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What AT&T Has to Fear From Google Voice

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AT&TLately, Google (s goog) Voice is perhaps one of the most widely discussed products in the Apple (s aapl) blogosphere besides Apple’s own native devices. With its rejection from the App Store and people pointing fingers at Apple, AT&T (s att), Steve Jobs and just about everyone and everything else in between, new evidence put forth by Andy Kessler and The Wall Street Journal (WSJ) directs blame squarely at AT&T. Rightfully so.

Is anyone really surprised?

We know that AT&T and every other cell phone carrier overcharges for service, taking into account the sheer volume of users and how long cell phone technology has been around. Considering how much providing basic cell phone service costs, and how relatively inexpensive it is to add text messages and data support, it’s clear that companies like AT&T stand to make a pretty penny.

I mean, honestly; it costs an extra $20 a month for unlimited texting in addition to $30 a month for “unlimited” iPhone data usage. Really? Text messaging costs two-thirds the price of always-on, feature rich email? Emails that support video, audio and images; something iPhone users still aren’t getting because of a lack of MMS support. There’s just no way the pricing structure is based on the product.

Looking at the Big Picture

The WSJ report reveals that AT&T’s profit margin for its wireless services are considered high at 25%. It makes sense, considering many people likely pay extra for hefty plans (data, text, video, etc.), when the actual impact on AT&T’s network is marginal. Granted, sometimes coverage is spotty and “crowded” but the fact is, that’s not because we’re causing too much strain on the network, it’s because AT&T should be investing in making these networks more interoperable with others and capable of carrying more users, but is instead price gouging customers for increasingly horrible service.

Are they taking advantage of us? Yes. We know that. (Even David Pogue agrees with his “Take Back The Beep Campaign”) So why on earth would AT&T quietly stand aside and allow Google Voice, since it represents such a dramatic shift from the norm? Google knows that voice calls and text messages are very easy on bandwidth. AT&T knows that allowing Google to steal its profits marks the end of an era. Landlines gave and continue to give ground to cell phones, and customers are switching to VoIP services or other mediums like Twitter or Google Voice for communication. Cell service might be next on the chopping block, if something like Google Voice is allowed to take root and grow.

The Future

Can AT&T reinvent itsefl and survive? The economy is tough, so now is the perfect time to be daring and really focus on your customers. Or will AT&T continue to overcharge and stifle innovation like Google Voice and other services? I personally hope that we will move towards a better future where carriers will play nicer with each other, with other services, and with other emerging technologies. For example, wouldn’t it be great if when I was at home, my iPhone routed calls over my Wi-Fi connection instead of over the “crowded” network? It might alleviate some of AT&T’s service outages. Things like this are possible, but only in consumers wield their power and demand that carriers provide them.

30 Responses to “What AT&T Has to Fear From Google Voice”

    • What now Justin? Since Apple also admitted to the same? And you do know right AT&T allows Google Voice on the BlackBerry? So why would they pull it from the iPhone? Once you have run out of excuses you can stop being an Apple fan boy and point the finger at Cupertino instead of Dallas.

    • Hardly a fanboy, RM.
      been posting on friendfeed all day on this, so you can see my commentary… which is very critical of Apple…
      Basically, I think Apple is either not telling us the truth about why they “haven’t approved yet” the app… or they’re not telling us the real reason. Either way, I’m betting that their insistence that they didn’t “reject” the GV app is a sign they’re trying to leave the door open for an about face.
      Be sure to check out the Riverturn blog entry. It’s great:

  1. It’s so interesting how AT&T gets ripped so hard (but rightfully so) thanks mostly to the association with the popular iPhone, when most all of the major carriers commit the same offenses. We are so addicted to the technology that we shell out $20 a month for texting on top of $30 for data (not just to AT&T), on top of how much we already spend for broadband at home? And that $40/month base plan that gets you a whopping 400 or so minutes. I think the consumer is just as much at fault, writing the checks because we NEED the technology. Do we really NEED it that bad? Do middle schoolers and high schoolers really NEED it that bad? That might make me sound like some kind of curmudgeon, but in reality I’m a 27 year old that loves his technology, but won’t pay these bs prices and I’m disgusted by people who do.

  2. I know it’s been popular to blame AT&T for Google Voice’s app being rejected, but it seems that we’ve very quickly forgotten that AT&T came out and said they have no control over the app approval/denial process and that Apple stayed oddly quiet. Then a Google exec resigned Apple’s board over it.

