Wireless carriers look for new business models to support bandwidth demand

Smartphones are a double-edged sword in the mobile phone world. Smartphones are one of the few categories in the consumer electronics market that is having robust growth, but the devices lure users who consume lots of bandwidth which in turn causes problems for wireless carriers.

The problems caused by high bandwidth devices are the stuff of legend on the AT&T network as the wireless giant lays the blame for poor network performance squarely at the feet of iPhone users who consume much more bandwidth than the average phone user.

AT&T announced later the same month that it would turn to Wi-Fi to help is congested network rather than use tiered pricing to punish heavy downloaders. AT&T later apologized for the subpar condition of its network and promised to spend heavily on upgrades to support the bandwidth that its users demand.

Reuters reports that AT&T is not alone in facing bandwidth woes attributed to smartphone users. Vodafone CEO Vittorio Colao said during a keynote speech at Mobile World Congress in Spain that new business models need to be pursued to cope with the demand for bandwidth by wireless network users.

Colao's comments hinted that wireless device markers are seeing huge profits from sales of bandwidth gobbling smartphones while the wireless carriers are left to pay for the network upgrades needed to deal with the new devices and the appetite for bandwidth of smartphone users. Google CEO Eric Schmidt told attendees of his speech at MWC that carriers need to work with Google to meet the demand for bandwidth on their networks.

Schmidt said, "Find a way to say yes, not no is our thesis. We need them to go ahead and invest these enormous amounts of money at great risk and in return they need us to continue to build powerful new reasons to upgrade the connections and get a new phone."

RIM is aware of the bandwidth demands of smartphone users and has stated that phone makers need to focus on producing handsets that consume less bandwidth. RIM's Mike Lazardis said, "If we don't start conserving that bandwidth, in the next few years we are going to run into a capacity crunch. You are already experiencing the capacity crunch in the United States."

AppleInsider quotes Lazardis saying, "Manufacturers had better start building more efficient applications and more efficient services. There is no real way to get around this."

Colao had an interesting statement on how wireless carriers can pay for the bandwidth and upgrades needed to support the bandwidth demands of users. He said that the wireless carriers could charge content providers and guarantee the provider bandwidth as well as charging the user more for consuming more bandwidth.

Spanish wireless carrier Telefonica SA has also said that it was considering charging search engines for bandwidth consumed. Charging search engines for bandwidth makes some sense considering that traffic to search giants like Google make up a large portion of the bandwidth consumed by users. 

"A lot of people pay zero for the cellphone ... That's what it's worth." -- Apple Chief Operating Officer Timothy Cook

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