Is the iPhone hurting AT&T's brand?

(CNET) -- The Apple iPhone has boosted AT&T's subscriber numbers, but network problems and a bevy of complaints from frustrated customers are likely hurting the company's reputation.

While a recent survey by the consulting firm CFI Group found that iPhone users are the most loyal smartphone users, with 90 percent saying they'd recommend the device to a friend, half of all iPhone owners surveyed said they would like to jump ship to another provider if given the chance.

And for the first time, AT&T has scored worse than all four major U.S. wireless operators in terms of overall customer satisfaction for smartphones. According to the survey, AT&T scored 69 out of 100 among users, and 73 among non-iPhone owners. Verizon Wireless was the most satisfying carrier with a score or 79 out of 100 among smartphone users.

Even Sprint Nextel, which has struggled to retain customers due to its poor reputation, scored better than AT&T among smartphone users. It got a 74 out of 100 in terms of customer satisfaction.

The figures are among the first to quantify growing dissatisfaction with AT&T's network.

"AT&T has never fared great in customer satisfaction surveys," said Doug Helmreich, program director with CFI Group. "But they've never been last. Now AT&T is coming up last among smartphone users. The iPhone has been a cash cow for AT&T, but that cash comes at a cost in terms of overall satisfaction."

Public relations and brand experts warn that if AT&T doesn't take steps now to correct its image that it could come back to haunt the company in the future. The main issue for customers is that many users, especially those in urban areas, report poor network coverage and service. Problems with AT&T's 3G wireless have been widely reported on blogs, Twitter feeds, and even in published reports from BusinessWeek and The New York Times.

Customers all over the country have complained about dropped calls and the inability to connect to the 3G network. CNET News writer Elinor Mills documented her frustrating experience with her iPhone in a blog post recently. The story hit a nerve among fellow iPhone users, and more than 400 comments were left on the story. Most of the comments corroborated the writer's plight. And the follow-up story on the same issue garnered at least another 300 comments from readers.

AT&T's company line

And yet, AT&T has not admitted any problem with its network. When questioned about potential problems with the AT&T network being overburdened by iPhone users, Mark Siegel, an AT&T spokesman, reiterated the company line: "We have a strong, high-quality mobile broadband network. It is the nation's fastest 3G network, now in 350 major metropolitan areas."

In fairness to AT&T, the company has acknowledged that it is upgrading its network to deal with increased demand from the iPhone. Siegel said the company plans to spend $17 billion to $18 billion on improving its wireless and wireline broadband networks in 2009.

Of course, this is a few billion dollars less than what the company spent in 2008. During that year, AT&T's annual report indicates it spent $20.1 billion on capital expenditures for its wireless and wireline networks. Still, $17 billion is nothing to sneeze at.

Some of these improvements include deploying 850 MHz technology across AT&T's 3G markets to improve in-building coverage, adding nearly 2,000 new cell sites to improve overall coverage, and increasing capacity in thousands of cell sites with more backhaul infrastructure.

"We are the leader in smartphones in the U.S." Siegel said. "We carry more iPhones than any other carrier in the world and handle more wireless data traffic than other U.S. carrier. Because of smartphones like the iPhone, among many others, people have dramatically changed the way they use the wireless network with data usage exploding."

Indeed, Siegel is correct. iPhone users use the mobile Internet more than other mobile subscribers. So even though Verizon may rank high in terms of customer satisfaction, people are not using the network as much or in the same way as heavy iPhone users.

Still, Siegel said the company will look into the survey results from the CFI Group.

"We welcome and value all feedback from our customers," he said. "We view such feedback as an important opportunity to help us continuously improve our products and services. We will certainly look carefully at the CFI Group survey results to see what we can learn from it."

Of churn and confidence

For now, AT&T's potential image problems haven't been hurting the company. In July, it reported that it had reduced its churn rate, or the rate at which customers dump it service, yet again to 1.09 percent for subscribers on a contract. This is one of the lowest churn rates in the industry.

