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IPhone sales blocked on Web in NYC

(Dean Fosdick/ Associated Press)
Associated Press / December 29, 2009

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NEW YORK - AT&T Inc. suspended online sales of iPhones to New Yorkers over the weekend for unknown reasons, then started selling them again just as mysteriously yesterday.

Spokesman Fletcher Cook said only that the phone company periodically “modifies’’ its distribution channels. He had no further comment on the resumption in sales, and officials with phone maker Apple Inc. did not immediately return messages for comment.

Bloggers speculated that the sales suspension was a means of managing data traffic, since AT&T has acknowledged that its network is overburdened with iPhone users in New York and San Francisco.

However, because the phones were still available in New York retail stores and from Apple’s website, the ban may have instead been an attempt to curb buyers who renege on service contracts and resell the phones to customers of other carriers overseas.

On AT&T’s website, buyers who supplied New York City ZIP codes were told yesterday morning to “Please shop for another phone.’’ By afternoon, though, the site raised no obstacles when the same ZIP codes were entered.

It was not clear whether the iPhone suspension had applied to all New York ZIP codes.

AT&T sells a new iPhone 3GS with 16 gigabytes of memory for $199, with a two-year contract requirement. A buyer who doesn’t pay the monthly service fee is assessed a $175 early contract termination fee, but that still leaves room for a reseller to profit. The phone sells for $600 on eBay after it’s been modified with software to work with the networks of overseas carriers.

In November, Verizon Wireless doubled its maximum early contract termination fee for smartphones to $350 partly to protect itself against resellers. That move drew scrutiny from the Federal Communications Commission, which asked why the fee needed to be so high. Verizon said the old fee didn’t cover the difference between what it charges customers and what it pays for the phones.