Daniel Eran Dilger
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AT&T fails to deploy iPhone Tethering and 3G MicroCell in 2009

Prince McLean, AppleInsider

Facing intense criticism of its mobile network coverage from a variety of sources, AT&T has both failed to deploy its iPhone tethering strategy and to successfully get its 3G MicroCell product into widespread distribution.

AT&T fails to deploy iPhone Tethering and 3G MicroCell in 2009
New tethering services would exacerbate AT&T’s existing network capacity problems, but availability of the 3G MicroCell would help to solve localized service holes for the company. The product is still confined to limited testing in just a few cities, which perplexingly do not include the two markets that are so infamous in terms of poor service that AT&T’s CEO has made apologetic remarks addressing them directly: New York City and San Francisco.

The company did not respond to requests for comment on its tethering and 3G MicroCell plans, both of which were widely expected to be available by the end of this year.

Bad ink over bad links

AT&T was hit hard during the holiday season by an ad campaign from Verizon Wireless which depicted AT&T’s data network as covering much less land area in the US compared to Verizon’s service. The ads also targeted the iPhone specifically as being crippled by AT&T’s network.

That campaign didn’t appear to have much real impact on buyers, however, who continued to snap up iPhones in record numbers. Analysts have projected blowout quarterly sales of iPhones to reach close to 10 million units for the holiday period.

Still, iPhone users are keenly aware that despite AT&T’s defensive response to Verizon, the company’s mobile coverage is still suffering from poor or completely unavailable areas of service even within areas AT&T portrays as being well within its 3G service coverage area. Critics have frequently cited New York City and San Francisco in particular as troubled areas for AT&T, in part due to their urban density and topographic challenges, from mountains to tall buildings, and in part because of the high percentage of iPhone users trying to use the network.

Now or tether

The company’s network problems help explain why AT&T failed to meet its goal of implementing an official tethering plan for the iPhone that supports the technical capabilities Apple built into the iPhone 3.0 software release this summer.

Tethering enables mobile subscribers to use their phone to provide a network uplink to their notebook computer over a USB or Bluetooth connection. iPhone users in other countries have been able to tether the iPhone for nearly six months now. AT&T supports tethering plans on other mobile devices it sells, but still hasn’t activated the service for iPhone users, apparently because it knows it can’t yet support any additional data demands.

The company similarly delayed the deployment of MMS features for domestic iPhone users until it could bolster its capacity to serve the millions of iPhone users it feared would overwhelm its network capacity. While MMS is limited to sending individual photos, videos and audio clips, tethering can involve large and sustained data transfers, making it a much larger issue for AT&T to address.

The company has also remained silent on any strategy to begin offering iPhone tethering services at a price high enough to limit its use to those willing to pay exorbitant fees. While it is reasonable to conclude that AT&T’s network is unable to manage ubiquitous tethering demands from everyone at no extra cost, it’s harder to understand why AT&T can sell tethering plans to users of other devices, but not to its iPhone customers.

Some users initially activated the latent tethering capabilities in the iPhone 3.0 software to use AT&T’s network anyway. That resulted in Apple releasing a patch in an iPhone update that has since defeated the feature within AT&T’s service area.

Alternatives to AT&T: frying pan to the fire

While Apple has consistently remained positive about its relationship with AT&T in public, most observers expect the company to be ready to escape from its exclusive contract as soon as its initial iPhone partnership with AT&T expires next summer, opening the iPhone to either CDMA carriers such as Verizon and Sprint with a new worldmode chipset, or expanding the iPhone’s 3G UMTS capabilities to work on T-Mobile’s non-standard 3G mobile frequencies. Either move would enable Apple to sell more iPhones domestically without running into the limitations of AT&T’s service capacity in the US.

At the same time, other carriers have instituted artificial limitations of their own which would impact new iPhone users on their network. Verizon has begun charging an outrageous $350 early termination fee for smartphone users and recently began forcing its BlackBerry users to install and not remove an application link to Microsoft’s Bing service. Verizon also has a long history of disabling Bluetooth and WiFi hardware features, disabling direct USB desktop sync, and forcing users to download or rent mobile software based on Qualcomm’s BREW platform.

A primary reason why Apple and Verizon couldn’t work out a deal for the original iPhone launch was because Verizon refused to allow Apple the control AT&T was willing to give the company. Since then, Apple’s efforts to deliver a sophisticated and relatively expensive smartphone with rich desktop syncing, a dedicated and original software marketplace not managed or limited by the mobile provider, and an unlimited data plan has resulted in the rest of the industry scrambling to create the same thing, without much success.

Control issues

Verizon has found that finding a sophisticated phone set with broad appeal is difficult to do. Other hardware makers are finding that copying Apple’s App Store success is also a tremendous challenge. While the less ambitious HTC, Motorola, and Sony Ericsson have backed Google’s fledgeling Android, more confident leaders like Nokia and Samsung have announced plans to create their own rival platforms, including Nokia’s Maemo Linux distribution and Samsung’s new Bada effort.

Palm and RIM are also working to advance their own original smartphone platforms, resulting a dramatic departure from the history of desktop PCs, where nearly all major makers were content to run an IBM-compatible DOS within just a few years of the personal computer emerging as a mass market product.

No matter how much work hardware makers put into their own platforms however, they’ll face significant push back from carriers who are tenaciously working to maintain their control over the handset market, particularly in the US. Unlike other countries where unlocked phones can be used on any provider, the US is currently split by mobile carrier’s technology boundaries which have helped keep phone models exclusive to a provider.