"The surest indication of customer satisfaction is churn," AT&T's Siegel said. "And ours is at record-low levels. Our own internal data suggests that our iPhone customers are very satisfied with AT&T."

But AT&T's confidence may be misleading. Currently, AT&T is the only U.S. wireless operator offering the iPhone. Once the exclusivity deal ends, which many believe will happen within a couple of years, dissatisfied customers may flee from AT&T to another carrier.

"I think it's safe to say that the same percentage of people who switched to AT&T for the iPhone, would likely leave if they believed they could get the same experience on a better network," said Helmreich. "And that could cause huge problems for AT&T since nearly half of its iPhone users switched from another carrier."

Public relations and brand experts such as Rob Adler, vice president at Vantage Communications, a technology public relations firm in San Francisco, say that AT&T must fess up to the reality if it doesn't want customers to punish it in the long run.

Adler, who is an iPhone subscriber living in San Francisco, says there is no question that AT&T's network has been overwhelmed. Like many people living in a city, he experiences frequent dropped calls and a sluggish wireless Internet connection.

Even though AT&T is trying to fix its network, he said that denying there is a problem won't win it any points with frustrated customers.

"AT&T can say that there is nothing wrong with their network all they want," he continued. "But when someone is experiencing dropped calls and no access to the 3G network every day, they take it very personally. And it is very frustrating."

Andrew Gilman, CEO of CommCore Consulting Group, which specializes in helping companies manage their brand image, agrees. He said the first thing AT&T needs to do is correct whatever problem it is experiencing. And then it needs to listen to its customers and prove to those customers that the problems have been resolved.

He said that in today's highly connected online communities, companies that refuse to acknowledge their customers' complaints do so at their own peril.

"Even if the network is perfectly fine, if several people in a social network complains, they have immediate influence over a large group of people," he said. "So even if people aren't experiencing the same problem, the negative comments have planted a seed."

Gilman said that the power of social networks has changed the game for companies who find themselves the target of negative customer sentiment.

"The world has changed over the past couple of years," he said. "A few years ago you might have been able to ignore some customer complaints and get away with it. But not anymore. With social media things spiral out of control very quickly. "

He cited the example of how Johnson & Johnson was forced last year to pull an online advertisement for its over-the-counter pain pill Motrin after it triggered protest on the Internet from consumers who thought an ad that depicted mothers with back pain carrying babies in a sling as being insensitive toward mothers. Angry consumers viewing the ads took to blogs, YouTube and Twitter to call for people to boycott Motrin, arguing the ad trivialized women's pain and the method of carrying babies.

Switchers as "satisfaction saboteurs"

Experts have said that AT&T's image problems likely go beyond its network troubles. Helmreich said that AT&T has invited trouble through its exclusive deal to carry the iPhone. About 40 percent of iPhone users dropped their carrier to get the iPhone. These customers weren't switching carriers because they wanted to be on AT&T's network; they wanted the iPhone.

As a result, Helmreich argues that these customers are more likely to be dissatisfied with AT&T's service. And they are more likely to complain and to share their complaints with friends.

Helmreich points out that people with one of T-Mobile's exclusive Google Android phones or Sprint's Palm Pre are also more likely to be dissatisfied with their service if they switched providers for those phones.

"In effect, switchers can be satisfaction saboteurs if they were not already inclined to choose AT&T," he said.

Adler also points out that AT&T's marketing and public relations strategy for the iPhone also helped create animosity toward the company. He said that from the start, Apple has established itself as the more valuable brand in the relationship with an iPhone customer.

Even though AT&T is making the device more affordable by subsidizing each device by at least $300 to $400 a pop, it doesn't highlight this fact to consumers. But Apple is the company that has designed the device. It sells it for $200. And it also offers the cool applications, which are either free or are relatively low cost.

