
Apple has been facing a public relations nightmare following last month’s release of the iPhone 4. The fourth generation iPhone’s well-publicized antenna reception problem—coupled with the fact that Apple has been lukewarm at best when it comes to acknowledging the problem—is the foremost cause of the negative press. In fact, Apple’s solution to the reception problem is telling owners to hold the phone differently. In all fairness to Apple, this is reasonable advice since the way one has to hold the phone to experience the antenna interference is rather awkward. However, this solution falls short of bringing satisfaction in a world where the customer is always right.
There are now talks of an iPhone 4 recall, though we doubt this will happen. Apple likely would succumb to pressure and hand out free protective rubber shields long before a recall happens. The protective shields completely eliminate the interference problem and are a much cheaper alternative to replacing all iPhone 4 devices. Most estimates are that these pads only cost about $1 to manufacture, so the financial loss would be far less than issuing a recall. In fact, Consumer Reports refuses to recommend the iPhone 4 until this problem is fixed
To make matters worse, Apple has also gotten itself into the muck with the law. Since the release of the first iPhone, Apple and AT&T have been locked in an exclusivity contract, meaning AT&T is the only carrier allowed to sell iPhones. In return, AT&T pays Apple a certain amount of money to maintain this privileged status. Details of this contract are only partially known, but recently it was revealed that the initial contract was for five years, meaning it won’t expire until 2012.
On Monday, a judge granted class-action status to a lawsuit filed on behalf of all customers who have ever purchased an iPhone through AT&T. At issue is whether or not customers realized they were essentially signing up for a five-year deal instead of the two-year contract written on paper. Of course, no customers realized this because details of the exclusivity deal are mostly secret. Consequently, the merits of the case look quite strong. For example, if you bought an iPhone in 2008, your contract with AT&T expires in 2010. However, all iPhones are locked, meaning you can’t simply take them to another network/carrier once your contract expires. In essence, your only option upon expiration of your contract is to continue with AT&T.
One thing is for sure: people are growing increasingly dissatisfied with Apple’s treatment of customers. All these problems with Apple are likely to help out its competitors who, with increasing regularity, are releasing smartphones that rival the iPhone in form and functionality. In fact, Apple’s stocks have begun to fall in recent days. Meanwhile, countless consumers continue to hold out for the iPhone to become available on other networks. However, these consumers might not ever purchase an iPhone if they discover other smartphones that meet all their needs, as we’ve already begun to see with the Droid series and other high quality smartphones released in recent months.