Could Apple’s new iPad end up being too much of a good thing?
Steven P. Jobs, Apple’s chief executive, played up the iPad’s ability to stream live baseball games and hit movies during his demonstration on Wednesday. But people who are willing to pay more to get that content over AT&T’s 3G data network may pay another price: glacial downloads and spotty service on an already overburdened system.
America’s advanced cellphone network is already beginning to be bogged down by smartphones that double as computers, navigation devices and e-book readers. Cellphones are increasingly being used as TVs, which hog even more bandwidth. They can also transmit video, allowing for videoconferencing on cellphones.
And a new generation of netbooks, tablet PCs and other mobile devices that connect to cellphone networks will only add to the strain. “Carrier networks aren’t set to handle five million tablets sucking down 5 gigabytes of data each month,” Philip Cusick, an analyst at Macquarie Securities, said.
Wireless carriers have drastically underestimated the network demand by consumers, which has been driven largely by the iPhone and its applications, he said. “It’s only going to get worse as streaming video gets more prevalent.”
An hour of browsing the Web on a mobile phone consumes roughly 40 megabytes of data. Streaming tunes on an Internet radio station like Pandora draws down 60 megabytes each hour. Watching a grainy YouTube video for the same period of time causes the data consumption to nearly triple. And watching a live concert or a sports event will consume close to 300 megabytes an hour.
“Video is something the industry needs to get a handle on,” Mr. Cusick said.
AT&T , the sole carrier of the iPhone in the United States, has become the butt of jokes and the cause of vexation for its customers in major cities because of dropped calls, patchy service, and other network hiccups.
The other carriers may share the problem as they sell more data-sucking devices; sales of smartphones are expected to increase 30 percent this year, according to Morgan Stanley analysts.
In a recent briefing with analysts, Ralph de la Vega, AT&T’s chief executive for mobility, said that users of smartphones, primarily the iPhone, were straining the network by watching video and surfing the Web. The company reported an unprecedented increase in wireless data use of nearly 7,000 percent since late 2006.
Jake Vance, for example, catches every Red Sox game he can — mostly on his iPhone.
“I watch every game I can’t get on TV,” he said. “I’ve also been known to watch baseball at home on my iPhone while my wife is watching something else on TV.”
Last season, Mr. Vance, 27, who works long hours making cupcakes in the vegan bakery he owns with his wife in Rutherford, N.J., listened to the audio streams of 70 games and watched 30 live games using Major League Baseball’s iPhone app.
“The iPhone has changed the consumer’s expectation of what a mobile device is able to do,” said Jeff Bradley, senior vice president for devices at AT&T. “We are working rapidly to make sure they can meet those expectations.”
Yet, even as carriers struggle to meet the demands on their networks, they are encouraging the use of more sophisticated devices and the swelling catalogs of apps. Analysts expect carriers will generate more than half their revenue from data in three or four years, up from less than 30 percent today.
The carriers increasingly look to data plans and services like streaming high-quality video and audio as a way to differentiate themselves from the competition, Ross Rubin, an analyst with the NPD Group, said.
AT&T, for example, is offering a $30-a-month unlimited data plan to iPad owners. Customers are not locked into a long-term contract as they are for their cellphones, which makes the new service more enticing. “They want to plant the seeds in consumers’ minds now about what the potential is, even before the networks are ready. But they have to balance between providing a poor experience and overloading the network,” Mr. Rubin said.
Networks in other countries have similar problems, said Chetan Sharma, an independent wireless analyst. But many carriers outside of the United States balance out network use with tiered data plans. And bandwidth-intensive smartphones are often spread across multiple carriers in the same city.
Still, some, like O2 in Britain, have suffered from service failures because of a concentration of iPhone owners in dense urban areas like London.
Streaming video and live video broadcasting are still in the early stages of adoption. But most have already gained significant traction among consumers. The $10 version of the M.L.B. app that allows users to stream live games has been downloaded roughly 300,000 times since it went on sale in June, said Bob Bowman, chief executive of MLB.com.
“We didn’t even have the full season to sell the application,” Mr. Bowman said. “We think we’re going to see a substantial increase next season.” The app was demonstrated on the iPad at the event on Wednesday with Mr. Jobs.
The National Football League recently announced plans to make its RedZone channel, which offers real-time highlights, updates and live snippets of games, available to cellphone users next season.
Knocking Live, a free app that allows iPhone and iPod Touch owners to stream live video to one another, akin to a live video conference, has been downloaded more than 275,000 times, according to its developer, Pointy Heads Software. Nearly 540,000 live-streaming video sessions were initiated since the app became available in early December. On average, 120 gigabytes of data are shared each day, and the company estimates that around 90 percent of the sessions were over AT&T’s 3G network.
Ustream.tv, a Web site that allows anyone to set up a live broadcast of things as varied as a wedding ceremony and round-the-clock coverage of newborn puppies, recently introduced a free app that allows iPhone and Android-powered smartphone owners to broadcast video directly from their handsets. Within its first two weeks of availability, the company said users uploaded more than 500,000 mobile broadcasts.
“The ease and simplicity of being able to pull your phone out, hit a button and go live” is what makes the app so appealing, said Brad Hunstable, president of Ustream.
Mr. Hunstable said that the data required to broadcast or watch live video using Ustream’s app is comparable to that of watching a YouTube video. But the company is testing a high-definition version of its iPhone app, which will use more bandwidth.
“As the technology improves, so does our ability to stream in higher quality,” he said.