All Things Digital

Is AT&T (T) ready to take on Best Buy (BBY)? The phone company announced today that it will offer a technical support team providing in-home service for “virtually any home technology or entertainment need.” (Makes one chortle, just a little, to think about the “entertainment needs” AT&T might service in one’s home.) The offering is obviously competition for Best Buy’s Geek Squad technical support operation.

AT&T says it will help consumers configure computers, set up networking, install home theaters and mount TVs. “ConnecTech” as it’s called, will be available in the 50 States. On its Web page, ConnecTech lists prices ranging from $69 for basic troubleshooting of your PC or home network support to $179 for someone to come to your home for the same.

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While the FCC and certain broadband companies like to insist that there’s real competition in the broadband market, right here in the heart of Silicon Valley, there’s little evidence that this is true. If there were real competition, they might take customer service seriously. In the past few days I’ve had two separate issues with AT&T that suggest that the company treats customer service as not just an after thought, but something to effectively be shunned.

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AT&T is “carefully considering” monitoring the Web-surfing activities of customers who use its Internet service, the company said in a letter in response to an inquiry from the House Committee on Energy and Commerce.

While the company said it hadn’t tested such a system for monitoring display advertising viewing habits or committed to a particular technology, it expressed much more interest in the approach than the other big Internet providers who also responded to the committee’s letter.

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Best Buy (BBY) shares are on the rise this morning on news that the company’s Best Buy Mobile stores will carry the Apple (AAPL) iPhone starting Sept. 7.

Pricing will be the same as it is through Apple and AT&T (T) stores: $199 for the 8GB model and $299 for 16GB, with a two-year AT&T service contract. Best Buy stores already sell iPods and Macs.

Meanwhile, Radio Shack (RSH) shares are sliding today. The retail chain already sells AT&T wireless service, but for now at least, isn’t going to be selling iPhones. Also hurting Radio Shack: news that the company has sold $325 million of 2.5 percent convertible senior notes due 2013.

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Back on June 26, Credit Suisse analyst Kulbinder Garcha picked up coverage of Research In Motion (RIMM) with an Underperform rating, setting a $100 price target. So far, he’s looking like a genius: RIMM shares are since down 16 percent. His view was that RIMM’s EPS momentum is poised to slow over the next 12 months due to loss of market share in North America and pressures on gross margin. In particular, he asserted that the company was likely to lose share to Apple (AAPL) and AT&T (T) with the introduction of the iPhone 3G. Garcha set EPS estimates of $3.56 for the Feb. 2009 fiscal year, and $4.54 for FY 2010, below the Street at $3.81 and $5.41.

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Comcast (CMCSA) is simply crushing its telco competitors.

Consider a few data points. As I noted this morning, Comcast today disclosed that it added 555,000 new phone customers in the June quarter (499,000 when you back out losses in their circuit-switched segment), along with 278,000 high speed Internet customers and 320,000 digital cable customers. (It did lose 138,000 basic cable subs.)

Compare that with AT&T, which lost 993,000 residential primary wirelines in the quarter, or Verizon, which lost 833,000 primary residential lines and another 133,000 DSL lines.

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AT&T is admitting that if it discovers users of its wireless broadband 3G service are making use of P2P apps, it will cut them off completely, and claims that it makes this clear in the terms of service. It hasn’t happened yet, but this bit of data will supposedly be used by a dissenting FCC commissioner this week to show that Comcast’s traffic shaping is pretty tame compared to other “rules” out there on network usage (ignoring the very different nature of the networks in question, of course).

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A quick update on Apple (AAPL) iPhone sales in in the company’s two Palo Alto stores.

I stopped by the Apple Store in the Stanford Shopping Center about 9:15 a.m. this morning. There were about 150 people in a line snaking through the mall; the store seemed to be letting people in at a slow but steady pace, with about 10-15 salespeople processing orders. At this store, as at the University Avenue store, a number of customers said there were server issues that slowed the process earlier in the day. (That’s consistent with both news reports and comments from customers on some previous posts here.) One customer said he spent an hour in the store before leaving empty-handed, due to an issue that others have raised about people who are on corporate discount voice plans being eligible for the $199 price on the 8 GB phone.

