07/21/2010 12:36 pm ET Updated May 25, 2011

Apple and AT&T: Why Monopolies Make People Mad

Steve Jobs says that the iPhone antenna problem "has been blown so out of proportion that it's incredible." He seems puzzled and annoyed by the intense anger, frustration, and criticism bombarding him. What he doesn't understand is that whenever you establish a monopoly, you had better make sure that your product or service is perfect - because any glitches or problems will be magnified by customers' feelings of being trapped.

Twenty years ago, when I was a manager at a large metropolitan newspaper, our advertising clients would angrily tell our sales reps: "If you guys weren't the only game in town, I'd take my business elsewhere!" Our rival newspaper had gone belly up, leaving us with a monopoly on display advertising. Our ad rates were exorbitant and every year our executives raised them. This infuriated advertisers, who felt trapped by our paper's monopoly on high-income readers. And whenever there was a typo or mistake in an ad, the client would fume helplessly because his hands were tied. Advertisers bitterly complained that our newspaper was arrogant and didn't care about customers.

Ten years later, after I had left the newspaper to become a management consultant, I came across a different sort of monopoly backlash at a Wilmington, California oil refinery. The people who worked there were highly paid with superb benefits. With its generous compensation and benefits, the refinery had, in effect, established a monopoly on the best workers in the area.

You'd think that morale would be high and that people would be happy with their employer - but they weren't. Rank and file workers complained about favoritism in promotions and overtime assignments. They complained about racism and sexism in disciplinary practices. The higher their seniority, the lower their job satisfaction. The employee relations department was up to its eyeballs in grievances, as well as headaches from the union.

Why? Golden handcuffs. Workers felt "trapped" by their high pay and great benefits. Most refinery workers had just a high school education and knew there were no other jobs in the Wilmington/Long Beach/San Pedro area where they could earn such high salaries without a college degree. So whenever employees were unhappy with management or their coworkers, they had no place to go - there were no good job options. Their golden handcuffs made them more unhappy over perceived problems at work.

Most companies think that having a monopoly in their field would be a good thing. Who wouldn't like to have a corner on the market for customers ... or workers? But a monopoly can easily backfire, as we see with the Apple/AT&T exclusivity. Anytime you cut off people's options, you make them mad.

This is exactly why iPhone customers are livid about the antenna problem and dropped calls. These may seem like small problems to Steve Jobs, but they feel like big problems to customers who are trapped by the monopoly established by Apple and AT&T.

Americans like to vote with their feet - and their wallets. They want companies to compete for their business. They want to be wooed and won. They want choices.

Jobs may be right when he says that dropped calls are a problem across the board with all service providers, but that is no consolation to customers who feel frustrated because they can't take their iPhones to Verizon, Sprint, or T-mobile.

Jobs tries to justify himself by pointing out that three million people bought the new G4 iPhones in spite of AT&T's crappy service. What he fails to realize is that he could have sold four or five million phones (maybe more) if he had let customers choose their own service providers.

Jobs defensively asserts that less than one percent of customers complained and less than two percent returned their new iPhones to Apple. But he doesn't understand that complaints are just the tip of the iceberg: 26 out of 27 unhappy customers will NOT complain, for a variety of reasons ("it's too much hassle;" "it takes too much time;" "it won't do any good anyway;" etc.). But we can be sure that these unhappy customers DO complain to their family, friends, and coworkers. They blog and tweet their frustration all over the Internet! They may resign themselves to lousy service for the time being, but they stew in resentment.

By shackling his customers to AT&T, Jobs brought this fury on himself. When you establish a monopoly, you'd better make sure you treat your customers even better than before, because you've taken away their options.

Steve, if you love your customers as much as you say you do, take off their handcuffs. Release them from bondage to AT&T. Let your people go.