What brought AT&T to its knees?

    by Philip Elmer-DeWitt

    A rash of online fraud in New York may have done what Operation Chokehold couldn't

    Why did AT&T Wireless (T) halt online sales of Apple (AAPL) iPhones in New York City the weekend after Christmas? None of the answers AT&T has given so far make much sense.

    The new policy was first reported to The Consumerist's Laura Northrup by a reader in Brooklyn. In a blog entry posted Sunday afternoon, Northrup suggested that AT&T had found a novel solution to the city's data congestion problems: it had simply stopped selling iPhones to online customers in the metropolitan area. "The phone is not offered to you," a sales rep told Northrup, "because New York is not ready for the iPhone."

    In an update later that day, Northrup posted AT&T Public Relations' inscrutable official statement on the matter: "We periodically modify our promotions and distribution channels." That didn't help.

    The mystery deepened Sunday evening.

    All Things Digital's Peter Kafka and John Paczkowski were told independently by AT&T representatives that sales had been halted due to an increase in "fraudulent activity" in the "high-risk area" — specifically fraudulent orders made online. Indeed, the iPhone is still available at both Apple and AT&T stores in the city.

    But as Paczkowski pointed out, you could still buy equally expensive Research in Motion (RIMM) smartphones in New York City through AT&T's website. Apparently the BlackBerry was not quite as hot as the iPhone in the city this holiday season.

    We await a fuller explanation from either AT&T or law enforcement officials.

    Meanwhile, the whole situation has got Fake Steve Jobs — whose Operation Chokehold protest against AT&T had no visible effect on the carrier — chewing Ativans like they were breath mints and threatening to throw cars through the windows of AT&T headquarters.