WWDC 2009: iPhone 3.0 OS & iPhone 3G S

Today, Apple kicked off this year's WWDC with their opening Keynote Address at the Moscone Center in San Fransisco, CA.  With the list of announcements made today, the major focus was on the iPhone (as usual) and it's 3.0 OS Update along with hardware enhancements for the new iPhone 3G S [Speed].  The 3.0 OS Release is scheduled for June 17th, with the new iPhone 3G S released two days later on the 19th.  Apple & AT&T definitely learned their lesson from the 2.0 launch after it bricked countless iPhones due to the overwhelming number of updates that day which neither AT&T, nor Apple were prepared for.

Apple also released the Gold Master to Developers today (iPhone 3.0 OS Gold Master [Build 7A341]) which is the final Release Candidate until the official launch on the 17th.  It's been over a month since the last release and so far I don't see much difference from Beta 5.  Of course the most anticipated feature coming in OS 3.0 is MMS, which will be released later this summer... to much disappointment of iPhone users.  As soon as the news hit, the rumors started flying and bloggers everywhere posted their assumed reasons why MMS for AT&T is delayed when the other carriers shown in the Keynote would be ready at launch.

As an employee of AT&T*, I find it somewhat offensive that people are quick to complain (to me, specifically) about AT&T when they don't have the full/accurate story.  After Apple's Keynote today, the bloggers spun out every possible imaginative reasoning for the timing of the release of MMS and Tethering, and the pricing for the new iPhone 3G S and blamed it all on AT&T... yet, AT&T isn't the one that MAKES the device.  People are VERY quick to blame the carrier (regardless of who it is) before the manufacturer.  I'm not blaming Apple for the MMS/Tethering delays, but I am blaming the fact that they allow everyone to assume AT&T is to blame for a JOINT VENTURE downfall.  The first obvious question I have is, why would Apple release the device if it is not fully supported by the #1 Carrier that APPLE CHOSE to service it's device?

To those who are begging Verizon and Apple to strike a deal... yea right.  Verizon operates on CDMA - an ANALOG technology which is limited to the US.  Apple has explicitely stated they chose AT&T because it is the #1 Worldwide Carrier and operates on the World Standard Mobile Technology: GSM/UMTS.  While, yes, the exclusivity between AT&T and Apple will expire in 2010, I doubt Verizon will have their LTE in place by then.  The only other carrier in the US that would have a chance would be T-Mobile, and lets be honest... not a threat.  Verizon has their very fatal downfalls as well... let's not forget that they castrate features like Bluetooth and Wifi (they made RIM remove Wifi from the Storm).  No doubt they'd have a field day with the iPhone.

So let's get into it... I will touch on three points to the iPhone 3.0 OS and 3G S announcements today: MMS, Tethering, and Pricing (for Device and Service).

MMS: Boy Genius Report "claims" that AT&T is at fault because it has to remove "MMS Opt Out Codes" from every iPhone subscriber.  This is FALSE.  Here is how the billing is actually set up:

• iPhone 3G Subscriber: Each subscriber at time of activation has three PPU (Pay Per Use) billing codes: Data PPU, SMS PPU, and MMS PPU.  When the iPhone Data Plan is added, the Data Pay Per Use code is removed (replaced by the iPhone Data billing code).  When the Messaging feature is added, both the SMS and MMS Pay Per Use codes are removed (and replaced by the iPhone Messaging code, which does not block MMS).  This prevents billing errors so that you are not billed for KB (Data), SMS, or MMS usage when you have a plan.  There is NO MMS OPT OUT code added.  If there is one, it was added in error by an uninformed rep.
• iPhone 2G Subscriber: Just as with the iPhone 3G, each subscriber at time of activation has three PPU (Pay Per Use) billing codes: Data PPU, SMS PPU, and MMS PPU.  When the iPhone data plan is added, all three of these are removed as the 2G data plans are bundled with messaging - so instead of adding two features, only one is added.  Again, NO MMS OPT OUT code is added.

The delay does NOT pertain to AT&T's BILLING system.  The issue is the way the iPhone manages data and only using one APN - where as most Carriers use two: one for MMS, and the second for all other data (e-mail, internet, application data, etc).  As Apple is obviously not changing the way they built the iPhone, the change now falls to the Carriers.  With the 5.9 MILLION 3G iPhones that have been sold, the bulk of those were activated on AT&T.

Apple (in typical Apple fashion) is implementing MMS differently than 99.9999% of current phones! Apple has demanded that carriers combine two different features into one, which requires a bit of reworking and retooling a system that spans a continent and has nearly 80 million customers. Apple's partner in Germany, T-Mobile, approaches 40 million customers, but the country is about the size of New Mexico. This makes it easier to adapt Apple's new use of an old technology. [Quoted from my friend Nick, a former Apple employee]

This is a HUGE NETWORK UPDATE that doesn't just affect iPhones, and as any SMART BUSINESS would want, AT&T would rather be SAFE THAN SORRY.  Oh, and by the way, if you're one of those who have a jailbroken iPhone, be prepared to probably have to call in to Customer Care (800-331-0500 for your reference) to file a ticket to fix the issue that will probably arise when iTunes can't update your device because you've had the MMS PPU feature added back, or the billing issue that you find on your next bill for the same reason.  Just a forethought.

Tethering: The reason for the delay (which is a delay and not a refusal from AT&T to support this feature) is simple.  It takes time to build rate plans - to test them, to make sure there are no billing errors, etc.  Along with having to rework our network to operate using one APN, some things have to be lower on the list.  It can take over 6 months to build and verify billing codes that are compatible with not only our current rate plans, but also grandfathered/expired plans (trust me, I know this process VERY well - it can be very long and drawn out).   Also, recall that Apple said today that this feature will not require additional software - so those of you complaining about "inferior AT&T software blah blah blah" - ask Apple to repeat that note for you.

