Is the iPhone Slowing AT&T's Network?

I see a trend.

Back in July, I wrote a post based on a Bernstein Research report which considered the question of whether the Apple (AAPL) iPhone has been a blessing or a curse for AT&T (T), citing among other factors the strain the data-happy iPhone users are placing on the company’s 3G network. The theme cropped up again earlier this week, in a Heard on the Street column in the Wall Street Journal, which asserted that AT&T is not getting much out of its position as the exclusive U.S. iPhone carrier.

Thursday morning, the New York Times picked up on the meme, with a story asserting that - surprise! - service on the AT&T network has been badly degraded by the heavy burden placed on the system by those data-hungry iPhones. “The result is dropped calls, spotty service, delayed text and voice messages and glacial download speeds as AT&T’s cellular network strains to meet the demand,” the Times wrote. “Another result is outraged customers.”

Of course, there is a potential solution: add more carriers. And there is growing suspicion on the Street that Apple next year may do just that, most likely Verizon (VZ).

Original post

Comments

[David Lentz:]

"Is the iPhone Slowing AT&T's Network?"

Or the alternative view,

"Is AT&T's feeble attempt at a broadband cellular network inadequate to the task?"

Either way, we are looking at the same coin. In a static, regulated-market-share market, AT&T could merely raise prices on its unlimited data plan (or raise prices on other parts of its network, milking its captive landline customers, for instance). But in a competitve marketplace, AT&T must either beef up the services it is selling or lose market share.

If losing market share to Blackberry, Android phones, and the Palm Pre is not satisfactory to Apple, they have only one choice -- expand the iPhone empire to other carriers.

I suspect that at this point, it is beyond the capabilities of AT&T to beef up its networks fast enough to stem the rise of competing smartphone market shares, and that means Apple will open up iPhone distribution.

Same theme as the above article. I'm not as confident that the first non-AT&T iPhone carrier will be Verizon, it will instead be whomever offers the best deal on coverage (subscribers) + bandwidth + iPhone subsidies. It could easily be T-Mobile (except for the part about subscribers), or (my favorite alternative) Apple could simply buy its own carrier.

Sprint looks ripe for the picking, especially with its beachhead in WiMAX. Apple could easily buy Sprint with a cash+stock offer.

Sep 04 11:35 AM

[PJ Louis:]

This is not a new discussion. In fact it is about 2 years old. Since AT&T Mobility launched the iPhone in 2007, there have been technologists like myself that have raised issues like the imoact on the network. Just as important issues regarding fraud (the unlocked phone issue - especially the 400,000 handsets that were illegally unlocked by 1Q2008) and lopsided revenue sharing have been discussed by the telecom industry since the iPhone's launch. Despite then popular investor belief, the iPhone was originally launched as a 2G handset and not as a 3G handset. The iPhone eventually launched a 3G version of itself, which took greater advantage of AT&T's 3G network. The problem AT&T has now has less to do with beefing up the network and more to do with evolving it to full 3G capability. Even the need for Apple to move away from exclusivity has been discussed since 2007. When AT&T originally signed the deal with Apple I objected to the contract's long term impact on AT&T.

I hate to say this: Nothing new here.

I suggest investors go back and do research dating all the way back to 2007. There were plenty of telecom industry experts objecting to the AT&T-Apple deal and for all the reasons analysts are now finally discussing.

Sep 14 09:38 AM