"iPhone users love Apple," Adler said. "They are loyal to the brand and they love the device and all the great applications. All they associate AT&T with is dropped calls, a hard-to-access 3G network, and high network fees. They even make iPhone users pay extra for SMS. It seems crazy to me that AT&T hasn't done anything to throw customers a bone to say, 'We love you as a customer.'"

Adler said that AT&T's exclusivity deal with Apple is a gift, which AT&T should be taking advantage of to create customer loyalty. He said that AT&T likely has plenty of time to redeem itself, but the company must take steps now.

He suggested it does three things: For one, he said that AT&T must admit its network has problems and then fix those problems. The challenge from a marketing standpoint is convincing its customers that the network has been fixed. And to do that, brand expert Gilman suggests that the company use specific examples.

"Once they fix whatever problems they have, they have to get testimonials to back up those claims," he said. "Maybe they could drive through neighborhoods and show people that calls aren't dropping and that the dead zones don't exist anymore."

The second thing AT&T needs to do is to more overtly market and explain its value to the consumer.

"AT&T needs to be more aggressive in promoting what they offer the customer," he said. "All they do is say they have the fastest 3G network, which everyone who owns an iPhone knows is absolutely not true in the real world. It may be true in a lab, but not on the street."

And the third thing AT&T must do is make goodwill gestures to its loyal iPhone customers. Gilman suggests the company give out coupons or anything that shows how AT&T values its customers. Adler thinks that AT&T needs to offer customers, who are already spending a lot of money on their service, more features and services for free.

But he said that free Wi-Fi at AT&T hot spots is likely not enough of a perk, since it only highlights deficiencies in the 3G network. Instead, he thinks that AT&T could offer free SMS to iPhone users renewing their contracts.

By Marguerite Reardon

Google Brings New Options to Search

Perhaps not to be outdone by Microsoft’s recent quickened pace of innovation in search, Google is adding new ways to slice and dice search results.

On Thursday, Google introduced more categories to its “search options,” a feature brought out in May that allows users to filter results by time (recent results, past year, past month, past week), type of result (videos, forums, reviews) and other criteria.

The new search options allow users to filter for results Google found in the past hour, and for books, blogs and news. Google also added the ability to emphasize or de-emphasize shopping-related results. And it is also allowing users of its search history feature to see only results they have seen before, giving them a quick way to find a page they have already seen.

Nundu Janakiram, a search product manager at Google, said all the new options were intended to give users a quicker way to get to the information they want. He said that the ability to search for items that have appeared on the Web in the past hour showcases Google’s constant indexing and crawling of the Web. But he said it is different from “real-time search,” a much ballyhooed and somewhat amorphous concept that typically refers to searches of services like Twitter or Facebook, where conversations between users are constantly updated.

Mr. Janakiram said that the ability to de-emphasize shopping sites would be useful for someone who was researching a new product, say a digital camera, and wanted to see product reviews and specifications. The same user may want to emphasize shopping sites when he is ready to buy an item.

Google introduced a string of other new search features in the past week. On Friday, for instance, Google enhanced search snippets for some results, allowing users to jump directly to the information they were looking for inside a Web page. In a search for trans fats, for example, a user might see a Wikipedia entry and links to jump from the snippet directly into sections of the page that discuss the chemistry of trans fats, their presence in certain foods or nutritional guidelines.

On Monday, Google began showing its popular hot trends directly on results pages for some of the most popular search keywords at a given time.

And late Wednesday, Google added links to discussion forum entries to search snippets from sites that have such forums. For instance, a search for “getting from Rome to Florence” will return a result from a travel site, with links to discussion forum entries on that site that touch on the topic.

“This past week of launches demonstrates how Google is enhancing the search experience,” Mr. Janakiram said.

A Google spokesman said the quick rollout of new features was not a response to Microsoft’s Bing but rather a reflection of how Google had always innovated in search and other parts of its business.

By Miguel Helft

M.I.T. Taking Student Blogs to Nth Degree

CAMBRIDGE, Mass. — Cristen Chinea, a senior at M.I.T., made a confession in her blog on the college Web site.