As for the service cost, we'll get into that now...

Pricing: AT&T's pricing for service is competitive against Verizon Wireless.  Plain and simple.  Verizon's Tethering Plan is $60 for BlackBerry, same as AT&T's.  Verizon's & AT&T's Voice Plans mirror each other.  Personal Data service across the board is generally $30.  Where is AT&T "gouging" it's customers if Verizon does the same?  Also note that you're getting access to the ISP APN with the tethering plan which provides faster speeds than the slower APN for standard mobile web data.

TIP: Call AT&T or visit AT&T Premier to see if you are affiliated with an organization that qualifies for special benefits on eligible products and services.

Equipment Pricing seems to be the other major pain point for current iPhone owners.  Keep in mind, Apple is the other major partner in pricing their own device.  Equipment pricing as always been a pain point for existing customers, with all carriers.  Why?  Because existing customers feel they're entitled for their "loyalty."  Let's break it down for you though (and keep in mind, AT&T is a Business... what do businesses do? Oh that's right, make money!)...

• AT&T makes money on SERVICE, NOT DEVICES.  AT&T purchases equipment from the manufacturer at cost, meaning if the original price of the device is $700 (like the 32 GB iPhone 3G S), that is how much AT&T purchased it from Apple for.  So when AT&T "sells" a device to a customer, they're already in the hole because discounts were provided when a contract is signed.
• So if a customer signed a 2 year contract, and purchased the 32 GB iPhone 3G S, AT&T has started off with a debt for this customer of $400.  If the customer has the basic voice and plans for the iPhone, they're monthly bill would be roughly $100 [$39.99 Nation 450, $30 iPhone Data, $20 Messaging].  That would take a minimum of 4 months for AT&T to not only make back the money it lost on the device, but also to START making a profit from that customer.
• Next, for existing customers, there is an upgrade policy which determines if a customer is eligible for an upgrade at a discounted price.  The standard length of service required to be eligible is 18 months FOR ALL CUSTOMERS, not just existing iPhone customers.  When the 3G iPhone was launched, a new policy was instated that provided EARLY upgrades at a discount - while not at the full discount, a discount none the less.  Unfortunately, this has caused iPhone owners to feel entitled to a discount when they haven't fulfilled their original commitment for which they got a discount from signing.  The 3G iPhone was launched roughly one year ago - for those of you who signed a one-year contract - congrats, you'll probably be eligible for a full discount.  Why? Because you're near, or out of your contract.  For those of you who signed a two-year contract, you've only completed 1/2 of your contact (at best).  To provide you with another full discount for the device when you're only extending your contract for 1 year (even though you sign a two year, you're just starting a new contract from that date, not actually adding on a full two years).  So if you're not committing the full length of the contract, why should you get the full discount offered to new customers who sign a 2 year contract?  How is that fair?  To be blunt - you're lucky Apple & AT&T have decided to provide a partial discount at all.  Don't be bitter because you can't afford it - there is always a cost of new technology.  A lot of people in this economy can't even afford the $99 that the 3G iPhone has been reduced to and may still be rockin' the old 4GB 2G iPhone.

iPhone 3G:

* New & Qualified Existing Customers: $99 (8GB), $149 (16GB)
* Early Upgrade Pricing: $299 (8GB), $349 (16GB)
* No-Commitment Pricing: $499 (8GB), $549 (16GB)

iPhone 3G S:

* New & Qualified Existing Customers: $199 (16GB), $299 (32GB)
* Early Upgrade Pricing: $399 (16GB), $499 (32GB)
* No-Commitment Pricing: $599 (16GB), $699 (32GB)

• As for the $18 Upgrade Fee - that's been around since the days of AT&T Wireless and Cingular Wireless.  AT&T is not the only carrier that charges an Upgrade Fee, and it applies to all upgrades, not just iPhone upgrades.
• Not eligible but your friend is and you got your device on the same day? Check your payment history - ever been late on your bill?  There's your reason.  If you're late paying your bill, your upgrade eligibility gets pushed back.  Because AT&T definitely wants to reward its customers for not paying their bill (a.k.a. Stealing).  [Added 6/9/2009]
• Lastly, there are always exceptions to the rule - seriously - if you think you have that big of a case that you should be granted a full upgrade before you're eligible, say so - the worse thing that can happen is they'll say no. [Added 6/9/2009]

Planning to cancel your line and activate a new line to get around this (because your math tells you it would be cheaper to do so)?  Think again.  This is called Phantom Churn (not to mention Equipment Fraud).  If you attempt to active a new line of service within six months of canceling the old one, this is flagged and the old line (with the original contract) is reinstated - meaning no new discount for equipment.

Lastly, if you're not tired from being served with the TRUTH - a word of advise: A lot of the rumors and "insider info" is false - even from AT&T Store Reps.  BE KNOWLEDGEABLE - DO YOUR RESEARCH! You wouldn't believe everything a car salesman, or any other salesperson for that matter, told you because we all know that they want primarily one thing - to SELL IT TO YOU; and unfortunately, that might include stretching the truth.  Don't go into a store blind and dumb - know the product you're wanting to buy before you go buy it.  That's just common consumer sense.

Inaccurate Blog Posts I've found so far:

• AT&T responds to iPhone 3G S pricing and (lack of) features
• Real Cost of iPhone 3GS: About $218 More Than You Think
• Why The iPhone 3G S May Be A Sucker’s Bet Right Now
• The reason why AT&T won’t support MMS with the iPhone until “late Summer”, tethering info!
• The dying goodwill toward AT&T

*While I work for AT&T, this blog or its contents do not, in any way, represent the views or opinions of AT&T or Apple.