Is the iPhone hurting AT&T's brand?

The Apple iPhone has boosted AT&T's subscriber numbers, but network problems and a bevy of complaints from

frustrated customers are likely hurting the company's reputation.

While a recent survey by the consulting firm CFI Group found that iPhone users are the most loyal smartphone users with 90 percent saying they'd recommend the device to a friend, half of all iPhone owners surveyed said they would like to jump ship to another provider if given the chance.

And for the first time, AT&T has scored worse than all four major U.S. wireless operators in terms of overall customer satisfaction for smartphones. According to the survey, AT&T scored 69 out of 100 among users, and 73 among non-iPhone owners. Verizon Wireless was the most satisfying carrier with a score or 79 out of 100 among smartphone users. Even Sprint Nextel, which has struggled to retain customers due to its poor reputation, scored better than AT&T among smartphone users. It got a 74 out of 100 in terms of customer satisfaction.

The figures are among the first to quantify growing dissatisfaction with AT&T's network.

"AT&T has never fared great in customer satisfaction surveys," said Doug Helmreich, program director with CFI Group. "But they've never been last. Now AT&T is coming up last among smartphone users. The iPhone has been a cash cow for AT&T, but that cash comes at a cost in terms of overall satisfaction."

Public relations and brand experts warn that if AT&T doesn't take steps now to correct its image that it could come back to haunt the company in the future. The main issue for customers is that many users, especially those in urban areas, report poor network coverage and service. Problems with AT&T's 3G wireless have been widely reported on blogs, Twitter feeds, and even in published reports from BusinessWeek and The New York Times.

Customers all over the country have complained about dropped calls and the inability to connect to the 3G network. CNET News writer Elinor Mills documented her frustrating experience with her iPhone in a blog post recently. The story hit a nerve among fellow iPhone users, and more than 400 comments were left on the story. Most of the comments corroborated the writer's plight. And the follow-up story on the same issue garnered at least another 300 comments from readers.

AT&T's company line
And yet, AT&T has not admitted any problem with its network. When questioned about potential problems with the AT&T network being overburdened by iPhone users, Mark Siegel, an AT&T spokesman, reiterated the company line: "We have a strong, high-quality mobile broadband network. It is the nation's fastest 3G network, now in 350 major metropolitan areas."

In fairness to AT&T, the company has acknowledged that it is upgrading its network to deal with increased demand from the iPhone. Siegel said the company plans to spend $17 billion to $18 billion on improving its wireless and wireline broadband networks in 2009. Of course, this is a few billion dollars less than what the company spent in 2008. During that year, AT&T's annual report indicates it spent $20.1 billion on capital expendituresfor its wireless and wireline networks. Still, $17 billion is nothing to sneeze at.