Apple’s iPad beauty could be an ugly beast for mobile operators

January 28th, 2010 by

www.telegraph.co.uk – The gadget appears to do everything but make your breakfast. Like its predecessor, the iPhone, more applications will be added over time and, eventually, its price will drop, making it even more desirable and ubiquitous. Therein lies the problem for already-strained carriers like AT&T in the US and O2 in the UK.
Sales of the device are unlikely to jump out of the gate. Even though the 16-gigabyte version costs less than $499 (£308), most anything the iPad does can already be done by an iPhone or a netbook for a lower price. Yet sales will heat up with time. The device displays books, runs business software and serves up web pages in a more appealing manner. For many people, the speed and utility of the device will be worth paying for.

Yet this speed may be the iPad’s Achilles heel. When outside a Wi-Fi connection, US users must use AT&T. And the operator is already feeling the strain from devices such as the iPhone, for which it is the exclusive carrier in the country. In December, the head of AT&T’s mobile operations admitted its New York and San Francisco networks were under strain from increasing use of smartphones.

Cell networks were designed for short and infrequent calls. The iPhone changed behavior, as customers use their handsets longer, for more data-intensive functions and more frequently. Streaming video, a key selling point of the iPad, is particularly hard on operators. If customers used wireless connections in the same way they use their broadband connections, operators would need 10 times as many base stations, according to Sanford Bernstein research.

The iPad will intensify this problem because it encourages users to stream video and play online games. Sure, iPad sales may take time to rev up, giving operators time to invest in their networks. And AT&T can deploy more urban Wi-Fi hotspots to reduce bottlenecks. Investors seem to be counting on this. They sent AT&T shares up slightly.

That may be first-day giddiness. The iPad is beautiful, but it may become an ugly beast for operators.


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