success of its men’s basketball team.

Despite being three-time Ivy League champions, Cornell was expected to exit the NCAA tournament without a win, like almost every other Ivy entrant over the years. Instead, Cornell advanced to the round of 16 in a Cinderella story that captivated much of the nation. Less than two weeks after the rash of suicides another curveball had helped turn things at least partially around. Stories were now about March Madness, Ivy League style.

“We were all checking the scores on our smartphones,” said Mr. Wolleman, a jeweler and father of four who managed to make it home to Scarsdale, N.Y., in time to watch the end of the game on TV. “This whole thing is a new experience—completely unexpected and wonderful. We’re more used to hearing about Nobel Prize winners in physics, not our athletic prowess.”

The good feelings surrounding the N.C.A.A. tournament are also helping to alleviate some of the gloom experienced by many students and alumni over the six suicides by Cornell students this school year. The most recent three occurred within weeks of one another beginning last month, all in the striking gorges on campus.

“The winter there is very long and cold and dark,” Mr. Weiss said, “and this goes a long way toward lifting the spirits on campus.”

—The New York Times, Energized by Cornell, and It’s Not Over Physics

Cornell’s March roller coaster is a reminder that curveballs can be disruptive agents for positive change, not just negative.

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Stepping Outside the (Urban) Batter’s Box

Friday, March 12th, 2010

Few American cities have been thrown as many curveballs as Detroit. The city that was once the symbol of America’s economic prosperity has been suffering from a long, sometimes gradual, sometimes precipitous decline. What began as white flight from a still economically vibrant but racially troubled metropolis, turned into an across the board economic meltdown that coincided with the collapse of the American automobile industry in 2008 and 2009.

Now, a city of nearly 2 million in the 1950s has declined to less than half that number. On some blocks, only one or two occupied houses remain, surrounded by trash-strewn lots and vacant, burned-out homes. Scavengers have stripped anything of value from empty buildings. According to one recent estimate, Detroit has 33,500 empty houses and 91,000 vacant residential lots.

—Associated Press, Detroit Wants to Save Itself by Shrinking

Recently elected mayor Dave Bing, a successful businessman and former professional basketball player, and the rest of the city’s officials, were confronted with a $300 million budget deficit, a small and shrinking tax base, and increasing demands for police, fire and other municipal services. Then the recession of 2008 struck, making things even worse. Detroit seems on its way to plunging into unprecedented depths for a modern American metropolis (save New Orleans). If ever
there is a time to think outside the box, this is it.

“Things that were unthinkable are now becoming thinkable,” said James W. Hughes, dean of the School of Planning and Public Policy at Rutgers University, who is among the urban experts watching the experiment with interest. “There is now a realization that past glories are never going to be recaptured. Some people probably don’t accept that, but that is the reality.”

—Associated Press, Detroit Wants to Save Itself by Shrinking

What is Detroit’s plan? To shrink the city. Blighted areas will be entirely demolished. Residents in those areas will be relocated to healthier parts of the city. And how will the demolished areas be redeveloped? They won’t be. The idea is to let them become semi rural and revert to agricultural and other uses that require very little municipal support. The concept has been used by other cities before, but never on the scale Detroit is proposing.

No one can yet say whether this “undevelopment” of Detroit will work. But what no one can deny is that, faced with a series of unprecedented curveballs the city’s new leadership is showing a willingness to step outside the batter’s box. You have to admire the effort.

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