Is The iPhone A Bandwith Hog?

Fortune's Apple 2.0 column asks an interesting question. It appears that iPhone users really like using their handsome little phones to surf the Internet, and at least in some areas, that usage is translating into a great deal of bandwith strain on the iPhone's cellular carrier, AT&T. Will that become a problem as new users continue to buy and use the phone?

...analysis by American Technology Research’s Shaw Wu found several points of concern going forward, one of which was new to us.

iPhone users, it seems, are “bandwidth hogs” to an extent that could affect Apple’s (AAPL) dealings with cellular carriers and sales to new users. As Wu put it Wednesday in a report to clients:

    Our sources indicate that the success of iPhone with its Safari web browser is putting strain on AT&T’s (T) EDGE network in areas with higher user density. We have been told that iPhone users are consuming “well over” 100 MB per month (compared to Blackberry around 10 MB). The relative economics to the carrier is unfavorable with actually lower net revenue while using considerably more network resources. To us, lower economic returns to carriers will mean lower subsidies relative to other platforms. This will put more of a cost burden on the consumer. We believe many consumers will pay up for AAPL products, but this could limit the elasticity of adoption somewhat.

It's not a trivial concern for AT&T. They pay a portion of the money they charge for cell service back to Apple for the exclusive rights to iPhone cellular plans in the United States. The next generation iPhone might make all the bandwith problem moot, but until then the relationship between Apple and AT&T might be strained, and affect Apple's profitability on the iPhone. After all, AT&T can simply do nothing, and iPhone users in big cities might be subjected to pokey download times. And the phone is only nifty if it works. The article is interesting just to read the Apple fanboys yelling at the author and quoted analyst in the comments. Remember, journalists: Apple=good, You=evil.