Apple iPhone 4 Antenna Response Fuels Debate

Apple CEO Steve Jobs' quickly called press conference July 16 -- in which he disputed whether there were problems with his company's new iPhone 4 device, blamed the media for the widespread coverage of reception issues, and offered a free accessory to take care of design problems in the antenna -- was supposed to tampen down the controversy surrounding the smartphone.

Instead, Jobs' comments are fueling the debate, drawing criticism from the analyst community as well as from competitors who say the CEO showed a lack of contrition, pointed fingers at the media rather than the company itself, and unfairly tried to paint rival smartphones as having the same problems with their antenna designs, spotty reception and dropped calls. In addition, analysts with market research firm IDC are finding that the issues are keeping iPhone users from upgrading to the new iPhone 4 due to the antenna issue, a development that could hurt Apple and its efforts to grow its customer base.

Jobs mockingly referred to “Antennagate” during his press conference, in which he sought to dial down the mounting criticism surrounding the Apple iPhone 4’s antenna design. During a portion of his presentation, Jobs noted that the smartphone’s reception fluctuation was quite normal, and that a number of other popular handsets did the same — an “Apple to BlackBerrys” comparison that Research In Motion co-CEOs Mike Lazaridis and Jim Balsillie didn’t appreciate.

“RIM has avoided designs like the one Apple used in the iPhone 4 and instead has used innovative designs which reduce the risk for dropped calls, especially in areas of lower coverage,” the two said in a July 16 joint statement, according to Crackberry.com. “One thing is for certain, RIM’s customers don’t need to use a case for their BlackBerry smartphone to maintain proper connectivity.”

The comment referred to Jobs’ offer of a free rubber “bumper” case to each iPhone 4 owner — while maintaining that iPhone 4 is still the best phone that the company had ever made. (How many purchasers called AppleCare to complain about the smartphone’s reception? Just 0.55 percent, Jobs said.)

Jack Gold, principal analyst with J. Gold Associates, also wasn’t keen on the smartphone comparisons. Gold wrote in a July 19 research note that Jobs spent a good deal of time insisting on how excellent the iPhone 4 is, “even saying it is the world’s best smartphone,” but then went on to compare its antenna to competitors’ devices and say that everyone in the industry has the same problems.

“Yes, physics is physics and radio waves are hard to control, but none of the phones he demonstrated have had the same problem in the marketplace, and none have been called unacceptable by Consumer Reports,” Gold wrote. “Sorry, Steve, but you can’t have it both ways. Yes, all phones in weak signal areas have issues to a greater or lesser extent. But they don’t claim to be perfect and the best phone ever invented.”

Gold was also quick to jump on a statistic Jobs offered — that the iPhone 4 drops less than one more call per hundred than the iPhone 3GS. For rounding purposes, Gold suggested assuming the figure is 1 percent, versus average network drop rates of 2 to 4 percent.

“So if the iPhone 4 is adding 1 percent to dropped calls, then it’s increasing dropped calls by 25 percent to 50 percent over the iPhone 3GS,” Gold wrote. “That’s a huge jump in dropped calls and highly significant. This should not be ignored, as it indicates a potentially significant end user satisfaction problem, further compounding the issue for both Apple and AT&T.”

Are users truly unsatisfied? Jobs suggested that the media had overblown Antennagate, considering that iPhone 4 return rates have been just 1.7 percent.

Despite the iPhone 4 breaking sales records for Apple, its antenna issue nonetheless does appear to be hurting sales, according to a July 16 report from market research firm IDC. Citing a brief survey, the firm noted that 66 percent of current iPhone owners have said that they’re delaying their purchase of an iPhone 4, “thus lengthening the normal upgrade cycle associated with the release of a new device.”

However, that figured was countered, wrote the research firm, by the 74 percent of non-iPhone owners who aren’t delaying a purchase.

Analysts have noted that for Apple to continue to grow, it’s important to bring new customers into the fold, versus relying on the brand’s established fans. How these two sides will shake out, however, time will tell, IDC suggested.

Noting that he was “pleased that Apple is working with its customers to offset the reception issues related to the iPhone 4,” IDC program director William Stofega said he’ll be keeping an eye on the matter. “It will be interesting to monitor the effect of Apple’s response to the antenna problem over the next several months ."