Demands on Network Are an iPhone Hang-Up

The iPhone has made AT&T the cool kid on the cellphone block, bringing in lots of new customers all eager to play with the shiny new device. Trouble is, the iPhone is expensive for AT&T, and not just because of the heavy subsidies on the initial purchase price. Users of iPhone download games, video and other Web data at two to four times the rate of other smartphone users, according to comScore. Yet AT&T charges iPhone subscribers the same fee of $30 a month for data that it levies on other smartphone customers. And aside from restricting certain activities, like file sharing, AT&T doesn't limit how much data can be downloaded. But Web applications popular with iPhone customers are bandwidth hogs. A recent analysis by Alcatel-Lucent of North American wireless network use during the midday hour on one day found Web browsing was consuming 32% of data-related airtime but 69% of bandwidth, while email used 30% of data airtime but only 4% of bandwidth. Email taxes network resources but in a different way. As the proportion of customers with iPhones grows -- 5.9 million 3G iPhones were activated in the last three quarters, 7.5% of AT&T's total subscribers -- the resulting growth in downloading and Web browsing will strain AT&T's network. AT&T will need to add cell towers and spend more on the back-haul lines that connect the towers to the rest of the network.