AT&T's tough talk on data use seen as part of struggle with Apple

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As AT&T this week said it may charge more to bandwidth-heavy iPhone users, one firm believes the wireless carrier has been stung by Apple's new found control of its subscribers through the App Store and iTunes.

iSuppli Corp views the comments from Ralph de la Vega, head of consumer services for AT&T, as part of an industry-wide behind-the-scenes struggle between wireless providers and hardware makers. As growth opportunities in voice service revenue have disappeared, cell phone carriers must turn to revenue from data.

But services like iTunes and the App Store, the firm said, have allowed Apple to usurp control of subscribers from AT&T. In other words, customers are now more tied to their phone than they are their carrier, which results in lost revenue for AT&T.

"Apple has generated major revenue and margin growth based on its iPhone business — while AT&T largely has been unable to cash in on the growth in data services beyond monthly access fees," said Jagdish Rebello, PhD, senior director and principal analyst for iSuppli. "This is making it difficult for AT&T to make the required investments to upgrade its network to support greater bandwidth. The net result is a deterioration in the mobile broadband user experience."

So much of the iPhone experience is tied to transactions made between the consumer and Apple on the App Store that have no relationship with AT&T. iSuppli believes that the issue of subscriber control is a battle that will be waged across the entire wireless industry.

In addition to Apple, Google, Nokia, Research in Motion and Microsoft have created their own comparable software download destinations. Each of them are attempting to "muscle in" on wireless carriers through offering premium content, service and applications, the firm said.

"Regardless of who wins, this battle will alter the balance of power in the mobile value chain," Rebello said.

Huge sums of money are at stake. The firm has forecast wireless data services, excluding messaging, to grow by 26.2 percent and amount to $87.7 billion in 2009. Into the future, iSuppli has forecast it to be a $188 billion revenue generator by 2013.

Apple has found tremendous success with the iPhone App Store, achieving the milestone of 100,000 applications available for download less than a year and a half after its debut. In September, the company revealed that over two billion applications had been downloaded from the store.

This summer, the iPhone was referred to as the "Hummer of cellphones" after AT&T's network struggled following the launch of the bandwidth-heavy iPhone 3GS. The average iPhone user is said to use 10 times the bandwidth of a typical smartphone user.

De la Vega revealed this week that 40 percent of the network data capacity for AT&T is used by just 3 percent of smartphone users, with most of that going to activities like streaming audio and video. Those types of services are made possible through software available for download on the iPhone App Store.


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