The Wall Street Journal is reporting that AT&T is still working to fine tune its network before allowing iPhone customers to tether computers to their mobile device.

“Whenever we offer new features, we want to offer the best possible customer experience,” an AT&T spokesperson told the publication. “For tethering, we need to do some additional fine tuning to our systems and networks so that we do deliver a great experience.”

Earlier this week AT&T announced that it will support voice applications using the iPhone’s 3G network connection. Applications like Skype and Google Voice were previously barred restricted to using only WiFi connections, as we reported this summer.

AT&T did not announce a time frame when customers would be able to use the iPhone’s tethering feature.

Source:

• Mobile Burn

With its large subsidies to Apple, AT&T doesn’t break even on iPhone accounts with high data-usage until the 17th month of a 24-month contract, according to a new report from Yankee Group.

The report, titled “The Golden Subsidy Egg’s Goose is Cooked: Welcome to the Brave New Subsidy-Free World,” looks at the downside of subsidies paid to manufacturers by cell phone carriers. The report cites AT&T’s iPhone contract with Apple as a prime example.

Subsidies have typically helped mobile carriers offer customers free or low-cost devices in order to lure them into buying long-term service contracts. Smartphone owners are happy because they’re getting the latest devices at rock-bottom prices. But the surge in data use and the rising cost of grabbing new customers are cutting profit margins for providers, says Yankee Group.

With the mid-2008 launch of the iPhone 3G, AT&T struck a subsidy deal with Apple that slashed the price to consumers to $199 for the low-end version but forced the carrier to bear the upfont costs of each unit. Several published reports have estimated that AT&T’s subsidy is at least $300 per phone. (Neither AT&T nor Apple responded to requests for confirmation.)

At the time, AT&T acknowledged that the new deal would impact profit margins and dilute earnings. The company’s second-quarter results did show a dip in both revenue and earnings.

AT&T went along with the subsidy because it felt that lower iPhone prices would bring in more customers. But in a catch-22, more customers have also put a strain on the carrier’s network, both for voice and data. Ralph de la Vega, CEO of AT&T Mobility and Consumer Markets, said in August that AT&T’s wireless data usage jumped almost 5,000 percent from 2006 to 2009.

That strain has made for some unhappy iPhone users and has forced AT&T to scramble in order to beef up its wireless infrastructure.

Removing the subsidy for AT&T would win the company a total return of 33 percent over a two-year contract and reduce the break-even point to eight months, Yankee Group said.

Moreover, unless mobile carriers in general can cut their reliance on subsidies, Yankee Group noted, they may see profit margins fall even further.

“Until now, North American operators have been kings of the devices market, controlling distribution and bearing many of the risks,” Andy Castonguay, Yankee Group director and author of the report, said Thursday in a statement. “Rising customer acquisition costs, exclusivity fees and flat-rate pricing are squeezing margins for coveted smartphone users. To reverse this trend, operators must spread the control and risks across OEMs and retailers to offer more affordable options and establish greater levels of clarity and trust with consumers.”

Source:

Cnet Reviews

While AT&T and Apple have remained silent on the absence of tethering and MMS with the iPhone, a new report provides insight on the effect an influx of bandwidth-heavy mobile users have had on the wireless network.

Digging into customer dissatisfaction with the AT&T network, The New York Times revealed that the carrier has struggled to keep up with demand as iPhone owners use more and more bandwidth. The report suggests that AT&T’s reputation could be tarnished because, for some users, its network is unable to keep up with demand. The bandwidth issues have led to delays of tethering and multimedia messaging, much-anticipated features for iPhone users.

“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 report, which compared the device to a gas-guzzling Hummer, states. “Another result is outraged customers.”

The average iPhone user reportedly consumes 10 times the bandwidth of a typical smartphone user, but that is expected to change in the near future. The growth of the iPhone and its impact on the AT&T network has even led to lawsuits. As other mobile devices emulate the iPhone and also use more network capacity, the problem is expected to grow on all networks, not just AT&T.

Even John Donovan, chief technology officer for AT&T, admitted his company’s struggles. “It’s been a challenging year for us,” he told the Times.

But in the face of demand, AT&T plans to spend $18 billion this year to upgrade and expand its 3G network. And the company has no plans to cap data use, whether solely through the phone or via tethering with a computer.

AT&T announced Wednesday that it had improved its 3G coverage in metro New York and New Jersey. The company expects to roll out nationwide improvements with HSPA 7.2 technology, with the upgrade to be completed in 2011. And 1,900 new cell towers are planned for construction in the U.S. this year as well. But expansion isn’t so simple.

“As fast as AT&T wants to go, many cities require lengthy filing processes to erect new cell towers,” the report states. “Even after towers are installed, it can take several months for software upgrades to begin operating at faster speeds.”

Many analysts believe that when Apple’s exclusive contract with AT&T expires in 2010, the handset maker will offer the iPhone on other carriers. The most obvious jump would be to Verizon, the largest carrier in the U.S., ahead of No. 2 AT&T.

Source:

• Apple Insider