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Can AT&T Bear the Burden of Another Apple Gadget?

By Erika Morphy MacNewsWorld ECT News Network
Jan 29, 2010 5:00 AM PT

Before Wednesday, if the rumors were to be believed, Apple was not only on the brink of jettisoning its exclusive U.S. arrangement with AT&T for the iPhone, but that it would also roll out its tablet device with support from multiple carriers.

Can AT&T Bear the Burden of Another Apple Gadget?

That, of course, didn't happen. AT&T is still the exclusive carrier for the iPhone, and no indication was given that the situation would change soon. AT&T is also the exclusive 3G carrier for the iPad -- or at least, the versions of the iPad capable of 3G connections. Rumors that consumers would be given a choice between AT&T or Verizon, for example, fell flat.

These developments raise the question: If AT&T is to remain the iPhone's sole carrier and act as the iPad's only cellular data provider, can its network handle the burden of all that traffic?

It's a fair question to ask; for months, AT&T has had to deal with consumer complaints about its 3G network, which has been dragged down by the data demands of the popular Apple smartphone. The problem is especially pervasive in cities like New York and San Francisco. Indeed, Verizon has poked fun at AT&T in its advertising over its network capabilities.

'Thorough Technical Understanding'

AT&T referred to this issue in its earnings call Thursday.

"AT&T is a natural fit for the iPad, given the combination of the ever-improving speed of our 3G network and our robust WiFi capabilities," said John Stankey, CEO and president of AT&T operations. "We have a thorough technical understanding, with a good read on the iPad's usage requirements and characteristics."

The company appears to be banking on users taking to WiFi at least some of the time for their connections, according to comments made by Rick Lindner, CFO for AT&T.

Backhaul Bandwidth

If Apple is smart, it has negotiated with AT&T to invest more money in its network, Todd Day, ICT industry analyst with Frost & Sullivan, told MacNewsWorld.

"The problem with the connection is on the back end side -- there needs to be more capacity to send signals out to the towers," he said.

AT&T has been taking steps, such as identifying the specific high-population areas or towers that are having the most problems and upgrading those first, he added.

"However, it is safe to say there still are issues with AT&T's network and its capacity," he added.

iPad Specs

The problem might not be so acute with the iPad as some fear, according to Hal Steger, VP of Marketing at Funambol.

"The iPad will work with any WiFi, so AT&T's network is only an issue for when users are traveling," he told MacNewsWorld.

3G data services on the iPad will be sold on a month-to-month basis, not through a long-term contract with AT&T. The device is unlocked, and its modem is based on GSM, which is a wireless technology used by both AT&T and T-Mobile in the U.S. However, the frequencies that the iPad's modem use preclude it from working on T-Mobile's 3G network, according to a report on WirelessInfo.com.

Much also depends on how many iPads actually sell with the 3G feature and what AT&T does between now and when it is available to beef up its network, Steger continued. "The iPad does look like a data-intensive device, as it can be used for Web surfing and watching videos. Our guess is that in cities where there will be a lot of iPad sales, like San Francisco or New York, this could be an issue, but for other places it's probably not that big of a deal."

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