An AT&T Mystery: Abrupt New York iPhone Shutdown

A halt in iPhone sales around New York on AT&T's Web site stirs fresh concern that its network is too frail to support U.S. urban smartphone traffic

By Arik Hesseldahl

A brief halt in online sales of the Apple iPhone in the New York area kept alive concerns that AT&T's network isn't up to the task of handling smartphone traffic in some of the largest U.S. cities.

Customers who shopped for an iPhone on AT&T's Web site and gave ZIP codes for areas in and around New York City were told that the device was unavailable during a period starting on Dec. 27 and lasting until the afternoon of the following day. Sales of the iPhone through AT&T (T) and Apple (AAPL) retail stores in the New York area, as well as via Apple's Web site, were unaffected.

AT&T offered little explanation for the halt in sales, and Apple kept mum on the subject. "We periodically modify our promotions and distribution channels," AT&T spokesman Fletcher Cook said in a message sent via e-mail. Some analysts speculated that the change, however short-lived, was further confirmation that AT&T's equipment is too flimsy to handle the heavy data use typically associated with the iPhone. "Clearly AT&T is struggling with quality-of-service concerns," says Rich Doherty, head of the Envisioneering Group, a research firm. "It's the first time I'm aware of this happening with any wireless product." Apple representatives didn't return repeated requests for comment.

As the exclusive U.S. provider of iPhone service, AT&T has come under criticism for the quality of its network coverage. Verizon Wireless, jointly owned by Verizon Communications (VZ) and Vodafone (VOD), has alleged that AT&T's network is ill-equipped to handle the demands of modern 3G smartphones such as the iPhone—which in addition to making voice calls, also run a selection of data applications, including video, Web-browsing, and games. Verizon Wireless carries competing smartphones, including the Droid, which includes the Android operating system backed by Google (GOOG).

bloggers mined AT&T worker comments

Even AT&T executives have acknowledged the problem publicly. At an investor conference earlier this month AT&T Mobility President Ralph de la Vega conceded network deficiencies in New York and San Francisco and said that the company was trying to improve performance. He also said the company was looking for ways to get consumers to throttle back data use.

Lacking information about AT&T's sudden move, bloggers sought to tease out details from conversations with AT&T customer service reps. One AT&T employee told Consumerist.com, which first reported the change on Dec. 27, that "New York wasn't ready for the iPhone," and that it lacked a sufficient number of cell towers to meet the heavy data demands imposed upon the network by iPhone users. Later, Consumerist reported that AT&T employees were blaming the change on unspecified "fraudulent activity."

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