Interesting Opinions: Wi-Fi Is Not Enough?

When I read the article with Glenn Lurie, an AT&T executive who sees every new consumer device before they are released, I was surprised. Although it is not his call alone, he has taken the position that Wi-Fi is not enough.

"We try to look for all the opportunities in the world to get the OEMs to understand that they shouldn’t be building two devices," he said in the All Things D interview. "They should be building one device with Wi-Fi and 4G. It’s more efficient for them than having two [product] lines."

He believes it is a simple matter of education. Consumers must learn that they need always-on connectivity, he said. Naturally, eliminating Wi-Fi only would serve AT&T too. More connections means more subscribers and more subscribers means a better revenue model if they choose AT&T.

I appreciate his candor, but the comments immediately following the story tell another story. Even with the best of intentions, Lurie is out of touch with the customer. People see subscriptions as traps.

Understanding the consumer mindset and product usage. 

It really isn't that hard to understand. People opt for Wi-Fi only iPads and tablets so they don't have to pay for another cellular subscription. Many of them believe the phone subscription is enough.

From the consumer perspective, it makes sense. It even has an historic context. The number one reason that newspaper and magazine subscriptions dwindled is because people are genuinely tired of subscriptions that eventually begin to feel like utilities — fees you have to pay for the basic services.

Among monthly fees, publications are frequently the first to go. Especially if your income is unstable (tip workers, etc.), elective subscriptions go twice as fast. So you have to pick and choose from a long list of fundamental and elective expenses.

For most people, mandatories include: electric, gas, water, municipal services, mortgage payments, car leases or payments, car insurance, telecommunications, mobile telecommunications, cable or satellite, and taxes. Now add health insurance (especially with new government requirements) and life insurance. Immediately following those payments are the electives, ranging from gamer accounts and clubs to gym memberships and lawn care. All of them cause a dwindling supply of disposable income.

Where do iPads and tablets fit? For many but not all consumers, it's closer to the bottom because those who opt for Wi-Fi only are satisfied with using their smart phones when they are on the go and Wi-Fi only when they have access at home, work, the hotel, and a growing number of other venues (both public and private hot spots). In fact, given how many places are adding Wi-Fi and AT&T's support of such hot spots to cut down on system overload, it seems more likely Wi-Fi is preferred (doubly so because some functions require Wi-Fi access to work). All things considered, why pay more?

Obviously, some people do have a need. The split between the products is generally 60 percent Wi-Fi only and 40 percent 4G. The slight advantage Wi-Fi has is a lower model price and no subscription fee after you purchase the product. But there is even more to the story.

AT&T and other providers have contributed to Wi-Fi only sales with usage throttling, data usage caps, service issues, roaming charges, high overage changes, etc. Maybe it's not the consumer who needs to be educated. AT&T could learn something about consumers and make 4G more tempting.

Making a better future to marry Wi-Fi and 4G. 

I'm not one of the many people who equate AT&T with the evil empire. I genuinely prefer them as my phone provider, think they have better customer service, and they recently did us right by offering advice on how to handle our phone service (for three phones) while traveling in a foreign country.

So how do carriers sell always-on connectivity? For starters, they could break away from device subscription models and replace them with account subscriptions instead. If you already have an iPhone, your iPad subscription is, gasp, inclusive because you're less likely to use both at the same time.

Or, they could implement lifetime plans built into the product price much like they did for Amazon Kindle (with a better fallback for usage overages). Or, they could give people the option of buying 4G-ready devices without a subscription, allowing them to add it (or drop it) at their leisure.

Of course, they could improve their system so it isn't affected by high-usage customers (thereby killing the throttle concept). And, if they are among those who want to regulate Internet traffic and bandwidths, they could give it up and stay focused on their core service to provide a better experience.

Simply put, it's not education that consumers need. They need an incentive, especially those who get along fine without 4G connectivity, using their iPad mostly around their already Wi-Fi friendly home.

Remember. AT&T is pushing "Think Possible." And right now, people think Wi-Fi everywhere, which is a better fit with Steve Jobs's old vision to make a contribution to the world by making tools for the mind that advance humankind. Something like that makes subscriptions optional.

Missing The Problem: AT&T

“The way we see the problem is the problem.” — Stephen R. Covey

Believe it or not, AT&T doesn't have a network problem. Not really. What it has is an increasingly critical public relations problem. And until it sees public relations as the real problem, things won't get much better.