    It doesn’t really seem like AT&T is involved in this at all, although everyone is using them as the scapegoat. Apple denied the Google Voice app. Can we get an article talking about why Apple is scared of Google (voice and otherwise?)

    That would be a good read.

    • If it was apple’s decision alone without AT&T influence, they would have rejected GV Mobile and VoiceCentral (independently created Google Voice apps) at the beginning. Instead, they accepted those and removed them only when they rejected Google’s native offering. This behavior is far too indicative of outside involvement to assume AT&T wasn’t involved. Sure, it was Apple’s ultimate decision… but they were probably just trying to honor their contract with AT&T.

  3. The referenced piece in the WSJ was an opinion piece, not reportage. It deserves less weight than you give it. Bad service and over high pricing isn’t a smoking gun to AT&T forcing Apple to ban the google voice app from the iphone.

    What do you say about the theory that the ban was part of a building Apple vs. Google competition put forth by Om Malik?

  4. Actually, AT&T doesn’t have oodles of fiber going to their towers. They currently only have a couple of T-1’s going to each tower, which is a drop in the bucket compared to what they need.

    They’ve been kicked in the ass by the iPhone’s high data usage, and because of that push, are now finally trying to bring their network up to par as fast as they can.

    I think all the carriers rape their customers over texting fee’s, it’s beyond retarded to think it costs $1 – $2 to send a 2k text message.

  5. Not only Google Voice is a viable competitor but didn’t T-Mobile offer wifi enabled phones a couple of years back? It may have not been perfect then but they were able to switch your call from Wifi to a wireless network transparently!

    The issue here is clearly not updating their business models and completely ignoring the technologies that changes them.

    • Yes, T-mobile’s “Hotspot @ Home” service came out the same WEEK that the first iPhone was announced. It would have been blockbuster news if it hadn’t been overshadowed by Apple.
      and YES, AT&T and Apple could offer that if they wanted… it would be a win-win for everyone. Too bad they’re myopic and closed off to new things.

  6. So, say someone has a google voice number (i do), and say someone has a jailbroken iphone with GV on it (like me).

    Is there a way to avoid att’s ridiculous prices?

    • By using Google Voice, you’ll save on AT&T’s bill in two…. maybe three ways:
      1) If you have a home or office phone you can choose to pick up that instead of your cell, saving on minutes when someone calls your GV number
      2) If you use the GV app or VoiceCentral, or even the Google Webapp, you can SEND text messages for free.
      3) Right now the incoming text messages are always sent to your phone, thus counting against your over-charged AT&T SMS total…. but presumably the Google Voice app would (eventually) support Push messages, thus cutting AT&T out of the other half of the SMS loop. Now THAT would be awesome for the consumer and perhaps the main thing AT&T is afraid of… since SMS is their biggest margin service.

  7. TheMacAdvocate

    Lest we not forget‚ it was AT&T’s bet on Apple that brought the iPhone into the world. Verizon was unwilling to take that risk. AT&T allowed the level of control over the product that SJ and Apple demanded. They conceded on visual voicemail and that allowed Apple carte blanche in terms of design and marketing. They also footed a large subsidy (yes‚ I know not initially). This was UNPRECEDENTED in the cell industry and represented considerable investment and risk for the company.

    Also‚ the volume of customers carried by a major wireless network like AT&T allowed phenomena such as the App Store to be as successful as they are. Developers were attracted by the thousands to a great SDK and exposure to millions of potential customers. A smaller carrier wouldn’t be able to spur that kind of interest.

    In exchange for this level of control and access to a large-scale network and volume of customers‚ AT&T agreed on a revenue model with Apple and got a vote on things that would impinge on the product’s profitability for AT&T if it took off like Apple and AT&T thought it might.

    That doesn’t excuse AT&T in perpetuity‚ but people who think that AT&T should have no legitimate say on apps that impinge on a revenue model that takes into account the risk they took and the dollars they invested with Apple should have their heads examined.

  8. @ R. Hawley,

    So you’re telling me AT&T has enabled all three GSM bands (900/1800/1900 Mhz) in all its markets? Yeah right! That is the problem with connectivity in SF right now – they dragged their feet and put off much needed network maintenance and are now paying the price. They brought this on themselves by being greedy and not investing profits into network maintenance.

