AT&T’s iPhone problems keep getting worse. The phones are behaving so badly in NYC that AT&T tried surreptiously to discourage sales. From Jeffrey Bartash, Dow Jones:

In a holiday-shortened week, AT&T has spawned a raft of headlines on the Internet after the company halted online sales of the iPhone in New York City, at least temporarily. The phone is still available to New Yorkers in Apple (AAPL) and AT&T stores, however….

Since reports of AT&T’s online move surfaced Sunday, a number of people have tried to order the iPhone online using New York City ZIP codes. An effort by this writer to do the same showed that “there are no phones and devices that match your search criteria,” according to AT&T’s Web site.

Now CNBC is reporting that AT&T has resumed online sales in NYC.

AT&T is in quite a pickle. According to a great NYT article by Randall Stross published two weeks ago, the problem isn’t AT&T’s network, it’s the iPhone’s electronics.

The iPhone performs so poorly (and not just in NYC as I can personally attest) that the reputation of the company’s network — and thus its brand — is taking a huge hit. But what’s AT&T supposed to do? It can’t throw its best-selling product under the bus.

No doubt there are some heated discussions behind the scenes between AT&T and Apple. My hope is that Steve Jobs can deliver a functional phone by the time my contract expires…

UPDATE: Reader LH offers the following link rebutting Stross’s piece. I guess I’m inclined to defend AT&T versus Verizon because of personal experience. I lived in FL for a few years and switched from AT&T to Verizon because of Verizon’s vaunted network, which for me performed terribly. AT&T’s was so good that even on drives over the Sunshine Skyway Bridge, I rarely dropped a call. Verizon couldn’t get me a good signal in my apt. Just one opinion….