Is AT&T to blame for the poor iPhone experience in cities like San Francisco and New York, where calls drop, data fails, and bars depict signal strength with no real connection behind them? And if so, what can they do about it -- build more network infrastructure, create tiered pricing, or maybe just give up on exclusivity?

Dan Lyons, writing under his nom-de-guerre Fake Steve Jobs recently posted a curse-filled parody, describing an entirely fictional, frighteningly plausible conversation between his character and an equally fake AT&T CEO, Randall Stephenson. It's climax:

And now here we are. Right here in your own backyard, an American company creates a brilliant phone, and that company hands it to you, and gives you an exclusive deal to carry it — and all you guys can do is complain about how much people want to use it. You, Randall Stephenson, and your lazy stupid company — you are the problem. You are what’s wrong with this country.

I stopped, then. There was nothing on the line. Silence. I said, Randall? He goes, Yeah, I’m here. I said, Does any of that make sense? He says, Yeah, but we’re still not going to do it. See, when you run the numbers what you find is that we’re actually better off running a shitty network than making the investment to build a good one. It’s just numbers, Steve. You can’t charge enough to get a return on the investment.

AT&T has made billions in profit off of its user base (and off the iPhone!) and many of those users think it would behoove AT&T to take a large portion of those profits and re-invest them in expanding and improving their network. AT&T claims they're doing just that, especially in high iPhone-density cities like San Francisco (now getting the 850Mhz band) and Dallas (upgrade to 7.2Mb HSPA). And as Fake Steve so deliciously skewered, AT&T Mobile CEO, Ralph de la Vaga has unfathomably discussed stopping users from using their devices under the "unlimited" data plans AT&T markets to them.

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But is the problem really AT&T?

The New York Times recently ran an article claiming AT&T had a great network despite consumer dissatisfaction... a great network for every other phone other than the iPhone. Of course, few other data-centric phones are as numerous as the iPhone, and none are as easy to use, or have as many users using as many data-centric features. Not to mention other carriers, such as Rogers in Canada and GSM networks across Europe don't seem to report the sheer number of problems AT&T users do. (We also remember with horror what happened when's Kevin took his just-release Rogers BlackBerry Bold to New York.) Perhaps it's the unique combination of AT&T's specific network setup and Apple's iPhone radios.

Either way, the perception problem is entirely AT&Ts at the moment and even with new customer-facing strategies like "Mark the Spot", an app that lets iPhone users report problem areas, it's not likely to change any time soon.

So let's say AT&T does invest billions in infrastructure -- more fast 3G HSPA bars in more places. It's the right and logical things to do, and the thing Fake Steve absolutely nails AT&T for being too greedy to go about doing. But what's the end result? Higher user satisfaction? Where does that lead?

Many suffer poor AT&T service just to own an iPhone. If they didn't have to suffer any more, if AT&T's network was considered as vast and solid as Verizon's, how many more might jump on it? Could even a greatly enhanced and expanded AT&T handle 10 million more people getting iPhones and using even more data, requiring billions more to keep up, and who knows how much to actually get ahead of demand?

AT&T's stick to go along with their network expansion carrot is, of course, capped data and tiered pricing. 3% of users "watching video" (or unofficially tethering, perhaps), using 40% of network resources. (And again, AT&T sold their bill of goods as "unlimited" so it's hard to sympathize). But even capping, throttling, and/or tiering those 3%-ers won't stop the millions of other hitting AT&T's towers over and over again like high volume machine-gun fire. It's not tenable. (Unless they're willing to accept their destiny and become "dumb pipes", then we'll talk).

So that leavoving the iPhone out of AT&T exclusivity and onto other US networks. It's happened in the UK and Canada.

AT&T acknowledges it will happen eventually. The date is unknown to anyone outside the contract-signers, but exclusivity is generally pegged to end in 2010 -- perhaps the end of 2010.

It won't be an easy transition -- T-Mobile uses a different frequency for their 3G bands and Verzion and Sprint use an entirely different radio technology. (Yes, even if Apple sold the iPhone 3GS unlocked, for use on any carrier, the only US carrier that whose 3G network is compatible right now is AT&T). That means, even with Verizon being interested, Apple would have to add T-Mobile's bands, perhaps switch to an entirely new, GSM/CDMA hybrid radio so that it can reach America's three other networks. A non-trivial solution to say the least, but perhaps a necessary one now.

If volumes keeps growing, even Verizon couldn't handle the iPhone by itself either. Just like new highways ease traffic congestion, letting the iPhone speed along several carriers might just make it better for everyone involved -- including AT&T.

If anyone can do it, Apple can. If not, Google might just be waiting in the wings...

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