Why Apple is Undercutting Its iPhone Partner AT&T

Last Updated Apr 1, 2010 2:52 PM EDT

Techies were puzzled last week by Apple's (APPL) introduction of a new app called Line2. Why would Apple approve software that violated several of the company's core principles? The answer is simple. Apple is distancing itself from its partner AT&T (T) as it lays the groundwork for an iPhone on multiple carriers this summer. The Line2 app allows users to make calls over a WiFi network. When launched on the iPhone, it creates a carbon copy of the phone's layout, contacts, etc. "Let's pause for a moment here to blink, dumbfounded, at that point," wrote the NYT's David Pogue. "Apple's rules prohibit App Store programs that look or work too much like the iPhone's own built-in apps."

This was the argument Apple presented to the FCC when it rejected Google's (GOOG) voice app, which would have worked just like Line2. "Oh well," concluded Pogue, "the Jobs works in mysterious ways."

There is no mystery here. Apple would never allow Google to integrate with the Iphone's core functions, where it might steal mobile ad revenue and charm users. But Apple is ready to move beyond AT&T and its notoriously spotty service. Line2 offers Jobs a chance to upgrade the iPhone's cell service without changing the basic iPhone experience one iota. Same layout, same contacts, same difference.

The impact on AT&T is mixed. Yes, Line2 lets people talk over WiFi, which doesn't count against AT&T minutes. This might cause some savvy customers to downgrade to cheaper plans with fewer minutes. But the app also takes some of the pressure off AT&T's congested network, helping its service run smoother for all users. One thing is clear: Apple is no longer afraid to hurt AT&T's feelings.

The real question, as the iPhone moves beyond a single carrier this summer, is whether Line2 represents Apple's true embrace of VOIP. This may be a stopgap measure intended to placate customers until the introduction of multiple carriers clears up service issues. The beauty of the App store's draconian regulations, from a business perspective, is that it can decide to yank Line2 at any time, for no reason, if it no longer suits its purposes. Jobs works, but his ways aren't all that mysterious.

  • Ben Popper

    Ben Popper writes at the intersection of culture and technology. His work has been published in the NY Times, Washington Post, Fast Company, Rolling Stone, The Atlantic and many others. He lives at www.benpopper.com.