Bob Geller was among the first to call it so, citing an article that confirms AT&T's throughput is 40 to 50 percent higher than the competition, had faster average download speeds, and signal strength of 75 percent or better more frequently. Most challenges are simply related to the adoption rates of data hungry consumers.

And yet, AT&T's strategy in the AT&T-Verizon smackdown continues to aim at censoring the Verizon message as much as it wants its own message out there. The latest attempt included purchasing two day-long "netblocks" across the entire Time Warner cable division. Sites included CNN, TBS.com, TNT.tv, NBA.com, Nascar.com, SmokingGun.com, and AdultSwim.com. The "netblock" buy was a step up from the ill-advised lawsuit, but not by much.

Even more telling than the actions of AT&T is how people react to what it says. When Ralph de la Vega, president of AT&T Mobility, framed up the company's challenge to convincing consumers to curtail consumption, most people translated his message to mean restrictive monthly usage limits. He meant something else, but the reaction still gives everyone a glimpse of how much consumer trust is bestowed upon AT&T — not much to none at all.

AT&T unwittingly reinforces the Verizon message.

Do you see any patterns in the actions of AT&T? Censor. Block. Drop. Limit. Curtail.

None of these words resemble anything close to what you want associated with a phone company or cellular network. And yet, almost every AT&T article includes those words, which prompted Saturday Night Live (SNL) to drive the point home with a joke.

How did it happen? Simple.Verizon is employing a classic political campaign strategy in its bid to regain the top spot. Verizon defined its competitor before AT&T even knew it was in a fight. Since, AT&T has unwittingly done everything possible to reinforce that message in an attempt to defend its brand.

But as the old saying goes: if you're defending, you're losing. And AT&T is certainly defending. Even with its Luke Wilson ads, which are meant to be an attack, it still comes across as overly defensive.

As a side note, a second message that seems to be sticking is that AT&T is somehow more "Ma Bell" than Verizon. In reality, both companies are decedents of the same parent. AT&T seems to own it, except in Vermont where they call Verizon "tinker bell" instead of a "baby bell."

So how was it that AT&T was defined by its competitor?

Once a negative message sticks, it's increasingly difficult to shake off. A quick situational analysis reveals how it happened:

On the front end, there were some existing misgivings about AT&T simply because it won iPhone exclusivity. Back then, it was Verizon that looked foolish and greedy. However, when AT&T and Apple launched the iPhone 3G, it did underestimate the demand on its HSUPA network.

The added data demand did impact service, which Verizon leveraged in its "there's a map for that" campaign that makes it appear as if AT&T has virtually no coverage. The campaign was a stretch, but AT&T all but agreed with it by launching a lawsuit that Verizon laughed at, along with everybody else.

What's not covered by the various insights and posts from public relations professionals, however, is the grassroots impact. Basically, Verizon made what was a "sluggish" challenge seem to be a real "deal breaker" with enough noise that everybody heard about it. But that's not where the real stickiness occurred.

The stickiness happened because anytime an iPhone customer had a problem during the campaign, they couldn't help but to think their problem was related to what Verizon said. Adding self-inflicted injury to this insult, AT&T went on the defense. Doing so only affirmed that there was a problem and AT&T was trying to cover it up.

When it couldn't win with legal, the counter attack came too late to be anything but defensive in the face of Verizon's "the truth hurts" rebut. After that, AT&T confirmed it had a problem and somehow its message morphed into blaming consumers.

How to fix the fiasco for AT&T.

AT&T still seems to be a better carrier in a world where every carrier is challenged by increased demand. Detracting from the ability to pay for these upgrades are price point wars that make many phones free, with strings attached. In addition, many phone companies are struggling because they have to have to support 3G services, maintain 2G services, invest in 4G services, and (in some cases) improve bandwidth along land lines.

That is part of the tradeoff for being in a high demand industry. And, it's only going to become more challenging as the future of all communication becomes mobile. (In the future, the only thing that will separate a device is the docking station).

So where does that leave AT&T? It needs to focus on its Achilles heel, which is obviously public relations.

Stop Defending. No one can dismiss a problem while confessing there is a problem. AT&T might as well own it and stick to talking about the future and its upcoming solutions, which include increasing the availability of free WiFi.

Start Selling. As good as the campaigns look, tit for tat campaigns don't work when they are the result of failed lawsuits. A primary message needs to be forward focused. Despite what many people say, AT&T is looking much further into the future than Verizon. It has been for a long time.

Centralize Social Media. AT&T needs to centralize its fragmented social media program. It is so fragmented, most people don't even know which typo-heavy account to follow on which social network. Once they figure it out, they are often directed to follow someone else. Their Facebook pages are no exception: walls filled with fluff, customer complaints, and spam.