“There’ve been several times when I felt like I didn’t really fit in at M.I.T.,” she wrote. “I nearly fell asleep during a Star Wars marathon. It wasn’t a result of sleep deprivation. I was bored out of my mind.”

Still, in other ways, Ms. Chinea feels right at home at the institute — she loves the anime club, and that her hall has its own wiki Web site and an Internet Relay for real-time messaging. As she wrote on her blog, a hallmate once told her that “M.I.T. is the closest you can get to living in the Internet,” and Ms. Chinea reported, “IT IS SO TRUE. Love. It. So. Much.”

Dozens of colleges — including Amherst, Bates, Carleton, Colby, Vassar, Wellesley and Yale — are embracing student blogs on their Web sites, seeing them as a powerful marketing tool for high school students, who these days are less interested in official messages and statistics than in first-hand narratives and direct interaction with current students.

But so far, none of the blogs match the interactivity and creativity of those of the Massachusetts Institute of Technology, where they are posted prominently on the admissions homepage, along with hundreds of responses from prospective applicants — all unedited.

Not every admissions office has been so ready to welcome uncensored student writing.

“A lot of people in admissions have not been eager for bloggers, mostly based on fears that we can’t control what people are saying,” said Jess Lord, dean of admissions at Haverford College, which posted student bloggers’ accounts of their summer activities this year, and plans to add bloggers this spring to help admitted students hear about campus life. “We’re learning, slowly, that this is how the world works, especially for high school students.”

M.I.T.’s bloggers, who are paid $10 an hour for up to four hours a week, offer thoughts on anything that might interest a prospective student. Some offer advice on the application process and the institute’s intense workload; others write about quirkier topics, like warm apple pie topped with bacon and hot caramel sauce, falling down the stairs or trying to set a world record in the game of Mattress Dominos.

Posting untouched student writing — and comments reacting to that writing — does carry some risks. Boring, sloppily written posts do nothing to burnish an institutional image, college admissions officials say, and there is always the possibility of an inflammatory or wildly negative posting.

Pomona has considered having student bloggers, but so far has felt that the risks outweigh the benefits, said Art Rodriguez, senior associate dean of admissions.

“Blogs can certainly help humanize the process,” Mr. Rodriguez said. “The flip side is that a few anxious high school students may think and worry too much about what someone wrote on their blog, and present themselves in a slightly different way than who they really are. And there’s always the concern about the political ramifications, that bloggers may open up an issue or topic that starts something negative.”

But Mr. Lord of Haverford said prospective students’ interest in the summer bloggers calmed his worries.

“High school students read the blogs, and they come in and say ‘I can’t believe Haverford students get to do such interesting things with their summers,’ ” he said. “There’s no better way for students to learn about a college than from other students.”

Many high school seniors avidly follow student blogs at the colleges they are interested in, and post comments. Luka, one of dozens responding to Ms. Chinea, for example, wrote: “I didn’t know about the anime club. I would have never guessed that people at M.I.T. are interested in anime. Oh well ... +1 on my ‘Why should I go to M.I.T.’ list.”

M.I.T.’s student bloggers said they had read the blogs when they were applying, posted comments and connected with other applicants.

“I was blogging myself, almost every day, when I was in high school, and I read the M.I.T. blogs all the time,” said Jess Kim, a senior blogger. “For me they painted a picture of what life would be like here, and that was part of why I wanted to come.”

Ben Jones, the former director of communications at M.I.T.’s admissions office, began with a single blog by a student five years ago, at the dawn of the Facebook era, and noticed high school students responding right away. “We saw very quickly that prospective students were engaging with each other and building their own community,” said Mr. Jones, who now works at Oberlin College, where he has added blogs to the Web site.

The M.I.T. student bloggers have different majors, ethnicities, residence halls and, particularly, writing styles. Some post weekly or more; others disappear for months. The bloggers are sought out as celebrities during the annual “Meet the Bloggers” session at Campus Preview Weekend.

