iPhone 4 Snafu Is the Latest Sign That Apple's Dysfunctional Customer Relations Will Be Its Downfall [Update]

Apple's (AAPL) iPhone 4 problems keep getting worse. Not only do more issues appear, but now there's evidence that Apple has deliberately protected its image at the expense and frustration of customers. A leaked Apple document instructs customer service reps to explain away phone reception problems and do nothing, in a case of corporate gaslighting. This is just the latest example of Apple's culture of dysfunctional customer relations, which will be its Achilles' heel.

To date, there have been at least six categories of problems found in at least some iPhone 4 units:

1. If you hold the iPhone by the antenna band that surrounds the case, you can lose reception and, in some cases, experienced dropped calls.
2. Some screens have yellow blotches or lines.
3. In some iPhones, the screen sports white dots that look like a constellation.
4. The first cases of the supposedly super-tough glass cases breaking on an accidental drop from a one-foot height have started to appear. On others, the glass has already begun to scratch.
5. Some units have swapped volume keys, so pressing louder makes things softer.
6. People using iOS 4, which includes more than the iPhone 4, had problems synching with Microsoft (MSFT) Exchange servers to keep current with email, contacts, and calendars.

However, that's the exception, because it's software and relatively easy to cure. The other problems are hardware, and there's no easy way to push a solution over the air. So what is Apple's approach? Try to talk people out of thinking that there's anything wrong.

This isn't the first time Apple has tried to pretend that a glaring problem didn't exist. It has ignored complaints about serious and dangerous overheating of products. On iPhone reception, Steve Jobs has replied to some customers to the effect that there is no problem.

Last week, Jobs replied to a customer's email, writing, "There is no reception issue. Stay tuned." Boy Genius Report yesterday documented a customer's interaction with both an Apple engineer and Jobs. The first reaction he gets from the company's CEO? "No, you are getting all worked up over a few days of rumors. Calm down."

[Update: Philip Elmer-DeWitt reported in Fortune that the second email exchange is a fake, according to Apple. However, Apple hasn't challenged the first "no reception issue" email. And Apple hasn't made a public statement, so it still has plausible deniability.]

And now, thanks to documents leaked to Boy Genius Report, we know that Apple's corporate stance is to deny that anything is wrong with reception and to do nothing:

1. Keep all of the positioning statements in the BN handy â€"- your tone when delivering this information is important.
   1. The iPhone 4's wireless performance is the best we have ever shipped. Our testing shows that iPhone 4's overall antenna performance is better than iPhone 3GS.
   2. Gripping almost any mobile phone in certain places will reduce its reception. This is true of the iPhone 4, the iPhone 3GS, and many other phones we have tested. It is a fact of life in the wireless world.
   3. If you are experiencing this on your iPhone 3GS, avoid covering the bottom-right side with your hand.
   4. If you are experiencing this on your iPhone 4, avoid covering the black strip in the lower-left corner of the metal band.
   5. The use of a case or Bumper that is made out of rubber or plastic may improve wireless performance by keeping your hand from directly covering these areas.
2. Do not perform warranty service. Use the positioning above for any customer questions or concerns.
3. Don't forget YOU STILL NEED to probe and troubleshoot. If a customer calls about their reception while the phone is sitting on a table (not being held) it is not the metal band.
4. ONLY escalate if the issue exists when the phone is not held AND you cannot resolve it.
5. We ARE NOT appeasing customers with free bumpers â€" DON'T promise a free bumper to customers.

For some time I've warned that Apple may severely damage its brand with its highhanded and dismissive attitude and tactics. Apple plays to a much broader audience than its traditional fans, and most consumers are far less understanding and forgiving, and far more demanding. Now there's one class action lawsuit over reception already filed, and at least one other law firm trolling for plaintiffs. But even some diehard Apple loyalists have had it. It's instructive to see the last comment from the customer who received multiple replies from Jobs, and who also identified himself as a 20-year-long Mac fan:

Steve. IT DOES NOT WORK! Geezzz I hope this this is not really you. Are we on a different MHz? I have yet to see an iPhone [4] work in Richmond when you hold it in your hand. It is not "isolated". I was a big fan. But I am done.

It doesn't matter how many whizzbang features the iPhone 4 can include if the device cannot reliably perform its most basic function: enabling phone calls. Even the Faithful eventually have to wonder whether the products are worth the money. I suspect Eric Schmidt at Google (GOOG) must be smiling -- and watching the unit count of Android climb at a dizzying rate.

Related:

• iPhone Problems Multiply as Apple Sticks Its Fingers in Its Ears
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• Why Fanboys Can Be a Tech Company's Worst Enemies
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