How Apple's iPad Ratchets Up Pressure On AT&T
With a bigger screen and more powerful processor than the iPhone, the iPad will give developers more to work with when building applications. It stands to reason that the iPad, if successful in the market, will put even more pressure on AT&T to upgrade its network in order to handle the extra traffic.
With the 3G iPad slated to arrive around the beginning of May, the race is on for AT&T to add the capacity necessary to handle the iPad.
"There's no free lunch in the physics department," said Joe Bardwell, president and chief scientist of Connect802, a wireless solution provider in San Ramon, Calif. "The addition of enhanced data, video, music and other services that the iPad brings to the market will increase the capacity requirements for 3G cells, and that can only result in either dissatisfied users or upgrades from the carrier."
Quy Nguyen, CEO of Allyance Communications Networks, an AT&T partner in Irvine, Calif., says AT&T has been aggressive about upgrading its network, but still faces challenges from new bandwidth intensive apps that are arriving on the App Store every week.
"Wireless infrastructure is a constant battle, and it's not just AT&T's problem," Nguyen said. "As soon as they upgrade the network, more video, music and streaming apps come out and put even more strain on the network."
AT&T says it's in the process of upgrading its 3G network and will continue to do so until 4G arrives. "Today we offer the nation's fastest 3G network and we will continue to increase network speeds throughout 2010 and 2011 in advance of 4G networks and devices being widely available," an AT&T spokesperson said in a statement.
The iPad will launch with two data plans from AT&T: One with a monthly data cap 250MB a month for $14.99, the other with unlimited data for $29.99. The latter is the same one that iPhone subscribers currently have, although iPad users won't have to sign a contract to access the service. Given the struggles AT&T has endured with the iPhone, the lack of a contract requirement could be an acknowledgment on the carrier's part that the "unlimited" pipe may not always be freely gushing.
Nonetheless, Apple seems pleased with its relationship with AT&T. Earlier this week in Apple's fiscal Q1 conference call, COO Tim Cook called AT&T "a great partner" that's well on its way to fixing its network issues. "AT&T has acknowledged having some issues in certain cities, and they have detailed plans for addressing these. We have personally reviewed these and have very high confidence that they will make progress in fixing them," Cook said.
The upgrades won't be cheap, however: Earlier this month, Gerard Hallaren, director of research at TownHall Investment Research, estimated that AT&T will need to spend $5 billion to upgrade its wireless network to catch up with Verizon, which is widely viewed as tops in the industry. AT&T has been focused on wireline investments but would be well advised to shift more resources toward wireless, Hallaren noted.
Seen in this light, perhaps it's telling that Apple chose not to include a camera with the iPad. Is this AT&T's recognition that the iPhone 3GS' video functionality has placed undue strain on its network? Only Apple and AT&T can answer that one, but AT&T still doesn't support wireless tethering despite pledging to do so last year, and it's not supported in the iPad either.
With the 3G iPad arriving in three month's time, a line in the sand has been drawn between AT&T and the hordes of Apple fans eager to get their hands on the iPad. AT&T is already under a microscope for its iPhone issues, but if it gets the necessary wireless network upgrades in place in time, that could help restore its battered image.
"AT&T is definitely working hard to upgrade their network. The plan is there, it's just a question of how long it will take," said Nguyen.