M.I.T. chooses its bloggers through a contest, in which applicants submit samples of their writing. “The annual blogger selection is like the admissions office’s own running of the bulls,” said Dave McOwen, Mr. Jones’s successor in the admissions office, in his message inviting applications.

This year, 25 freshmen applied for four new spots, and, Mr. McOwen said, it was hard to choose.

“You want people who can communicate and who are going to be involved in different parts of campus life,” he said. “You want them to be positive, but it’s not mandatory.”

And not all posts are positive. Ms. Kim once wrote about how the resident advising system was making it impossible for her to move out of her housing — expressing enough irritation that the housing office requested that the admissions office take her post down. Officials refused, instead having the housing office post a rebuttal of her accusations; eventually, the system was changed.

But most of the blogs are exuberant, lyrical expressions of the joys of M.I.T. life, like last month’s post on returning as a sophomore:

“Something’s changed,” wrote Chris Mills. “Now you know what you’re in for, you know the sleepless nights and frustrations are never far away, but this knowledge can’t seem to remove the exhilarating smile on your face. And it’s in that masochistic moment that you realize who you are. That this is what you’re made for.”

By TAMAR LEWIN and Mark Wilson

Cisco Buys Norwegian Firm for $3 Billion

SAN FRANCISCO— Cisco Systems continued to show just how serious it was about videoconferencing, announcing late Wednesday night the $3 billion acquisition of Tandberg, a Norwegian video communications company.
Cisco sells companies expensive, room-size videoconferencing systems known as TelePresence systems. Tandberg has similar technology but also sells smaller, cheaper conferencing units. In addition, Tandberg has specialized software for managing videoconferencing systems and for creating connections between systems that rely on different underlying technology.

“It really enables us to build out our portfolio,” said Ned Hooper, a senior vice president at Cisco.

Cisco’s corporate videoconferencing products require the company to outfit a customer’s conference room with several large display screens, networking equipment and even special tables, chairs and wall paint. By contrast, Tandberg has a range of gear, including high-definition video systems, that can sit on desks or be used with personal computers.

The all-cash tender offer has been recommended to Tandberg’s shareholders by that company’s directors and stands as an 11 percent premium over Tandberg’s closing price on Wednesday. Tandberg reported $809 million in revenue last year, and has close to $200 million in cash.

In recent years, Cisco, based in San Jose, Calif., has been one of the technology industry’s most aggressive companies when it comes to acquisitions. It has bought close to 40 companies in the last five years, including the $6.9 billion purchase of the set-top box maker Scientific Atlanta and the $2.9 billion purchase of the Web meeting software maker WebEx. This year, Cisco bought Pure Digital, which makes the popular Flip video camera for consumers, for $590 million.

The acquisitions have suited Cisco’s mission of backing products that generate more Internet traffic, which in turn drives demand for the networking hardware that has long been the core of its business.

The deals have also thrust Cisco into new markets like consumer electronics, business collaboration software and computer servers where the company now finds itself in direct competition with its traditional business partners, like Hewlett-Packard, Microsoft and I.B.M.

During an interview last week, Cisco’s chief executive, John T. Chambers, boasted that the company had managed to move into 30 new markets through acquisitions and its own internal product development.

“We are involved in things that may shock you,” Mr. Chambers said, referring to things like smart-grid technology for municipal power systems and the construction of entertainment and networking systems for sports stadiums.

With $35 billion in cash — the most among technology companies — Cisco appears set to continue with this expansion.

“You will see us move with a lot of acquisitions over the next year,” Mr. Chambers said.

Still, companies like Cisco, Dell and EMC must find ways to match the heft of Hewlett-Packard and I.B.M., which have huge technology services businesses to complement their hardware and software pursuits.

Rather than acquiring a large services company, Cisco will continue to partner with independent players like Accenture and Wipro, Mr. Chambers said.

“I think that is a more scalable, faster-speed and less confrontational model,” he said.

