Early AT&T iPhone Upgrades Will Cost $50 More

iPhone users who upgrade early will pay AT&T $50 more. While AT&T blamed more-sophisticated devices, it's also a tacit admission of network problems. AT&T has already turned off HSUPA for its new 4G smartphones, and upgrading to other phones will also cost more. An analyst noted AT&T's bad timing with its T-Mobile deal pending.

AT&T told media outlets Monday that the carrier's iPhone prices will rise by $50 beginning this week for customers looking to upgrade or replace their Apple handsets before the expiration of their two-year contracts. The carrier attributed the increase to the rising sophistication of mobile devices, which it said means higher costs.

However, the network problems caused by AT&T's data Relevant Products/Services-hungry smartphone Relevant Products/Services users in high-traffic metropolitan areas such as New York and San Francisco are also undoubtedly a major factor. So it seems the only real surprise here that it took so long for AT&T to admit that the iPhone is a big drain on the carrier's data network.

"Though Android devices are equally data hogs by comparison to broadband, for example, there are far more iPhones on the AT&T network -- at least for now," said Gartner Vice President Phillip Redman. "I would expect Android to also see some increases, though the average wholesale prices of Android are lower than iPhone."

Network Problems

Indeed, AT&T is also raising prices for its other smartphones by $50 to $150, depending on whether the customer is making no commitment or agreeing to a one-year contract. All these price changes invite further criticism, industry observers say.

"It's very counterproductive for AT&T to make this type of move now -- many months prior to the close of the T-Mobile acquisition," noted Lisa Pierce, an independent wireless analyst at the Strategic Networks Group. "This type of action reinforces how much market power Relevant Products/Services is held by just two providers."

AT&T's decision does show one thing, however: How loyal customers are to Apple, Pierce said. "They've done their analysis, and relatively few customers will bolt anytime soon," she explained. "Other device Relevant Products/Services vendors, take note."

AT&T's smartphone price hikes also potentially point to network problems. AT&T told media outlets last week that the HSUPA capability on its new 4G phones, such as the Atrix 4G and the HTC Inspire 4G, will not be enabled until a later, which means the handsets are preset to max out at around 300 Kbps.

Still Struggling

As for why AT&T couldn't implement HSUPA on its new 4G phones at the outset, Redman said this simply could be what the phones can actually support Relevant Products/Services. "But most of it goes to their transition on the network, and the network is not ready to support faster speed uploads," Redman said. "Upload support usually follows download speed increases because it is more difficult to do overall."

The storm of complaints unleashed by users promised 4G who got 3G appears to have surprised AT&T. "Usually uploads from phones are minimal and don't contain a lot of data or have high data needs [because] e-mail and web surfing are both low-end data," Redman said. "Since this device is often used attached to a computer, data demands were higher than anticipated."

In the wake of the damage that AT&T's reputation has already suffered due to data-congestion problems from Apple's iPhone, the carrier's failure to switch on 4G for its newest handsets surprised many observers. Still, Redman observed that AT&T has long struggled and still struggles to deliver high-speed data consistently on its network.

"[AT&T] has had a hard time supporting the scale and demand of these next-generation devices across its network," Redman explained. "It certainly has one of the largest wireless networks in the world, which creates these challenges, but as users rely more on wireless connections, any problems will be put under the microscope."