Did McKinsey & Co. tell AT&T there was no market for mobile phones?

Question

In this interview about his time at Bell Labs and their ability to "invent" the future, Prof. Brian Kernighan (the famous computer scientist involved in the development and popularisation of the computer language C and UNIX) argues that he and his colleagues at Bell Labs were not very good at forecasting and nor was anyone else.

He illustrates this by referring to a supposed McKinsey & Co. report that, he claims, told AT&T (the parent company of Bell Labs) that there was no market for mobile phones:

[05:33] Prof. Brian Kernighan: I think that's against something people didn't predict. There is this famous story that a consulting company in the United States - McKinsey - did a study for AT&T and told AT&T that there was basically no market for cell phones, that people didn't want portable phones.

[05:54] Prof. Brian Kernighan: And this I think is a triumph of how consultancy can go wrong and yet not suffer for it.

Is there any independent verification that any such report by McKinsey exists?

Answer 1

McKinsey & Co's prediction of mobile phone users was about 1% of the actual value. Their prediction persuaded AT&T to pull out of the mobile phone market, a decision which ended up costing AT&T billions of dollars.

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According to Prof. Angel Lozano (emphasis mine):

In 1980, McKinsey & Company was commissioned by AT&T (whose Bell Labs had invented cellular telephony) to forecast cell phone penetration in the U.S. by 2000. The consultant’s prediction, 900,000 subscribers, was less than 1% of the actual figure, 109 Million. Based on this legendary mistake, AT&T decided there was not much future to these toys. A decade later ... AT&T had to acquire McCaw Cellular for $12.6 Billion.

^{Prof. Angel Lozano: The Hall of Innovation - Cellular telephony: just a niche market.}

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According to the NY Times:

It told AT&T in 1980 that it expected the market for cellphones in the United States in 2000 would amount to only 900,000 subscribers. It turned out to be 109 million.

^{Andrew Ross Sorkin - New York Times: McKinsey & Co. Isn’t All Roses in a New Book - September 2, 2013}

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According to The Economist (emphasis mine):

HERE is a cautionary tale about a telephone giant and a management consultancy. In the early 1980s AT&T asked McKinsey to estimate how many cellular phones would be in use in the world at the turn of the century. The consultancy ... concluded that the total market would be about 900,000 ... this persuaded AT&T to pull out of the market.

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These days [late 1999] 900,000 new subscribers join the world's mobile-phone services every three days.

^{The Economist: Cutting the cord - Oct 7th 1999}