i Phone's pain is rivals' gain

Apple sold more than a million iPhone 3G cell phones its first weekend — with some stores running out — and 2 million more since then, analysts say. But its July debut has been nothing less than a public relations headache for AT&T, with eager buyers complaining about dropped calls and poor network connections.

Some fingers point to Apple, which has tried to deflect the complaints. But many others point to AT&T's cellular network. Whatever the source of the problems, AT&T's rivals, long irritated by all the attention the iPhone has received, are on the attack and happy to exploit the discontent.

"A phone is only as good as the network it's on," said a full-page Verizon Wireless newspaper ad on Thursday, lobbing a shot at AT&T's 3G, or third generation, high-speed network. A Verizon executive sent an e-mail to Wall Street analysts last week: "So much for a 'new' way of doing business at the old AT&T — your father's phone company."

For AT&T, the nation's No. 1 wireless carrier, which exclusively offers the iPhone, the situation is especially tricky because the stakes are so high. Apple's customers are largely forgiving of any foibles of the iPhone's maker. But wireless companies, though, like AT&T and Verizon, are afforded no such a luxury. The 3G network is supposed to make it easier to surf the Web and watch videos online. With nearly 90 % of all Americans owning a mobile phone, there is little room to grow and these rivals can little afford to lose customers.

Further aggravating consumers, neither Apple nor AT&T has fully explained why calls were dropped and the network slow. Theories abound, which is causing even more confusion — and fingerpointing. Is it a problem with the phone itself? Richard Windsor of Nomura Securities surmised in a recent research report that a new radio chip made by Infineon, a German chip maker, was to blame for the iPhone's spotty service in areas where the cellular signal was weak.

Since Americans are not the only iPhone users complaining — consumers in the Netherlands reported iPhone problems too — some analysts think the iPhone is partly to blame. Apple offered a software fix to mixed reviews — but no explanation. Most analysts put the onus on AT&T. "If consumers are not getting the full 3G experience, that is not Apple's fault," said Akshay K. Sharma, a research director of carrier network infrastructure at the Gartner Group, a consulting firm.

Nielsen Mobile, a consulting firm, said in tests in the 47 largest American cities, it was able to connect to 3G networks 93 % of the time. (Its sample included all carriers.) By contrast, in the San Francisco area, where many of the iPhone troubles have been reported, that number was 87%.

Phil Marshall, a senior research fellow at the research firm the Yankee Group, said the problem probably lies somewhere in between, in how the iPhone interacts with AT&T's network and signals are transmitted and received.