  9. I’m no fan of AT&T’s pricing, but I’d have to sell a kidney to pay for Verizon services, so I’ll stick with the evil I know. Furthermore, I’m over CDMA.

    I’ve had AT&T for a total of 8 years. I left and I came back, because every other carrier I used (Sprint, T-Mobile, and Nextel) was worse in terms of coverage (voice and data), price, and data speed. I think AT&T gets blamed unfairly by iPhone users, because the nature of the device makes it a bandwidth hog, and they need to realize that the iPhone would also cripple Verizon and T-Mobile in major metropolitan areas. I have a Blackberry, and not only do I not experience dropped calls, but I don’t have any issues with data speed anywhere I go up and down the east coast. My iPhone wielding friends here in NC don’t complain of any network issues either. There is just too high of an iPhone saturation in certain metropolitan areas, and it’s at the root of the complaints.

  10. Michael K

    First of all Google Voice is NOT a VoIP service. I have it and it relies on another phone system to complete the calls. So if I make a call on Google Voice, it will ring either my office line, home phone or cell and the call continues from there. AT&T would PROFIT from such a setup for the cell phone portion of this scenario. However, it does undercut their profits when it comes to international calling. I can call London for more than half of what it costs to call using my cell phone and I don’t need to pay for an additional fee per month to do this.

    AT&T is most likely responsible for the denial of these apps, as it will always come down to how much revenue are we losing? Remember for every app that is sold Apple is making money, so it would be unwise for them to not approve such an app that is not detrimental to their phones and has already passed mustard.

  11. I’m rarely ever use att’s 3g for data. There’s wifi pretty much everywhere I go. I’ve asked my friends and it’s the same for them. Do you guys use 3g that much?

    With wifi being so readily available almost everywhere, I don’t see how att’s network is that bogged down.

  12. R. Hawley, you have NO CLUE, in fact they have MORE than enough infrastructure (I live next to an actual AT&T engineer). They have the infrastructure, they choose to nickel and dime everyone.

    • R. Hawley

      Respectfully, I disagree. AT&T has oodles of optical fiber, but the most precious (and limited ) resource on the network is radio spectrum and no amount of investment can create more of that. The iPhone has blown away all estimates of bandwidth usage that any prudent designer ever made. The big problem to be solved: how to hand off traffic from wireless radio to big fat optical pipes.

      Also, Apple skates on iPhone glory while AT&T gets blamed, sometimes unfairly. Example: poor javascript performance in original iPhone had users muttering about the network.

  13. RIGHT ON!!!! AT&T sucks ass when it comes to their pricing. How I WISH they had the pricing of Sprint. Did I suck it up and buy the 3GS? Damn right I did. Am I happy that I’m with AT&T? Well, service is ok, plans were designed be someone with a little brain with NO CONCERN for fairness pricing. The fact that “unlimited data” doesn’t include text is a play by AT&T to blood suck every last drop of blood from its customers. The fact that their pricing is more than anyone elses (with Verizon a close second). Considering that others around the world PAY LESS for MORE features – we’re getting screwed and we sit back, rather, continue to bend over the desk and let these idiots take it to us.

    Here’s another hot topic. Morons at AT&T not allowing us to Tether when the friggen iPhone has it built in now!

    DOWN WITH AT&T!!!!!!

  14. R. Hawley

    If you really understood what it takes to operate a network, you’d know that the iPhone is a phenomenon driving previously unimaginable levels of network traffic. AT&T despite billions (with a “B”) in capital investment, simply can’t build infrastructure as fast as Apple can sell iPhone.

    • Kendall Tawes

      Why yes it is hard to build the infrastructure up but that’s because they need to hire more people to do such work. For example AT&T then Cingular said that 3G service would be in Charlottesville, VA by the end of 2007 and the last I heard they may have it by late fall 2009. I hope that is true because I finally upgraded from my Edge iPhone to a 3GS though knowing their history I will probably be sporting a 128 GB iPhone 4GSS by the time we get just basic 3G support. Mind you up for a long time I was defending them saying the same thing you said but 2 years late in 3G rollout is just pathetic. Prove my wrong AT&T, oh please prove me wrong.

    • Kendall Tawes

      Oh, I am also annoyed that for the last two weeks my iPhone data has nearly stopped working over Edge locally. I have to go to a Wifi Hotspot to do anything data related. I actually got a download speed of 1 Kbits/s and an upload speed of 0 Kbits/s, rounded of course.