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Piper Jaffray’s Gene Munster, perhaps the most bullish analyst on the Street on Apple (AAPL) shares–he maintains a Buy rating and $250 price target–wrote a detailed analysis today on what the true cost of the iPhone 3G will be for U.S. consumers. In short, while the retail price, at $199, is half the old price, other costs will make this version more expensive than the old over the life of the required two-year contract. And secondly, he estimates that the actual costs of the hardware will be a lot higher than the stated $199 price tag.

One issue, as Munster notes, is that the data plan for the first generation iPhone phone was $20 a month, including unlimited data and 200 text messages a month, on top of a voice plan. For the new phone, the data plan is $30 a month, and it will run you another $5 a month for 200 text messages. On that basis, the data-related fees over the course of two years will actually be $360 higher than before, or considerably more than the $200 cut in the hardware price.

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And the lines begin.

With about 21 hours to go before the West Coast debut of the iPhone 3G, I took a drive over to the Apple (AAPL) store on University Avenue in Palo Alto, just a mile or two from CEO Steve Jobs’s house, to check out the scene. So far, things are pretty tame: There were about a half-dozen people in line.

At the front of the line, sitting in a folding chair on the corner of University and Kipling, just around the corner from the front door, was 17-year-old Danny Fukuba, a recent graduate of Palo Alto High School. Fukuba and two of his friends, 16-year-old Eric Vicenti, who will be a senior at Paly in the fall, and 19-year-old Noah Rogers, a Paly grad who now goes to Foothill College, say they took their spots in line at 9 p.m. last night. They came armed with sleeping bags, folding chairs, a mattress, an Xbox, a monitor and Guitar Hero guitars. They were actually playing Guitar Hero in the street in the middle of the night, until the Apple store stopped letting them plug into its electrical outlets.

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On July 3, Chief Judge Vaughn Walker of the U.S. District Court in California made a ruling particularly worthy of the nation’s attention. In Al-Haramain Islamic Foundation Inc. v. Bush, a key case in the epic battle over warrantless spying inside the United States, Judge Walker ruled, effectively, … that the president lacks the authority to disregard the Foreign Intelligence Surveillance Act, or FISA. The story of how Al-Haramain’s lawyers negotiated the journey thus far to Judge Walker’s ruling … is a surreal saga, involving a top-secret document accidentally released by the government, a showdown between Bush lawyers and a federal judge, the violent destruction of a laptop computer by government agents, and possibly even the top-secret shredding of a banana peel.

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In the mobile phone business, the big news this week is Friday’s arrival of Apple’s (AAPL) 3G iPhone. But Palm (PALM) apparently has some ideas on how to take advantage of the extra traffic the new iPhone will generate in AT&T (T) stores.

On the official Palm blog, the company yesterday announced plans to start selling a new electric blue version of the Palm Centro at AT&T stores starting on Friday.

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The countdown to iPhone Day Part Deux has begun, meaning that Apple and AT&T are rallying the retail troops to get things ready for Friday. According to MacRumors, AT&T stores are going to receive their first demo units of the iPhone 3G today, although they won’t be activated until at least the 10th or available for public use until the 11th. 

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So Apple called Tuesday, a little annoyed with my portrayal Monday of AT&T’s iPhone pricing. The main difference on plans for the new iPhone versus the old are simple: The data plan is $10 more a month, mainly because the faster connection will mean higher data usage; and text messaging is charged separately.

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As you might expect, Dish Network (DISH) shares are lower today following the company’s disclosure last night that AT&T (T) has notified the company that it will terminate their distribution agreement at year end. The odd thing is that DirecTV (DTV) shares have barely budged on the news, despite the fact that they would be the obvious beneficiary if AT&T decided to change satellite television partners.

But the Street instead is apparently interpreting the news as a negotiating ploy, rather than a clear signal of plans to switch its relationship from DISH to DTV. Jamie Townsend, an analyst with investment research firm JRPG, asserted in a note this morning that it is more likely that the company stays with DISH but on improved terms.

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