The Failure of 3G Hurts Apple and Its Competition

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Paul Sakuma / AP

A poster touting applications available for Apple's iPhone and iPod touch hangs from a metal support at the Macworld Conference and Expo in San Francisco. Apple says it has 25,000 apps in its app store and there's one for "just about anything."

The inadequacy of 3G networks to carry data and video for large numbers of handsets simultaneously is hurting the performance of the Apple (AAPL) iPhone. The problem only starts there. The weakness of 3G networks has also likely undermined the consumer's opinion of new products from RIM (RIMM), the Samsung Instinct, and a host of new products from market leader Nokia (NOK).

None of the consumer electronics companies banking on 3G to drive handset sales to pre-recession levels are going to be able to count on their carrier partners for services that will show off the best features of phones that can download and manipulate files, access the internet, and play video. (See the top iPhone applications for new moms.)

The Wall Street Journal reports that the iPhone is so feature rich that "the resulting growth in downloading and Web browsing will strain AT&T's network." AT&T is not alone. Sprint (S) and Verizon Wireless (VZ)(VOD) are up against the same problems.

The promise of 4G wireless networks, which should operate at speeds five to ten times faster than 3G, may be years away. Sprint is testing WiMax ultra-fast broadband in several cities, but there is no guarantee that the technology will work in nationwide rollout. AT&T and Verizon are preparing technologies which are supposed to offer similar results. (See the top ten gadgets of 2008.)

The handset and cell industries face a particularly vexing problem. The current 3G networks are not powerful enough to allow consumers with advanced handsets to take advantage of all of their features, especially networks strained by huge transfers of data to and from handsets. It is a problem that cannot be solved soon enough to keep customers from being disappointed because the phones they have purchased will not work well on the services they have subscribed to.

Douglas A. McIntyre

See the top ten iPhone applications.

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