The Beginning of the End at AT&T

May 24, 2010

In an incredible announcement, AT&T declared that it will be raising its termination fee for iPhones and a few other devices from $175 to $325.  The company offers some explanatory chatter about handset subsidies, but the real message it’s sending is that it’s simply done trying to win over customers.  Rather than keeping us the old fashioned way, by creating and sustaining real value, AT&T is now just charging us a ransom to leave.  Imagine an AT&T that was truly confident in its ability to serve? How would it behave in the marketplace?  It would invite customers to stay only as long as we’re satisfied — and not a cell-phone minute longer.

I find this decision scandalous, particularly since I’m already a frustrated AT&T customer (I can barely make it through a phone call without it being dropped).  When a company moves towards trapping customers, the clock starts ticking on its ability to serve them.  Penalties for ending the relationship create sharp antagonism with customers — antagonism that’s disproportionately felt by front-line workers — and signals to the entire organization to forget about excellence.

This toxic combination ensures mediocrity and accelerates a company’s decline.  I get it.  Winning the cell phone game is hard, and the people behind the idea likely had the best interests of the company in mind.  But when you broadcast that you can’t convince customers to voluntarily stick around, everyone hears you loud and clear, including your employees.  Who would keep trying in a culture like this?

Sigh.  This is a sad day for AT&T.