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Tuesday, February 16, 2010, 06:55 am PT (09:55 am ET)

Carriers seek new business models to afford iPhone bandwidth

As bandwidth-heavy smartphones like Apple's iPhone turn huge profits for handset makers, wireless carriers across the world have struggled to keep up with bandwidth needs. One executive said this week that new business models must be explored for carriers to remain profitable.

Vittorio Colao, CEO of Vodafone, said at the Mobile World Congress in Barcelona, Spain, on Tuesday that the demand for data in mobile devices has become a problem for carriers. According to Reuters, he specifically named Google and said the company should not be allowed to control the flow of money through dominating the search and advertising market.

To get their fair share, Colao said, carriers could charge customers more for greater bandwidth, or guaranteed high speeds. They could also charge content providers, and guarantee them bandwidth speeds as well.

Under the current business model, Colao said it is difficult for operators to invest in their networks.

With the new high-speed 4G long term evolution wireless standard on the horizon, things are only expected to get more expensive for carriers. The transition to LTE is expected to cost U.S. carriers an estimated $1.78 billion each in the first year alone. Last week, AT&T announced partnerships with Alcatel-Lucent and Sony Ericsson for 2011 commercial deployment of its 4G network.

T-Mobile on Tuesday revealed its own plans to introduce a nationwide "4G" HSPA+ network in 2010. Phones compatible with the network have not yet been announced, nor have specific cities or a timetable been revealed, though the program is currently active in Philadelphia, Penn.

Reuters also spoke with Mike Lazaridis, co-CEO of Blackberry maker Research in Motion, who said handset manufacturers need to do something to ensure their products use less bandwidth. He said if they don't, a global "capacity crunch" would emerge, which has already begun in the U.S.

"Manufacturers had better start building more efficient applications and more efficient services," Lazaridis reportedly said. "There is no real way to get around this."

Last December, Ralph de la Vega, president and CEO of mobility and consumer markets with AT&T, the exclusive carrier of the iPhone in the U.S., made headlines when he said it was inevitable that high-bandwidth users will be charged for what they use. Those comments led to speculation that AT&T was exploring tiered data plans for the iPhone — a rumor the wireless carrier quickly denied.

As smartphones become more bandwidth-hungry, the iPhone has lead the pack, causing major network problems for AT&T upon the launch of the iPhone 3GS last summer. One report said the average iPhone user consumes 10 times the bandwidth of a typical smartphone user. De la Vega, too, noted that 40 percent of AT&T's network capacity is consumed by just 3 percent of smartphone users.