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Customers Angered as iPhones Overload AT&T

Slim and sleek as it is, the iPhone is really the Hummer of cellphones.

It’s a data guzzler. Owners use them like minicomputers, which they are, and use them a lot. Not only do iPhone owners download applications, stream music and videos and browse the Web at higher rates than the average smartphone user, but the average iPhone owner can also use 10 times the network capacity used by the average smartphone user. “They don’t even realize how much data they’re using,” said Gene Munster, a senior securities analyst with Piper Jaffray.

New iPhone 3GS
Source: Apple
New iPhone 3GS

The result is dropped calls, spotty service, delayed text and voice messages and glacial download speeds as AT&T’s cellular network strains to meet the demand. Another result is outraged customers.

Cellphone owners using other carriers may gloat now, but the problems of AT&T and the iPhone portend their future. Other networks could be stressed as well as more sophisticated phones encouraging such intense use become popular, analysts say.

Taylor Sbicca, a 27-year-old systems administrator in San Francisco, checks his iPhone 10 to 15 times a day. But he is not making calls. He checks the scores of last night’s baseball game and updates his Twitter stream. He checks the local weather report to see if he needs a coat before heading out to dinner — then he picks a restaurant on Yelp and maps the quickest way to get there.

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Or at least, he tries to. “It’s so slow, it feels like I’m on a dial-up modem,” he said. Shazam, an application that identifies songs being played on the radio or TV, takes so long to load that the tune may be over by the time the app is ready to hear it. On numerous occasions, Mr. Sbicca says, he missed invitations to meet friends because his text messages had been delayed.

And picking up a cell signal in his apartment? “You hit the dial button and the phone just sits there, saying it’s connecting for 30 seconds,” he said.

More than 20 million other smartphone users are on the AT&T network, but other phones do not drain the network the way the nine million iPhones users do. Indeed, that is why the howls of protest are more numerous in the dense urban areas with higher concentrations of iPhone owners. “It’s almost worthless to try and get on 3G during peak times in those cities,” Mr. Munster said, referring to the 3G network. “When too many users get in the area, the call drops.” The problems seem particularly pronounced in New York and San Francisco, where Mr. Munster estimates AT&T’s network shoulders as much as 20 percent of all the iPhone users in the United States.

Owners of the iPhone 3GS, the newest model, “have probably increased their usage by about 100 percent,” said Chetan Sharma, an independent wireless analyst. “It’s faster so they are using it more on a daily basis.”

Mr. Sharma compares the problem to water flowing through a pipe. “It can only funnel so much at a given time,” he said. “It comes down to peak capacity loads, or spikes in data usage. That’s why you see these problems at conferences or in large cities with high concentration of iPhone users.”

When thousands of iPhone owners descended on Austin, Tex., in March during South by Southwest, an annual technology and music conference, attendees were unable to send text messages, check their e-mail or make calls until AT&T installed temporary cell sites to amplify the service.

AT&T’s right to be the exclusive carrier for iPhone in the United States has been a golden ticket for the wireless company. The average iPhone owner pays AT&T $2,000 during his two-year contract — roughly twice the amount of the average mobile phone customer.

But at the same time the iPhone has become an Achilles’ heel for the company. “It’s been a challenging year for us,” said John Donovan, the chief technology officer of AT&T. “Overnight we’re seeing a radical shift in how people are using their phones,” he said. “There’s just no parallel for the demand.”

AT&T says that the majority of the nearly $18 billion it will spend this year on its networks will be diverted into upgrades and expansions to meet the surging demands on the 3G network. The company intends to erect an additional 2,100 cell towers to fill out patchy coverage, upgrade existing cell sites by adding fiber optic connectivity to deliver data faster and add other technology to provide stronger cell signals.

As fast as AT&T wants to go, many cities require lengthy filing processes to erect new cell towers. Even after towers are installed, it can take several months for software upgrades to begin operating at faster speeds.

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The company has also delayed bandwidth-heavy features like multimedia messaging, or text messages containing pictures, audio or video. It is also postponing “tethering,” which allows the iPhone to share its Internet connection with a computer, a standard feature on many rival smartphones. AT&T says it has no intention of capping how much data iPhone owners use.

The upgrades are expected to be completed by next year and the company has said it is already seeing improvements.

But AT&T faces another cost — to its reputation. AT&T’s deal with Apple is said to expire as early as next year, at which point other carriers in the United States would be able to sell the popular Apple phones. Indeed, a recent survey by Pricegrabber.com found that 34 percent of respondents pinpointed AT&T as the primary reason for not buying an iPhone. “It’s a P.R. nightmare,” said Craig Moffett, a senior analyst with Sanford C. Bernstein & Company.

AT&T might be in the spotlight now, analysts say, but other carriers will face similar problems as they sell more smartphones, laptop cards and eventually tablets that encourage high data usage.

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Globally, mobile data traffic is expected to double every year through 2013, according to CiscoSystems , which makes network gear. “Whether an iPhone, a Storm or a Gphone, the world is changing.” Mr. Munster said. “We’re just starting to scratch the surface of these issues that AT&T is facing.”

In preparation for the next wave of smartphones and data demands, all the carriers are rushing to introduce the next-generation of wireless networks, called 4G.

Analysts expect that in a year or so, AT&T’s network will have improved significantly — but it may not be soon enough for some iPhone owners paying for the higher-priced data plans, like Mr. Sbicca, who says he plans to switch carriers as soon as the iPhone becomes available on other networks. “What good is having all those applications if you don’t have the speed to run them?” he said. “It’s not exactly rocket science here. It’s pretty standard stuff to be able to make a phone call.”

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