Sidecut Reports

In a performance that is insulting to intelligent people on so many levels, AT&T has released a YouTube video that attempts to put a positive spin on its iPhone-related network problems. And just to make sure it was hip, cool and in-line with the medium, AT&T trots out some bozo who calls himself “Seth the Blogger guy” — whoa, dude, you won me over with your total street cred! Look, confused hair, a little no-shave shadow, a button-down bowling shirt with a t-shirt underneath and nerdy glasses — Seth MUST be one of those blogger guys who knows about all this networking stuff!

So instead of real answers about A) How much spectrum AT&T actually has, B) How much it can actually use to support iPhone customers, C) Why the company sold so many iPhones that it overloaded its network, and D) When actual improvements in the way of more spectrum purchases, leases or other arrangements might be forthcoming, you get… Seth. And some talk about highways and the billions AT&T is spending. Enjoy.

UPDATE: Karl over at DSL Reports is tracking the response to the video, with sentiment weighing mainly against AT&T.

Call it the iPhone story that won’t go away — now it’s the New York Times checking in with a report about how iPhone customers aren’t happy with the network performance of their snazzy new device.

The story is mostly anecdotal in nature, with some quotes from respected analysts like Chetan Sharma who could probably provide a lot more detail about the problems AT&T has. But the story — like so many others — doesn’t really challenge AT&T, especially on AT&T’s solution to the problem, which is to add more towers and use an undefined amount of spectrum at the 850 MHz band.

But our guess here — and it is just a guess since AT&T will not answer any questions about its spectrum holdings — that AT&T simply doesn’t have the spectrum depth necessary to handle the popularity of its iPhone offering. For years, service providers have gambled, necessarily, when building networks, trying to build out just enough capacity to support most of the users most of the time. But as Om notes quite lyrically, “today’s 3G networks are like glittering skyscrapers built on a foundation of matchsticks.”

The success of the iPhone and the exclusive deal has meant millions of new customers for AT&T, but you have to wonder how many of those users will stay with the carrier if the problems continue. Increasingly, AT&T’s iPhone gamble looks like a bet that may in the end cause more pain than gain for Ma Bell.

After a week of all 3G iPhone all the time, it’s pretty clear that the performance hurdle is being set for the “new” Clearwire and its planned nationwide WiMax network: Devices will need to look and perform reasonably like an iPhone, at as-fast or faster speeds, for lower prices, to get any traction at all. Luckily for Clearwire and its partners, those barriers aren’t insurmountable, but there’s also not a lot of time or chances to get things right. As we say in our most recent revision of our WiMax report, it’s still Game On, WiMax. But Clearwire better hurry, before Apple and AT&T run the table.

On the device look-and-feel front, it seems like Clearwire should be safe — WiMax partner Samsung is already showing a touchscreen iPhoneClone, and Google’s Android interface looks sufficiently iPhone-enough to compete, should it arrive as scheduled. On the speeds front, Clearwire should be able to make the 3G iPhone look pokey, if the company actually delivers its promised speeds of between 2 and 6 Mbps on the download side. Since Clearwire claims in its official merger filing with the FCC that its networks will support mobile two-way video, it appears that the folks on the networking side are pretty confident. That leaves us with pricing plans as the place where Clearwire might stumble in its bid to unseat the iPhone.

With an upfront cost of $199 and monthly plans of $60-70 for voice and data, the 3G iPhone isn’t cheap, so Clearwire seems to have some breathing room, especially since Clearwire service plans are likely to include a bundle of home and mobile Internet service for the same customer. But since Clearwire doesn’t plan to subsidize device costs, it will have to do a lot of marketing to convince customers that it may be cheaper in the long run to buy a more-expensive device and pay less per month; it will then have to turn around and sell an opposite story to Wall Street, claiming it can make more in revenues by signing more customers to cheaper contracts, including those for ad hoc or daily use.

Hmmm.

Clearwire may get an additional break or boost if AT&T and Apple run into network congestion problems following the July 11 availability date for the 3G iPhone. (Wonder if we can get odds on the downtime next week at NXTcomm in Vegas?) Ideally, Clearwire would start some limited public tests as soon as possible to give users a taste of what a 4G device could look and feel like. Until then, all we’re likely to hear is how much the fanboys love their 3G iPhones. The louder that chorus gets, the harder it will be for Clearwire’s song to be heard.

Need to know more about WiMax? Order our recently updated WiMax report, with full analysis of the “new” Clearwire deal and the motivations for investors Comcast, Google, Intel and others.