Shore Up Public Support. It would be easier if the social media architects knew what they were doing, but they obviously did not. (The AT&T social media program is in itself a case study in why author-consultant expert models are not scalable.) So in the short term, AT&T might fare better with localized campaigns that reach out to customers in specific markets and communicate solutions to those markets.

Generalize The Attack. There is no reason for the market share leader to elevate the name ID of the number two service provider. As the current market leader, it makes more sense to generalize any attack messages so that anyone who knows Verizon will get the message while anyone who doesn't know Verizon won't be introduced to them.

For example, Verizon feels justified in doubling its early termination fee to $350. The penalty is far and away more expensive than AT&T, Sprint, and T-Mobile, which charge $175 to $200 and prorate those charges over the course of the contract.

AT&T coming out strong with a short-term "no penalty" enrollment program would hurt Verizon. Without mentioning the competition, it would give AT&T an opportunity to brand Verizon as a company that tries to trap its customers while demonstrating that AT&T is not afraid to let new customers leave if they don't experience better service. Of course, that would require making good on that promise or at least presenting a compelling plan to make it work.

The alternative is to keep taking lumps and invest heavily in a 5G network (whatever that means) that will leapfrog over anyone attempting to develop a 4G network. That strategy served Apple well when when it changed smart phones forever.

Ultimately, however, unless a company is poised to think four or five years out from anyone else like Apple tries to, the lesson AT&T has to embrace is one of the toughest of all. At the end of the day, it doesn't matter if you have the better product or service. It only matters that people "think" you have. And if they don't believe it, you can't talk your way around it.

"You can’t talk your way out of what you’ve behaved yourself into.” — Stephen R. Covey

Looking For Market Share: Verizon

In 2006, beginning with a boost from rumors of the iPhone, AT&T accomplished something few would have thought possible. It captured market share in a field that was once dominated by Verizon.

Everyone knows the primary reason. The iPhone was the only smart phone capable of turning the tables on the cellular selection process: Whereas most people chose a carrier and then a phone, Apple and AT&T convinced people to buy an iPhone regardless of the carrier.

Today, the iPhone commands about 23 percent of the market share, which undoubtedly keeps AT&T in the lead position as a carrier. The effect on Verizon has been profound.

After grossly underestimating the impact of the iPhone and serving up a series of distress campaigns, Verizon has finally decided to draw a line in the sand and set its sights on clawing its way back to the top.

In 2009, Verizon invested heavily in a multi-front comparative attack against its competitors that now rounds out three of the top ten most expensive attack campaigns this year: $100 million to introduce Fios against Comcast (unrelated to the AT&T spat); and $100 million to introduce the Droid as its weapon of choice against AT&T.

Framing Up The Verizon vs. AT&T Smackdown

Saving the Comcast battle for another time, the two-prong iPhone/AT&T attack seems to be working but not in the way Verizon anticipated.

While it has gained ground, it has yet to recapture significant market share away from AT&T. It is also a long, long way from generating profit on smart phone sales given that Verizon spends about $100 per $199 Droid for advertising and offered customers a $100 rebates.

In terms of awareness, Verizon's attack against AT&T and AT&T's counterattack have generated brand awareness for both companies, with Verizon eking out a slight lead.

In terms of market share, the Droid seems to be capturing people who decidedly wanted iPhone features without (less so) the Apple brand and/or (more so) AT&T service. Still, in the third quarter, AT&T signed up 2 million new subscribers; Verizon signed up 1.2 million new subscribers.

In term of public relations, Verizon clearly comes out on top despite consistently fudging facts. What is interesting is that AT&T has a better network, but public perception consistently positions AT&T as an inferior network. (Here is the truth that was buried beneath the bad publicity generated by an ill-advised lawsuit against Verizon).

In terms of marketing, AT&T seems to be relying too heavily on its ability to be exclusive iPhone carrier. If the contract ends in 2010 or 2012, AT&T will be forced to find new solutions ... unless it can reverse its partly undeserved image. (While most consumer reviews place AT&T second in terms of dropped calls, people talk about it as if its last. It's not.)

When you add it all up, AT&T will be in a real fight next year to retain what began as Verizon's unwillingness to meet Apple's initial conditions to be an exclusive carrier. While AT&T previously held a better marketing strategy and still holds the superior market share, it has yet to communicate tangible consumer benefits in terms that resonate with the public.

*Comparison chart by Gigaom.