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Monday, December 28, 2009, 07:20 am PT (10:20 am ET)

AT&T halts online iPhone sales to New York City residents

Apple's exclusive U.S. iPhone wireless provider AT&T began halting online sales of the touch-screen device to residents of New York City and its surrounding areas this past weekend but has been unable to provide a reasonable explanation as to why.

The matter was first brought to light by the Consumerist after one of its readers attempted to placed an iPhone order through AT&T's website for delivery to a Brooklyn, New York address and received a message saying "this Package is not available in your area."

Further checks revealed the Apple handset is currently unavailable for purchase through the carrier's website to consumers living anywhere in New York City, or in any of the suburban zip codes in Westchester County or northern New Jersey.

When questioned about the situation Sunday, an AT&T online customer service representative by the name of Daphne told journalist Laura Northrup that the iPhone is no longer being offered to customers in those areas "because New York is not ready for the iPhone."

"[Your area doesn't] have enough towers to handle the phone," she added.

Since then, AT&T has been scrambling to disseminate alternative explanations for the sales blackout, but the reasons offered are leaving customers and industry-watchers with more questions than answers.

AT&T spokesman Fletcher Cook fired off an email response to several publications in which he said that "We periodically modify our promotions and distribution channels," but refused to provide further details.

Meanwhile, online support rep Daphne also change her tune, later telling both the New York Times and All Things D that the blackout is “due to increased fraudulent activity" in New York City and the surrounding areas. She suggested customers visit a brick-and-mortar Apple or AT&T retail store, where the phone is still available for sale to city residents.

The peculiar move can be seen as the latest chapter in an ongoing public relations fiasco for the No. 2 US wireless provider that stems from perceived shortcomings in its nationwide wireless network.

In recent months, the Dallas-based firm has come under fire from customers and larger rival Verizon Wireless, who've combined to charge the carrier in a series of lawsuits and television spots with making false promises regarding the capacity and reach of its mobile 3G network.

Surprised and unable to keep up with the sheer popularity of the iPhone, AT&T has flirted with the idea of introducing tiered data plans that charge bandwidth-gorging customers more, all while pumping hundreds of millions of dollars into upgrades to its 3G networks in areas of the country hit hardest by the influx in mobile activity.

For example, the carrier said it will have added 1,900 new cell sites in the San Francisco Bay area by the start of the new year as part of a $65 million investment in its regional coverage there. Like in New York, AT&T's San Francisco 3G network has come under considerable strain from iPhone-wielding consumers, but as of Monday morning the carrier had not halted online sales of the device to local residents as it did in New York.

Generally speaking, the iPhone is believed to be largely responsible for a fourfold increase in traffic on AT&T's wireless 3G network over the past 12 months. Earlier this month, the carrier called on customers to help report problematic or overly-congested areas of its network through a free iPhone app it commissioned called "AT&T Mark the Spot."

By the end of this year, year AT&T said it will have invested between $17 billion and $18 billion in its wired and wireless networks.