As Apple formulates its post-AT&T strategy, it will have to consider how open other carriers are to the idea of supporting a smartphone that does not work with their lucrative ringtone, software rental and video clip services such as Verizon’s VCast.

  • stormj

    It doesn’t excuse the situation, but the most vocal of AT&T critics don’t realize that being on Verizon is not awesome for a smartphone user. But (and this isn’t snark) for the foreseeable future, voice telephone calls are what most people use their phone for the most, and AT&T just doesn’t seem to be able to deliver on that.

    I know, I know. It’s all the data. It’s the frequencies they use. Yes, yes—I understand all of the technical details. Understanding the failure doesn’t make it a success.

    And that would be making calls on the go… which is why AT&T’s retort that it’s map covers 97% of the population is fatuous. That’s great–if we want to use our mobile phone in our houses. Of course, we want to be able to use it anywhere, to territory is also important…

    …which is why for all of their other virtues, T-Mobile is a non-starter.

    I haven’t had a Sprint phone in 10 years. Do they suck less?

  • http://www.tech21.de olivervoel

    In Germany, there are legally unlocked iPhones available thanks to the laws in the European Union. Tethering is allowed by providers such as simyo, but with the iPhone OS update 3.1, Apple has broken this function. Apparently, Tethering now requires a specially signed configuration file which is not easily available even if the provider wants to offer it and it worked with OS 3.0.
    This means I cannot use Tethering with my iPhone although my provider would like to offer it for no extra cost. The provider says they have contacted Apple repeatedly in this matter and got no response. Apple could certainly do a better job here.

  • airmanchairman

    Launching the iPhone on other US networks will achieve a few positive outcomes, even for AT&T which stands to lose its exclusive contract in the Summer.

    The immediate benefit will be the easing of network congestion as the wildly popular phone becomes available on T-mobile and possibly Verizon, allowing them to absorb some of the tremendous data load that is characteristic of this ground-breaking appliance.

    US technophiles, particularly of the pro-AT&T persuasion, should possibly prepare for Fall and Winter seasons of extreme hilarity and “Schadenfreude” as the 3G networks of their rivals crash and burn even harder than they have taking the brunt of the voracious i-hordes’ data demands. It may come as no surprise if subscribers that decamp from AT&T vote with their feet again and return to the carrier as the lesser of two evils, the devil you know…

    Long-term benefits will include proper infrastructure planning by all networks for the data demands of the future, which have unexpectedly arrived well ahead of time with the advent of the iPhone and its copycat clones. The carriers are now going to have to “put their money where their mouths are”. This means that all the fat text and service nickel-and-dime revenues which have hitherto been surreptitiously siphoned off to shareholders and investors will now have to be diverted into the infrastructure rollout they have been paying lip service to all these years.

  • http://berendschotanus.com Berend Schotanus

    “other carriers have instituted artificial limitations of their own”

    All in all, probably, Apple hasn’t done a bad job at all with its AT&T coalition. And, given its increased power in mobile communication, Apple might do some even better steps in the future.

    From my side I stubbornly keep believing that the only way out lies in customers paying for hardware and communication as two separate products. Mobile communication really is a complicated product: you have to keep track of all those different radio frequencies, sources of interference and regulation thereabout. It does take a lot of experimentation and experience to get it right so it is really a profession on itself.
    When you have a monopoly it is so easy to not put all this effort in product improvement and just keep earning your revenues from customers that don’t have a real choice. The vertical integration model is not a complete monopoly but it comes close to it.

    I’m looking foreword to what Apples next steps will be and maybe we will know pretty soon when the iSlate does have some kind of 3G connectivity.

  • jdb

    Apple is in a tough position in the US. I doubt they want three different models of the iPhone but in order to get the iPhone on all 4 major US carriers, but that is what they would have to do. Just the inventory problems alone would be a big problem.

    It is possible that in the near future, that could be reduced to 2 models if a single chipset becomes available either for both AT&T and T-Mobile 3G or as Dan suggests, a “world mode” CMDA phone that also does either AT&T or T-Mobile 3G. As far as I know, such chipsets do not currently exist though there was a report in December that Motorola is working on one for AT&T and T-Mobile 3G.

    If it isn’t technically possible to satisfy those requirements, then another likely scenario is leave the current iPhone 3GS on AT&T and create a new, lower end iPhone that works on CDMA. There were rumors that Apple was sourcing a smaller phone display for a future iPhone. This would follow Apple’s iPod strategy of targeting the lower end of the market after several years of the original iPod (classic) design.

  • iPaladin

    I’m betting on the Gobi chip being in the next iPhone. That would put Verizon in play as an iPhone provider. AT&T won’t lose the iPhone altogether, but for GSM enthusiasts, it will remain the best option.

    The next iPhone will probably run on the Snapdragon QSD8672. That chip includes the Gobi. Yes, I know CDMA is supposed to suck in theory, but if that’s true, then why does the VZW network cover so much more of the country in 3G than their slow dumb Blue Counterparts at the Death Star? I wish that AT&T and T-Mobile would get their heads out of their asses and get 3G where I live, but I have a better shot of getting a 3G iPhone through Verizon than that happening.

  • http://www.austinsteele.blogspot.com bOMBfACTORY

    So AT&T won’t allow me to tether my iPhone because apparently that will put too much stress on their network. Yet they seem to have no problem adding 10 million new (over)paying iPhone customers every quarter. Will the AT&T PR dept. ever release a statement that makes even a bit of sense?

  • iPaladin

    I think I’ve found the answer now.

    Qualcomm could throw in a CDMA/HSPA modem out of the QTR8610 variety. The rest of any iPhone/iTablet will assuredly be of the PA Semi variety that Apple bought in 2008.