Insurance works the same way as gym memberships. The insurance company wants you to pay the monthly premium but doesn’t expect you, or even want you, to collect the insurance when things go wrong. It works the same way with gym memberships. They want you to sign up, pay regularly, but don’t use the gym too often because it’ll get crowded.
AT&T thought they could make a similar deal with iPhone owners. We would pay for the 3G service and unlimited usage, but not actually use it. To their corporate surprise, AT&T’s vaunted 3G is overloaded. With iPhone users. Michael Mulvey:
Here’s how I see it in a nutshell – AT&T was happy to sign up as many iPhone customers as they could. Their mentality was probably very similar to gyms who sign up as many people as they can in January when everyone makes their New Year’s Resolution to lose weight.
In a nutshell, that’s it. Remember Customers Angered as iPhones Overload AT&T in the NYT? Same thing, except Jenna Wortham said, “the iPhone is really the Hummer of cellphones.” Ostensibly because it guzzles bandwidth more than other cellphones on AT&T’s network.
More than 20 million other smartphone users are on the AT&T network, but other phones do not drain the network the way the nine million iPhones users do. Indeed, that is why the howls of protest are more numerous in the dense urban areas with higher concentrations of iPhone owners.
Michael Mulvey points out the real problem, and uses a perfect gym membership analogy to drive home the point.
Gyms are packed the first few months after January but then there’s a drop-off in attendance, because people tend to slack off, so even though the gym might ‘overbook’ their spaces, it’s only being used by a fraction of the members. The gym wins – few customers to take care of and lots of profits.
Unfortunately for AT&T and iPhone owners, we’re not like insurance owning lemmings, or fickle gym membership users who don’t use the gym. We actually use the iPhone for the intended purpose. In contrast, AT&T wanted many customers and few users.
This didn’t happen with iPhone customers. Unlike average customers with average cellphones that have small screens and poorly designed user interfaces who just use their phones for calls and occasionally check email – iPhone owners users integrate their iPhones into their lives. They surf the web, check their GMail, Yahoo and thanks to Exchange integration, their work email. Not to mention downloading applications, music and videos.
Now, AT&T is scrambling to upgrade their network to handle the users, from which they were all too happy to take money but not deliver the service. Would Verizon’s 3G network have fared better? Probably not. Michael Mulvey again:
You sold a bunch of Ferarris and didn’t think people would drive em.
Priceless. At least we’re not Hummer owners.