In an address at a USB conference in New York Wednesday, AT&T executive Ralph de la Vega told investors that the performance of the wireless provider's 3G network is being strained by the heavy data demands of a relatively small number of smartphone users. Just three percent of all AT&T network users are consuming 40 percent of the carrier's capacity, he said.
AT&T's mobility strategy put advanced wireless data service at the center of the customer experience, de la Vega noted. "As a result, twice as many smartphone customers have chosen AT&T versus any of our competitors," AT&T's head of consumer services said. "The U.S. now leads the world in smartphones, and AT&T leads the U.S."
On the downside, the carrier's 3G capacity is being strained by the heavy demand from iPhone data users, which comes as no surprise to Gartner Research Director Akshay Sharma. But the problem is "not unique to AT&T; it's a coverage and capacity issue" facing all the major carriers, Sharma said.
The Need for Network Upgrades
Given the continuing popularly of mobile data devices, wireless networks around the world will need to be re-engineered with always-on and higher data capabilities, Sharma observed. "This means more base stations, perhaps via femtocells in the building, fatter backhaul pipes, and better service-provider routers in the core networks," Sharma explained.
AT&T has held exclusive U.S. rights to Apple's highly successful iPhone since the trailblazing device launched in 2007 and handled a record number of iPhone activations in the third quarter. However, the constraints involved in handling so many data devices have become obvious.
De la Vega said AT&T is targeting network upgrades in two markets where "performance is at a level below our standards: Manhattan and San Francisco -- especially in the financial center." In San Francisco, AT&T "has some micro-cells that need to be replaced."
Overall, de la Vega sought to assure investors that AT&T has a high sense of urgency about upgrading the network and is on the right track.
"Were are adding 2,000 cell sites this year, we're adding 100,000 circuits to strengthen the backbone, [and] we're doubling the number of fiber-served cell sites this year," de la Vega said. "We're beefing up our backbone with Internet connectivity, and there's much more to come."
Other improvements will come via AT&T's forthcoming deployment of advanced high-speed packet access (HSPA) 7.2 technology, which will ramp up the 3G network's speed. "We will have this technology up and running in six markets by the end of this month, and we plan to re-launch in 25 of our top 30 markets by the end of the second quarter next year," he said.
De la Vega added that AT&T is "going to focus on making sure that we give incentives to that small percentage to either reduce or modify their usage so they don't crowd out the other customers in those same cell sites." He also thinks AT&T needs to do more to educate subscribers about what constitutes high data traffic.
It's not e-mail that constrains the network, de la Vega noted, but rather "things like video or audio" that keep playing around the clock.
Sharma thinks usage fees may be an effective way to "throttle the data consumption of superusers." Instead of charging data users by the megabyte, however, Sharma thinks a pay-for-value model would be better the better way to go.
"In other words, a streaming video of a game may be more valuable to watch, and charge more for, than for a simple cartoon," Sharma said.