Wednesday, June 16, 2010

AT&T, Apple Struggle to Handle iPhone Orders

The Wall Street Journal

AT&T Inc.'s website, unable to handle the demand for Apple Inc.'s new iPhone on Tuesday, had difficulty processing orders and in certain instances appeared to reveal subscribers' personal information to strangers.

Although the scope of the problem and its underlying cause couldn't immediately be learned, some AT&T customers, who were logged into AT&T's website as themselves ended up in other users' accounts.

AT&T and Apple didn't immediately comment on the apparent glitch.

The security lapse was the second in a week for the No. 2 U.S. carrier, which acknowledged June 9 that a flaw in its website allowed a group of computer experts to uncover the email addresses of thousands of owners of Apple iPads, including prominent officials at companies, in the military and in the government.

The problems Tuesday with AT&T's site took shape as the company's chief executive, Randall Stephenson, was in New York talking to the media and investors.

Asked about last week's iPad incident, the CEO said privacy issues are important and that a failure to prevent more serious breaches of network security would stall the growth of the mobile data market.

"Customer privacy, data privacy is critical," Mr. Stephenson said in an interview before the latest problems became apparent.

Apple's iPhone 4 officially goes on sale June 24, but AT&T and Apple began accepting preorders Tuesday. Almost immediately, would-be buyers began complaining they were unable to complete order requests through AT&T's or Apple's websites.

AT&T said the day was the busiest for online sales in the company's history, but didn't say how many units were ordered. All iPhone 4s that could be preordered for delivery on June 24 sold out, the company said. Customers who order now will get devices on June 25 or later. There will also be iPhone 4s available in stores on June 24, AT&T said.

"I tried ordering in two states," said Chris Freeberg, who was trying to order the new iPhone from a computer in a downtown San Francisco Apple Store. The 27-year-old owner of an original iPhone woke up at 5 a.m. in his hometown of Chicago and tried to reserve the device before flying to the West Coast, but gave up after four tries.

His effort to order from Apple's own store failed, too, so he decided to try again Wednesday. "I'm just ready," he said. "I just want it mailed to me so I can have it on the first day."

The computer outages appeared to be severe in some cases, forcing sales clerks to adopt manual work-arounds to get people signed up.

An Apple store employee in New York City said the preorder system had gone down. Apple stores in Manhattan and San Francisco were letting customers reserve the new phone at the store for pickup when the device goes on sale.

An AT&T sales representative at a New York City store said the preorder system had been down for much of the day. She was taking customers' credit card information and planned to enter it into the system once it came back up. She said similar issues were seen last year when the iPhone 3GS opened up for early orders.

The computer glitches are a black eye for AT&T and Apple, which have struggled to overcome complaints about dropped calls with the iPhone, but it wasn't clear whether they would have any lasting effect on demand for the smartphone.

Justin Berk, a meteorologist at the ABC affiliate in Baltimore, said he bounced around between the Towson, Md., Apple store and a neighboring AT&T store, enduring a 40-minute wait before an AT&T clerk manually took his credit card information. "Every iPhone launch has been a debacle," said Mr. Berk. "I'm so frustrated, but I still can't wait to get this phone."

Even as customers showed why the iPhone has been a key driver of AT&T's growth, Mr. Stephenson spent time talking about how new devices are making the smartphone market much more competitive, an indication the wireless carrier is already looking ahead to the day when its exclusive contract to carry the Apple device expires.

In an interview with The Wall Street Journal, Mr. Stephenson said 70% of his customers are tied up in family plans, which would make it harder for them to run to the doors in the event a competitor got hold of the iPhone.

He also said AT&T is broadening its slate of offerings, including to new phones powered by Google Inc.'s Android mobile operating system.

"We have a lineup that we haven't disclosed," he said. "There will be other devices that come along, and we'll do just fine."

On Monday, AT&T announced that it would sell its second Android phone, HTC Corp.'s Aria, starting June 20, and Mr. Stephenson said the top handset manufacturers are pouring money in Android in an effort to build the next flagship device.

"You're going to see Android become more and more prevalent in our device line-up," Mr. Stephenson said.