Attention, iPhone Shoppers: Not All AT&T Stores Are Created Equal

Posted by: Peter Burrows on June 15

By now, everyone with a jones for an iPhone knows that the device will be sold only at Apple and AT&T retail stores (and at Apple.com). But here’s something you might not know: odds are, your local Cingular store (until recently, Cingular was the brand for AT&T’s cell phone service) probably won’t have iPhones, when it goes on sale on June 29. That’s because only the 1,800 stores that are actually owned by AT&T will have them—and not the 6,200 or so other outlets, that range from Cingular franchisees to multi-line retailers, according to the AP.

Take the Cingular store on University Ave. in Palo Alto, California. From the look of it, it would seem to be a logical place to go for an iPhone if the line at the gleaming Apple store a few blocks away gets too long. After all, the sign on its storefront says Cingular Wireless, and the banner in the window says “Cingular is now the new AT&T”. But since the store is owned by a franchisee, it won’t have iPhones. That’s already causing confusion. Some five people a day have been coming in asking to get on the waiting list for an iPhone, says salesman Bruce Hamilton.

Why limit iPhone-mania to AT&T-owned stores? Hamilton and store manager Sean Doyel believe the primary reason is that Apple wants to make sure nobody sells iPhones below its $499 (for the 4-gig model) and $599 (for the 8-gig model) price points. The problem is that AT&T can’t legally tell its retail partners what to do on this account. “Our contract with Cingular says they can’t dictate our prices,” says store manager Sean Doyel.

It’s one of the consequences of a deal between AT&T and Apple that stands the typical cellular phone contract on its head. Normally, carriers buy handsets at a wholesale price, and then sell them at a loss so as to make their money on service contracts. But Apple is banking that it can entice consumers to pay its hefty prices—and lock in heftier gross margins than if it took the wholesale route. “Most phone makers want their products in as many stores as possible,” says Doyel. “But this is a sign of Apple’s negotiating power. This is the first phone in my career that we’ve not been allowed to carry.”

That’s undoubtedly causing plenty of agita among AT&T’s franchisees. Both Doyel and Hamilton know they’re bound to lose a lot of business for their lack of iPhones, and yet they’ve got little choice but to grin and bear it. Rather than try to diss the iPhone to get consumers to buy one of the models they can sell, Hamilton says AT&T has notified the store of the process it would like to see. He’s free to ask questions to see if the iPhone really fits the customers’ needs. If that doesn’t work, “AT&T wants us to help them fill out an [online] order form at Apple.com, while they’re still here in the store. We don’t make any commission, but we pretty much have no choice—becuase if we send them to another store, they may never come back and do business with us.”

All told, sounds like a formula for confusion to me. My advice: call ahead, come June 29.

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