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AT&T's Phantom Limb Syndrome

By Jeff Kagan
Apr 12, 2012 5:00 AM PT

The Lumia may be AT&T's biggest wireless handset launch since the iPhone. This is a big gamble on AT&T's part. If successful, it could stand tall. It could help reboot Nokia and Microsoft in the wireless business. If unsuccessful then AT&T will have egg on its face. Why take the risk?

AT&T's Phantom Limb Syndrome

My Pick of the Week is US Cellular, as it makes some public relations changes by hiring Ketchum from Omnicom as its PR agency.

Then and Now

I recently gave a speech to a group of industry executives and then consulted with them, discussing what was coming next. AT&T, Microsoft and Nokia have started cranking out press releases and turning up the heat on their marketing engines. They do that well.

Why is AT&T taking such a risk? I call it the "phantom limb syndrome." It lost the iPhone exclusivity, and now it has to replace it with something else.

Five years ago, there were more carriers -- many have merged, and there are fewer today.

Five years ago, smartphones were not being adopted as quickly as they are today.

Five years ago, the smartphone leaders were RIM's BlackBerry and Palm.

Five years ago, Nokia was the world's leading handset maker.

A lot can change over five years, can't it?

Today the wireless industry is lead by smartphones.

Today Apple's iPhone and Google's Android operating system are dominating that space.

Today smartphone sales are growing so quickly it's impossible for the industry to keep up.

Today apps have mushroomed from a few hundred to more than half a million.

Today some carriers are reaching the limits of their spectrum capacity.

Tough Withdrawal

Apple decided to break into the smartphone business several years ago. It approached Verizon Wireless first. The problem was these two companies both had to be the captain of the ship, and we all know there cannot be two captains.

So next Apple went to AT&T, which loved the idea and inked the deal. AT&T didn't know what it was in for. It had been quietly building its smartphone capabilities and had the best selection of devices in the market. AT&T's top brass thought they were ready.

The last five years were both the best and the worst for AT&T -- best for growth, and worst for quality of service and brand reputation. Things got very bloody at AT&T.

Unfortunately, in the early years, Apple had as few discussions as it could get away with, and AT&T didn't know what it was up against. AT&T didn't realize it had stepped through a doorway that would give it the most success and biggest struggle of its life.

With all the customer problems, AT&T still grew as a company and an investment. Things were so good on the growth side, it had to keep the iPhone exclusivity as long as possible.

After renewing the exclusive iPhone deal, the device became available a few years later at Verizon Wireless, Sprint Nextel and C Spire.

Now AT&T has nothing special to set it apart from competitors. It seems lost.

Call it separation anxiety. It had become addicted to exclusivity like a drug.

So what does AT&T do next? It has spent the last few quarters looking at the next drug of choice.

A New Habit

AT&T has built an impressive operation and wants to be back in the spotlight. So it has settled on the Lumia from Microsoft and Nokia.

Nokia Lumia 900
The Nokia Lumia 900

While this is an impressive device, and may help both Microsoft and Nokia dig themselves out of the hole a bit, is it enough to match the iPhone and Android phenomenon?

As an industry, we need more choices. The iPhone is great. So are many of the Android devices. However, users want more. There are plenty who simply don't like the iPhone or the Android OS. So there is a market for other operating systems. There is no doubting that point.

Lumia may be the next big hit -- or it may not. It's too early to tell.

The question is, should AT&T be focused so much on creating the next iPhone -- substituting a new habit for the one it lost?

Microsoft and Nokia are big companies and leaders, but they have not yet matched the marketing excitement of either Apple or Google. They just don't think that way.

When wounded soldiers come back from battle with a lost limb, they often say they can still feel their limb. But it is no longer there -- it is one of the tricks the mind plays on us.

Could AT&T be suffering from phantom limb syndrome? If so, will this new focus on the Lumia be enough to satisfy it? This is a gamble -- only time will tell.

Good luck, AT&T, Microsoft and Nokia!
Jeff Kagan's Pick of the Week

My Pick of the Week is US Cellular, which is hiring Ketchum from Omnicom as it's public relations agency. Ketchum has been successfully in this business for many years, so we could be seeing some new things coming from US Cellular.

Publicis Groupe's MSLGroup competed with Ketchum in the final portion.

A lot has changed at the company recently. Mary Dillon left McDonald's and became president and CEO of US Cellular in spring 2010. And David Kimbell left PepsiCo and became VP of marketing.

The company looks like it has been preparing for some major changes. US Cellular even turned down the Apple iPhone during its reboot. Could the butterfly be about to come out of its cocoon?

I have an idea for US Cellular, which is based in Chicago. Perhaps one of the first changes should be to change its name to "US Wireless." After all, "US Cellular" sounds so last decade.

E-Commerce Times columnist Jeff Kagan is a tech analyst and consultant who enjoys sharing his colorful perspectives on the changing industry he's been watching for 25 years. Email him at

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