Consumer Reports turns up the heat on iPhone 4 problems

Consumer Reports stepped up its criticism of Apple over iPhone 4 antenna problems, saying Apple and not consumers should be responsible for fixing the faulty devices.

Consumer Reports wrote on its blog Tuesday: "Why Apple—and not its customers—should fix the iPhone 4:"

In our reporting and a video yesterday, we made the point that the signal drop that iPhone 4 customers have observed when they hold their phones the “wrong” way is real—and we’ve called on Apple to do something about it. In an earlier statement, the company noted that attenuated performance is a “fact of life” for every wireless phone. Apple suggested owners mitigate the problem by holding the phone differently or purchasing a case. But those solutions put the onus on consumers and skirt Apple’s obligation to offer a product that works consistently and reliably out of the box.

We think it’s the company’s responsibility to provide the fix—at no extra cost to consumers.

Consumer Reports tests, conducted in controlled lab conditions, confirmed anecdotal evidence of iPhone 4 antenna problems. "Our tests found that when your finger or hand touches a spot on the phone’s lower left side—an easy thing to do—the signal can significantly degrade enough to cause you to lose your connection altogether if you’re in an area with a weak signal," the organization said.

Consumer Reports also attempted (unsuccessfully, I think) to explain an apparent contradiction in its findings. "Ironically, aside from these reception glitches, our other tests placed the iPhone 4 atop the latest Ratings of smart phones. But we did not feel comfortable listing a phone with such a problem as 'recommended,' and therefore have withheld that tag."

Major blow to the brand

"The complaints against Apple have delivered a major blow to a brand that is, for the most part, known for making high quality products. Apple’s stock price dropped by 2 percent on Tuesday to end the day at $251.80," PCWorld reported. The stock recovered to $254.80 as I write this morning.

What should Apple do about the problem? CultOfMac queried several PR experts, and they suggested Apple should recall the iPhone 4, saying a recall is inevitable.

But a recall is unlikely, and would cost $1.5 billion, says Bernstein Research analyst Toni Sacconaghi, as reported by Barrons.

The Bernstein analyst thinks that the time has come for Apple to “explicitly and constructively address the iPhone 4’s reception problems - ideally with an explanation for the root cause of the antenna issue, and a solution(s) for addressing it.” Sacconaghi noted that it is difficult to know if the issue can be fixed with a software patch - it seems to be a hardware issue - or whether it could be cured with an in-store hardware fix. He estimates the cost of an in-store fix at $75 a piece, or $450 million assuming their are 6 million units sold or in transit. A full recall and the issuance of a revamped phone - an option he does not think is likely - could run $250 a phone, or an estimated $1.5 billion. Sacconaghi agrees with other analysts that a more likely solution would be for the company to issue rubber cases to all iPhone owners, a solution he thinks could cost the company a buck a unit or less.

Bigger cultural problem

But there's a bigger, cultural problem at Apple, says Sacconaghi in a CNET report.

“Perhaps the bigger, longer-term concern for Apple investors is the emerging pattern of hubris that the company has displayed, which has increasingly pitted competitors (and regulators) against the company, and risks alienating customers over time,” Sacconaghi wrote. “Examples of its behavior have included its limited disclosure practices (Steve Jobs’ health; plans for deploying its cash balance), its attack on Adobe’s Flash, its investigation into its lost iPhone prototype (which culminated in a reporter’s home being searched while he was away and computers being removed), its restrictions on app development, and its ostensibly dismissive characterizations of the iPhone’s antenna issues (i.e., phone needs to be held a different way; a software issue that affects the number of bars displayed). The worry is that collectively, these issues may, over time, begin to impact consumers’ perceptions of Apple, undermining its enormous prevailing commercial success.”

Maybe that kind of behavior will undermine Apple's success. I've been critical of some of the same action that Sacconaghi criticizes. But I bristle when I hear Apple being criticized for "arrogance" (the usual word Apple critics use) or "hubris" (Sacconaghi's word). Apple is hugely successful making brilliant products, and that takes arrogance. If Apple or Steve Jobs were properly humble, we wouldn't have wonderful products like the iPhone and iPad.

What Apple's critics call "arrogance," and Sacconaghi calls "hubris," I see as the confidence to develop great products and bring them to market, despite criticism from armchair quarterbacks. Apple measures success using the only metric that matters, whether customers choose to buy its products.

iPhone 4 problems, and the company's so-called "arrogance," may not be hurting Apple's bottom line at all, writes my colleague Jonny Evans. He talks to researchers at Changewave who say that demand for the iPhone is still hugely powerful. Customer satisfaction is also soaring, Changewave says. I'm one of those satisfied customers; I got my new iPhone last week, my third. I love it, and I haven't seen any of the antenna problems that others are reporting.

Meanwhile, Conan O'Brien has discovered a new problem for Apple:

I found a huge design flaw in my new iPhone. People get angry when I talk on it during a funeral.less than a minute ago via web

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Conan O'Brien

ConanOBrien

Mitch Wagner

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is a freelance technology journalist and social media strategist.

Copyright © 2010 IDG Communications, Inc.

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