Why AT&T's New "Microcell" Service Upgrade is a Major Ripoff

AT&T (T) was hoping customers would be excited about its new 3G Microcell, a home-based device intended to improve cellular connection speeds and prevent dropped calls. But many customers found AT&T's offer downright insulting. That's because AT&T is essentially asking to be paid, in minutes or dollars, to work off the broadband connection a customer already owns.

The 3G Microcell works by tapping into an existing DSL or cable Internet connection. It then become a sort of mini cell tower, broadcasting a strong signal for an area of about 5000 square feet. That's enough coverage for a good size apartment or office space, a circle roughly 80 feet in diameter. The catch -- a one time cost of $150, plus a monthly fee of $20 if you want unlimited minutes.

Here's what makes this device such a ripoff. If you are in an area where you have access to broadband, then you probably also have Wi-Fi. It would be just as practical, and $150 cheaper, to connect your iPhone to that network and use a VOIP application like Line2 to place your calls.

AT&T's website calls the device "portable", but only if you consider lugging it around and reconnecting in an AT&T approved zone "portable". A VOIP app, in contrast, works anywhere you get Wi-Fi: home, office, coffee shop, etc. Plus, calls made through services like Line2 don't count against your minutes and you can decide on the payment plan.

A quick scan through the comment boards show what dire shape AT&T is in. Many customers are switching to other carriers, or planning to as soon as the iPhone hits other networks, which the WSJ reports could happen this summer. This was an effort to improve service and customer satisfaction. But a device that locks customers back into the AT&T network while taking a free ride on their data pipe is no way to make amends.