Bad Connection: Inside the iPhone Network Meltdown

AT&T's network proved unable to cope with the deluge of data traffic generated by the iPhone, particularly in cities like San Francisco and New York. Even as the #attfail meme burned up Twitter, AT&T accelerated its network upgrades -- it has spent nearly $37 billion on new equipment and capacity since the iPhone launch and expects to invest around $13.5 billion in 2010. The effort may have already boosted performance, with at least some independent studies showing that the carrier's network has improved. And yet AT&T's image remains deeply damaged, and the body slams keep coming -- including insults from mischievous blogger Fake Steve Jobs, The Daily Show's Jon Stewart, and Facebook's Mark Zuckerberg. Meanwhile, the groundbreaking alliance has deteriorated into a loveless celebrity marriage. Each company has publicly described the other as the ideal partner (and neither would comment for this story beyond reiterating that talking point), but behind the scenes both have jockeyed for position while consumers have lashed out, looking for someone to blame.

Those problems are exposing a fundamental schism that's occurring between all smartphone makers and carriers, not just Apple and AT&T. That partnership has lain bare a fundamental disconnect between phone makers -- who want to make indispensable devices that customers use constantly to their fullest capabilities -- and carriers, who want to limit the data demands on their networks. This dysfunctional relationship is not unique to Apple and AT&T; the tensions that have undercut the iPhone will likely bedevil every manufacturer and carrier. And what that means is, at some point, everyone with a smartphone will probably experience the same frustration as AT&T customers.