AT&T Upgrading 3G for Better iPhone Service

With a million new iPhone 3G S models now in the hands of customers, AT&T is upgrading its 3G services to improve coverage and speed by refitting slices of the 850 MHz spectrum it owns.

The upgrade involves taking blocks of spectrum in the 850 MHz band, formerly used for the outdated service TDMA, and retooling it with 3G equipment.

Such a move promises to bring improved coverage to 3G subscribers, especially in metropolitan areas, AT&T (NYSE: T) spokesman Mark Siegel told InternetNews.com.

“The spectrum leftover from a technology we retired, TDMA, is being used in the upgrade, and 850 propagates the signal further and penetrates buildings and walls more effectively, so it has the effect of virtually doubling the network capacity, so we’re working to roll that out to 3G markets in the U.S.,” said Siegel.

In large cities with concentrated 3G user bases such as New York and San Francisco, AT&T customers sometimes experience dropped calls and signal problems because the carrier’s current 1900MHz spectrum is overextended.

“When you’re in a 3G market, hypothetically, and have three bars, with 850, chances are good you’re going to get five — it really improves coverage,” Siegel said.

He added that there are 350 3G markets up and running now, and that AT&T plans to add an additional 20 by the end of the year, and that many of those will be using the 850 MHz band.

The next coverage move is to add 2,100 cell sites and to improve wired Internet connections on AT&T cell sites to accommodate the additional iPhone traffic, Siegel said.

AT&T is enjoying the boost in new subscribers from an exclusive deal with Apple to support the iPhone series to next year. During the year’s first quarter, it added 1.2 million net new subscribers, with three-quarters of that signing long-term contracts.

Naturally, Apple’s iPhone played a significant role, as AT&T activated 1.6 million new iPhone accounts during the same time period.

However, the arrangement has also resulted in some difficulties for the carrier in meeting consumer demand.

Most recently, AT&T came under fire for not immediately supporting tethering and MMS, new features in the 3G S, and for its upgrade pricing plans for existing customers.

Apple issued a $30 iTunes credit to those affected by activation delays for the new iPhone, caused by a server overload glitch — though the company did not say whether AT&T had been at fault.

AT&T isn’t the only wireless company struggling with congested networks, however. As data use continues to climb, telcoms are increasingly under pressure to improve infrastructure to meet demand.

Despite the recession, mobile data services growth in North America will exceed 8 percent through 2014 and “will shield mobile services revenues against growing voice pricing pressures,” according to a report issued this week by ABI Research.