Apple underscores one of the strengths of AT&T's cellular network

Image: Apple Inc.

Scheduled to air on primetime TV Monday night are a pair of Apple (AAPL) iPhone advertisements that highlight one of the few things AT&T's (T) network can do that Verizon's (VZ) can't: surf the Web in the middle of a phone conversation.

(AT&T's GSM network allows simultaneous voice and data connections; Verizon's CDMA network does not.)

The spots — posted below the fold — follow a series of high-profile Verizon ads attacking both AT&T and, by association, the iPhone, for the shortcomings of the carrier's 3G network.

Apple's response — showing users a feature that they may not have been aware of  — is considerably more subtle than AT&T's, which accused Verizon of false advertising and sought relief from its ad campaign in the courts, so far without success.

The ads are scheduled to run during House, Dancing With the Stars, How I Met Your Mother, One Tree Hill, Big Bang Theory, CSI: Miami, The Daily Show, and the late-night talk shows (Conan, Kimmel, Fallon, Craig Ferguson).

Below the fold: the new ads, via BusinessWeek's Arik Hesseldahl.

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Its Cinderella contract with Apple for the iPhone runs out in seven months, says one analyst

Brian Marshall. Image: Bloomberg

Broadpoint AmTech's Brian Marshall, who has replaced Piper Jaffray's Gene Munster as the most bullish of the mainstream Apple analysts, made several assertions of fact in an Bloomberg TV interview Friday that — if true — struck me as newsworthy. Chief among them:

• The contract that gives AT&T (T) exclusive access in the U.S. to Apple's (AAPL) iPhone expires in June 2010.
• Apple is now getting a $450 subsidy from AT&T for each iPhone it sells; after June, that subsidy will be reduced to $300 for all carriers, domestic and international.
• The 4% of AT&T subscribers who use the iPhone consume roughly 40% of the network's bandwidth.

Here and in a research note issued last late month, Marshall has been lobbying heavily for Apple to start selling the iPhone through Verizon (VZ). It turns out he may have personal reasons for doing so. He told Bloomberg's Pimm Fox that whenever he travels to New York or San Francisco with his iPhone he gets dropped calls "all the time."

"A very frustrating experience," he said, "but I'm not going to move away because Apple has their hooks into me"

You can hear all this, plus what Marshall has to say about the Chinese iPhone market, Windows 7's effect on Mac sales and Apple's 2010 earnings, in the interview posted below the fold.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

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The No. 2 telco responds defiantly to AT&T's claims that its ads are false and misleading

"AT&T did not file this lawsuit because Verizon’s 'There’s A Map For That' advertisements are untrue; AT&T sued because Verizon’s ads are true and the truth hurts."

So begins Verizon's (VZ) legal reply to a pair of lawsuits filed earlier this month by AT&T (T) demanding that Verizon pull five disputed ads from the air. The issue: a pair of 3G coverage maps that AT&T claims are "false" and "misleading" and are causing it "irreparable harm" as the two companies enter the holiday selling season.

The 53-page filing lays the factual basis for the ads and concludes its introduction with a  paragraph that gets to the heart of AT&T's problem: its failure to prepare for the success of Apple's (AAPL) iPhone, for which it is the only authorized U.S. carrier.

"In the final analysis," the introduction concludes, "AT&T seeks emergency relief because Verizon’s side- by-side, apples-to-apples comparison of its own 3G coverage with AT&T’s confirms what the marketplace has been saying for months: AT&T failed to invest adequately in the necessary infrastructure to expand its 3G coverage to support its growth in smartphone business, and the usefulness of its service to smartphone users has suffered accordingly. AT&T may not like the message that the ads send, but this Court should reject its efforts to silence the messenger."

The document is available as a PDF here.

See also:

• The iPhone wars: AT&T vs. Verizon
• Verizon vs. AT&T: There's a map for that
• Rumors: A Verizon iPhone in 2010
• AT&T Mobility is nipping at Verizon's heels

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Ma Bell strikes back with a letter, another lawsuit and its own coverage maps

The map that AT&T sent to the press. Source: AT&T

Claiming "irreparable harm," AT&T (T) has filed its second lawsuit in two weeks asking a U.S. District judge to force Verizon (VZ) to pull its new TV ads — cartoons that depict the iPhone as the latest arrival to the "island of misfit toys." The issue, once again: coverage maps that AT&T claims are "false" and "misleading."

On Thursday, AT&T followed up with a "set the record straight" letter reminding customers and the press that it, not Verizon, carries the "most popular smartphones" — i.e. Apple's (AAPL) iPhone — and that its customers, not Verizon's, have access to more than 100,000 applications.

The letter includes a link to the version of AT&T's coverage map — shown above — that the company thinks Verizon should be showing in its ads.

We're not so sure. Let's look a little closer at this map — and some others — below the fold.

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What happens when telcos practically give it away ($13 for 100 megs!)?

NiQ Lai, chief financial officer of Hong Kong's City Telecom (CTEL), stopped by FORTUNE's San Francisco offices this week while on an investor tour. I had one question for him: Short of moving to Hong Kong, how can I get some of what he's selling?

I pay $25 to AT&T (T) every month for DSL that tops out at 1.5 megabits per second downstream, and 384Kbps for uploads. It's not always as fast as advertised. Sometimes it doesn't work at all. Cable offers faster speeds in my neighborhood, but the service also costs more, so I just try to remember the days of dial-up modems and convince myself that DSL is good enough.

