Lessons On Alienating Your Core Customer

Flickr photo by jacobms

AT&T, faced with complaints about its coverage area, is blaming it on users that stream audio and video on their smartphones, and indicating that they may move to restrain heavy users from unlimited streaming.

Last week, at UBS Global Media and Communications Conference in New York City, AT&T head of consumer services Ralph De La Vega told investors that 3 percent of smartphone users are consuming 40 percent of the network capacity, and that the most high-bandwidth activity is video and audio streaming.

AT&T has taken lots of criticism for the broadband coverage offered by their network, and is locked in an advertising war with Verizon over the same. Apparently, they think the solution is to penalize their heaviest users.

AT&T has sold many iPhones and data plans on the excitement of unlimited untethered streaming activity. I know my husband cancelled his subscription to satellite radio, upgraded to an iPhone and data plan, and started listening to Pandora in his car. Now, AT&T customers like him that bought the phone and the data plan, and are getting the most enjoyment out of it, may be limited.

My point is this. Internet radio and Pandora in particular have witnessed great audience growth as a result of smartphones and wireless broadband connectivity. AT&T built a customer base in part around that. People didn’t buy iPhones because they want to talk on them – they bought them to do all the other stuff…including streaming music.

The impact of streaming on AT&T’s network cannot be coming as a surprise to the company, which has been promoting Pandora and streaming radio to its customers since 2007 when they were using Pandora to sell MEdia Max bundles for $19.99 a month. There’s a name for this way of selling your products to consumers, it’s called Bait and Switch, and it’s a bad business strategy for AT&T…

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