When Steve Jobs introduced Apple's (Nasdaq: AAPL) iPad, his confession that its cellular access would be available only through AT&T (NYSE: T) brought audible groans from the audience.
The iPhone was notorious for dropped calls, particularly in the San Francisco Bay Area -- where the iPad launch was held -- and New York City. iPhone owners in those areas are known to have so much trouble with AT&T that they use Skype's iPhone app and a wireless network for iPhone calls. Some of their neighbors compromise with a two-device solution, carrying an iPod Touch and a cell phone from another service provider such as Verizon (NYSE: VZ), Sprint Nextel (NYSE: S), or Deutsche Telekom's T-Mobile.
Whose fault was it? AT&T took most of the heat, but it was never clear that the dropped iPhone calls were not the iPhone's fault. And last year's Antennagate episode with the new iPhone 4 was not exactly an endorsement of Apple's cellular-technology capabilities.
The proof is in the Verizon iPhone
A Verizon version of the iPhone 4 came out in January, to the delight of many an iPhone fan who prizes reliable cellular service. The rollout also allows us to answer that nagging question: Is the iPhone's dropped-call problem AT&T's or Apple's fault?
According to a March study by ChangeWave Research, AT&T is the reason the iPhone drops calls. Users of the Verizon iPhone 4 reported a 1.8% dropped-call rate, the same rate as users of other Verizon phones. Users of the AT&T iPhone 4 reported a 4.8% dropped-call rate, 2.7 times the rate of Verizon iPhone users.
AT&T has been touting network improvements since at least last summer, no doubt over concerns that Verizon would get the iPhone. The ChangeWave survey was last month. Just imagine what AT&T's dropped-call rate was before its network improvements!
Foolish takeaway
Settling the dropped-call debate is a clear negative for AT&T. And it's a positive for Verizon, although concerns remain that if Verizon signs up too many iPhone users, its network could suffer from overloading and dropped calls, much like AT&T's.
Settling the debate could also boost iPhone sales, a positive for Apple. It could help mitigate some of the pressure from smartphones based on Google's Android, such as Motorola Mobility's (NYSE: MMI) Droid series or HTC's Thunderbolt, which was recently reported to be briskly selling at Verizon stores.
Just don't tell anyone "I told you so."
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