But if we had a US version of City Telecom, I'd switch in a heartbeat – which is precisely what the residents of Hong Kong have been doing lately.

City Telecom's 400,000 customers pay $13 a month for 100 megabit synchronous broadband. And they get a money-back guarantee: If they don't clock 80% of the promised speed, the company pays them twice their monthly fee.

"We have a big hairy audacious goal," says Lai, referring to the term popularized by "Good to Great" author Jim Collins. "We want to be the largest IP service provider in Hong Kong by 2016. And three years into our strategy, we're well on our way to doing it."

If you live within coverage area of Verizon's FiOS service (VZ), you pay as much as $150 a month for up to 50 megs downstream and 20 upstream.

How can City Telecom possibly offer service that's more than twice as fast at less than 10% of the price?

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Two sources say Apple is building a hybrid "worldmode" phone that Verizon could use

Judging from reader comments in this space, there are a lot of cellphone owners in America locked into Verizon (VZ) contracts who would buy an iPhone in a minute if they didn't have to switch carriers to get it.

Verizon has made it pretty clear that it would cut a deal with Apple (AAPL), were it not for a couple of impediments: 1) the contract that makes AT&T (T) the iPhone's exclusive U.S. carrier, and 2) the fact that Verizon's network (based on CDMA2000 technology) is incompatible with Apple's smartphone (which uses W-CDMA (UMTS)).

The first roadblock — AT&T's contract — is set to expire next year, according to a widely cited 2008 USA Today article that included an interview with chairman Randall Stephenson. (Stephenson declined to comment on the details of the contract.)

The second barrier could also disappear were Apple to build a new iPhone that is compatible with both AT&T and Verizon's networks. More

Going after AT&T's network and Apple's iPhone could prove an expensive proposition

Source: Motorola

Broadpoint AmTech analyst Mark McKechnie's estimate that Motorola (MOT) sold 100,000 Droid smartphones last weekend has been getting a lot of attention, although nobody's quite sure what to make of it. McKechnie called the number "encouraging." Nielsen's Roger Entner found it "a little troubling." IDC's Ramon Llama said it was "nothing to shrug off."

Part of the problem is that everybody is comparing Motorola to Apple (AAPL), which sold 270,000 iPhones in its first two days of sales in 2007 and 1 million iPhone 3GSs in three days last June. The consensus on the Street is that Motorola will do well to sell 1 million Droids by the end of the year.

The other problem — and the reason Nielsen's Entner is so troubled — is that the ground had been softened for the Droid by a carpet-bombing ad campaign, the biggest in Verizon's (VZ) history. According to Ad Age's Rita Chang, the carrier has budgeted $100 million to support the Droid, most of it to be spent before the end of the year.

You can do the math.

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Motorola and Verizon invited comparisons, and that's what they got

Photos: Motorola, Apple

The Droid lands in stores Friday, and on Thursday the heavyweight reviewers — which is to say the Wall Street Journal's Walt Mossberg and the New York Times' David Pogue — weighed in.

Given that Motorola (MOT) and Verizon (VZ) pitched the Droid in its first TV ad as everything Apple's (AAPL) and AT&T's (T) iPhone was not, it was perhaps inevitable that every reviewer so far, including these two, treated its arrival as a grudge match.

Mossberg's review is positive but tepid — especially the video version. He plods through the comparisons item by item like a slightly boring homework assignment. His top-line summary:

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New software transforms your phone into a GPS device – and a pretty good one, too

Navigon's MobileNavigator app for the iPhone has features some standalone units lack. Photo: Navigon.

As my wife will tell you, I have a comically bad sense of direction. I once got lost driving home from the mall.

This makes me a prime candidate for a GPS device. I’ve used a few for brief stints, mostly on long road trips, but never got into the habit of using one for everyday errands. There are a couple of reasons for that. For one, it’s a hassle to dig the thing out of the glove compartment. For another, entering an address on most of these things is a crazy-making experience.

My perspective changed recently, though, when I bought a new GPS unit for $70. Well, that’s not exactly what happened. I actually downloaded a GPS-based iPhone (AAPL) app for $70.

Yes, 70. Seven-zero. I’ll be the first to admit that it sounds crazy to pay that much for software that runs on a phone. The overwhelming majority of phone apps out there cost between 99 cents and $10. More

Apple has 93,000 to Android's 11,300. But how many applications do you really need?

Photos: Motorola, Apple

In the flurry of quickie reviews that appeared overnight after Wednesday's unveiling of Motorola's (MOT) Droid — Google (GOOG) and Verizon's (VZ) latest answer to Apple's (AAPL) iPhone — little has been said about how the two platforms stack up in terms of apps.

At first glance, it seems an unfair comparison. Apple has spent a small fortune promoting those famous 85,000 iPhone applications — a number than has since grown to roughly 93,000 and is on track to hit 100,000 in a matter of weeks.

Source: AndroidLib.com

But it's not as if there are no apps for the Droid. As of Thursday morning there were 11,284, according AndroidLib.com's unofficial count of the offerings in Google's Android Market. Moreover, that number too is growing by the thousands. Android developers added 2,333 new apps in September and another 2,431 so far in October.

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