Is AT&T Ready for the 3G iPad?

AT&T Inc. (NYSE: T) won't talk about its network strategy with regard to the additional mobile data usage consumed by the 3G iPad. But the conversation is happening anyway.

Analysts say the device will boost overall bandwidth usage, and one suggests that the carrier has some capping options with its month-by-month contract for the new tablet.

Apple Inc. (Nasdaq: AAPL) started selling the 3G iPad last Friday with estimates that it moved 300,000 units in the first weekend. The device has proved wildly popular: Apple claims it sold a total of 1 million of the WiFi-only and dualmode tablets in the first 28 days they have been available. (See 3G iPad: Sales, Hacks & Video Issues and 3G iPad Proves Popular.)

WiFi, 3G, and data traffic
AT&T CEO Randall Stephenson has so far said he expects the iPad to be a "WiFi-driven" device. "I think the use case will favor WiFi, with 3G where you must," agrees Heavy Reading senior analyst Gabriel Brown.

The fact that many users waited and paid more than $100 extra for a 3G option suggests that there is some appetite for the cellular capability, however. "Anyone willing to pay that premium is doing so because they intend to use the 3G service a lot," suggests Technology Business Research Inc. (TBR) analyst John Byrne.

"I think about the iPad as along the lines of a netbook in terms of its ability to drive network traffic," Byrne says. "Arguably, the iPad makes it even easier to access bandwidth-hogging applications such as video, so the usage on the iPad could even be greater than on a netbook."

So what does this mean in terms of traffic numbers? "As a rule of thumb, a smartphone would use 200 MBytes a month; a laptop dongle would use 1 GByte," Heavy Reading’s Brown says.

TBR’s Byrne, meanwhile, cites factors of 10 in data growth usage from handsets to smartphones to notebooks. "Smartphones utilize about 10 times the bandwidth of a voice customer while laptops utilize 100 times [the data]," he notes.

AT&T’s iPhone users consume 273 MB of data a month on average, according to Consumer Reports, with 12 percent of users pulling down more than 500 MB a month. So, 1 GB a month for iPad 3G users appears to be a reasonable, and possibly conservative, estimate for average data usage on the iPad.

It could potentially be a lot more: A blogger has so far pulled down more than 30 GB on AT&T’s 3G network without triggering a cap. (See Gadget Watch: Others Eye iPad Success.) AT&T admitted late last year that its 3G networks in NYC and San Francisco were "underperforming" as it added millions of iPhone users to its roster. The carrier says it has started to upgrade those networks and will spend an additional $2 billion, mainly to boost its 3G capacity, this year. Nonetheless, AT&T users are still reporting more dropped calls than subscribers on other networks, according to a ChangeWave report released this month.

Major implications
TBR’s Byrne believes that the launch of the 3G iPad "raises major implications for AT&T for capacity and signaling."

But AT&T doesn't seem to care. LR Mobile asked AT&T for an interview following the 3G iPad's launch. It would only reply via its PR firm, from where a spokeswoman emailed to say: “We are pleased to be offering the 3G iPad and pleased with its launch.” Thanks for clearing that up! Independent analyst Carmi Levy, however, believes that AT&T must be doing more behind the scenes to prepare for the iPad. "AT&T learned the hard way with the iPhone that network capability must lead, not lag, the bandwidth demands of increasingly capable and data-rich handsets and applications," he tells LR Mobile.

"It would be corporate suicide for the carrier to repeat the same mistake with the iPad… I'd expect the carrier is quietly and aggressively moving to shore up its baseline network infrastructure to prevent a repeat performance. Essentially, it has no choice if it wants to remain a marquee player in next-generation mobility."

A simple fix?
Byrne, though, believes that AT&T’s 3G contract for the iPad, which is renewed by users every month, potentially offers the carrier another way to control usage. "The advantage for AT&T in offering 3G on a prepaid basis is that they can change the terms if need be," he says.

"So if they get a year down the road and see that the unlimited iPad plans are overtaxing the network, they can modify the plans, raise the price per month, or add in a bandwidth limitation to the high-end plan that is currently unlimited. The prepaid gives AT&T options to act decisively to make sure the iPad doesn’t affect their network the way the iPhone has."

Of course, such changes would be unlikely to please users.

— Dan Jones, Site Editor, Light Reading Mobile

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