The iPad’s Real Effects on Service Providers

AT&T Inc. (T) took a lot of grief over failing to anticipate how much bandwidth smartphones use when it became the exclusive Apple Inc. (AAPL) iPhone carrier. Users in metro areas, most of all, complained of slow download and upload speeds and dropped calls, all thanks to network congestion that mushroomed as more people bought the popular iPhone. Now, with the release of the much-hyped iPad, for which AT&T also is the sole service provider, some observers predict even more clogged pipes and subscriber frustration.

Yep, it's a game-changer.

“AT&T seems to be convinced that most of the time users will be connected to Wi-Fi,” Sanford C. Bernstein & Co. analyst Craig Moffett wrote last week in a research note. “That’s a pretty big stretch, given it’s a new device nobody’s used before.” But claims like that may be overblown.

“This is not a major problem,” said Craig Mathias, founder of research firm Farpoint Group. “Most people won’t be using the iPad on the go.”

In other words, the iPad is more like another notebook computer that comes with 3G access. People don’t stream video all at the same time, and they won’t all be on the 3G network at the same time either. That’s because the iPad also works on local area networks, or Wi-Fi, which will cut the load on AT&T’s 3G networks. (And yes, the iPad was experiencing Wi-Fi problems its first couple of days on the market, but that doesn’t change the point.) Plus, as AT&T transitions to the LTE 4G standard and lets loose faster broadband speeds, the issue will become moot, Mathias pointed out.

From AT&T’s point of view, congestion concerns have no basis.

“We’ve factored the iPad into our network technology planning and we’re ready,” a spokeswoman said.

Competition, Backhaul and Spectrum

In fact, the true significance of the iPad, and the related slew of forthcoming tablet or “slate” devices, will be felt in competitive pressures on operators, as well as mobile backhaul and spectrum availability.

The iPad, which sold more than 300,000 units in its first days of availability, has already spurred responses from other device makers. Computer-and-printer corporation Hewlett-Packard (HPQ) is on the verge of releasing its rival slate computer — which, according to leaked details, will include features like front- and rear-facing cameras, a USB port and memory card slot, as well as the ability to pair with an HDTV. The iPad offers none of that.