As Cisco moves into new areas, it faces the difficult task of trying to find businesses with profits that can match those gained from its networking hardware. Cisco’s routers and switches produce 65 percent gross profit margins.

Mr. Hooper stressed that Tandberg had gross margins of 66 percent. “It fits squarely into our operating model,” he said.

Tandberg has had most of its success selling videoconferencing systems to large companies in North America and Europe. Cisco plans to use Tandberg’s technology to help it pursue smaller companies and eventually to sell to consumers, Mr. Hooper said.

A number of companies make videoconferencing systems. Like Cisco, H.P. sells large systems aimed at companies that need sophisticated tools for their video meetings, like the ability to display graphics and movies.

Microsoft and I.B.M. have focused on adding PC-based videoconferencing to their collaboration software lines, while start-ups like LifeSize have tried to undercut the larger players on price.

By ASHLEE VANCE and Peter DaSilva

Google invites users to join Wave

Rory Cellan-Jones talks to the developers of Google's 'next-generation' messenger service

Google Wave, which combines e-mail, instant messaging and wiki-style editing will go on public trial today.

The search giant hopes the tool, described as "how e-mail would look if it were invented today", will transform how people communicate online.

It will be open to 100,000 invitees from 1600BST, each of whom can nominate five further people to "join the Wave".

The tool is also open source, meaning third party developers can use the code to build new applications.

The developer behind Wave described it as "a communication and collaboration tool".

"It struck us that e-mail is still the main communication tool on the web, which seemed remarkable given that it is 20-year-old technology," said Lars Rasmussen, who, alongside his brother Jens, was the brains behind Google Maps.

In designing Wave, the brothers took as a starting point the idea of "a conversation sitting in a cloud".

"We found we could build a flexible tool with a surprising amount of functionality," Mr Rasmussen told BBC News.

Such functions includes real-time typing.

This means people can see a comment being written character by character and can formulate their answer to a question before a fellow 'Waver' has even finished asking it.

Mr Rasmussen acknowledges that this feature could be annoying, but thinks it is also a great time-saver.

For those unsure whether they want all their Wave friends to see exactly what they are writing, when they are writing it, the developers are working on a draft mode which will allow the real-time aspect to be switched off .

Unlike traditional instant messenger (IM) conversations continue even once everyone has logged out. This means that those invited to a Wave conversation but not currently online, can read the message strand in full at a later date.

Sharing photos

More radical is the inclusion of wiki-style editing tools.

All messages can be edited at any point by members of the conversation and a Playback facility allows everyone to see exactly who has edited what and at what time.

Google, a famously collaborative firm, now writes all its design documents in Wave.

Wave also makes it very easy to share photos, which can simply be dragged from the desktop onto the Wave platform.

"If you are planning a trip. you can talk about it and plan it in Wave and then share all the photos at the end," said product manager Stephanie Hannon.

Google Wave runs in most browsers, with the notable exception of Microsoft's Internet Explorer (IE). Users of IE will have to download a plug-in, known as Chrome Frame to use the application.

Microsoft does not recommend installing this plug-in, claiming it compromises security.

As IE is still the dominant browser, its incompatibility with Wave could affect take-up of the platform.

Google insists the failure of Wave in IE is not an excuse to promote its own browser, Chrome. It said the developers worked "very hard" at trying to make it work in IE.

Much of the code for Wave is written in HTML 5, the next-generation of web language.

In a nod to social-networking site Facebook, there are already a host of applications for Wave, including Sudoku and Chess.

"We are now trying to persuade someone to build a crossword puzzle," said Mr Rasmussen.

He acknowledges that the success of the platform will depend on how many people are willing to join.

"Without other people adopting Wave it will never take off," he said.

"I have been accused of being pathologically optimistic about it but I can't see why people wouldn't want it," he said.

His enthusiasm seems to be being borne out to a certain degree. Since Wave was announced at a Google developers' conference in May, one million people have registered interested.

Wave will have a full consumer launch early next year.

By Jane Wakefield