Google Phone May Add to Network Strain

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'Lifeblood'

"While we do not have an immediate need for additional spectrum, it is the lifeblood of our network so we can't rule it out for the future," Verizon spokesman Jim Gerace said. Network investments over the past decade will give Verizon an advantage as data traffic grows, he said.

James Fisher, a spokesman for Overland Park, Kansas-based Sprint (S), said the company's investments in newer technology through a partnership with Clearwire Corp. will help the carrier meet higher demands for data.

T-Mobile, the last of the four carriers to roll out a so-called third-generation network, has seen data grow on its network at about the same rate as AT&T, said Mark McDiarmid, a T-Mobile executive in charge of systems engineering.

"This is not a T-Mobile concern or an AT&T concern, it's really an industry concern," McDiarmid said in an interview. "As we've mobilized the Internet and really brought great devices to market, we've seen dramatic increases, too."

Limiting Features

While carriers can build out their networks to handle the increased traffic, if no new spectrum is found, companies like T-Mobile will have to limit new features, McDiarmid said. Bellevue, Washington-based T-Mobile probably won't need more spectrum for three to five more years, he said.

"We are victims of our own success," said Christopher Guttman-McCabe, a vice president at Washington-based CTIA-The Wireless Association. "The technology, the innovation is just taking off."

That leaves the carriers looking for new ways to handle the burden, like asking the U.S. Federal Communications Commission to make more airwaves available. Adding towers and updating technology only partly solves the problem of congestion on networks, Guttman-McCabe said. Identifying and allocating the new network space may take more than a decade, according to the CTIA, whose members include AT&T and Verizon.

More Problems

AT&T and Verizon added spectrum in 2008 after the FCC freed up airwaves used by television broadcasters, raising almost $20 billion in the auction. Carriers are asking whether TV companies should relinquish more airwaves, a plan broadcasters oppose.

"You see the struggles AT&T is having with the new demand created by the iPhone, and you project forward not just for one company and one network but for the entire country," said Blair Levin, the FCC official overseeing an initiative to add high-speed Internet capacity in the U.S. "That's a serious potential problem."

The carriers are also investing in newer technology known as long-term evolution to cope with the onslaught. Verizon will start its LTE service this year, and AT&T may follow in 2011.

The upgrades will make the spectrum four times more efficient, leading to faster data speeds and greater capacity, according to the 3rd Generation Partnership Project, a technical association. Still, those gains will likely be outpaced by data traffic without additional spectrum, said Bernstein's Moffett.

"It's going to take more than just better technology," Moffett said. The increase "pales in comparison to the 50-fold increase in data traffic that AT&T has seen in just the past three years."

To contact the reporters on this story: Amy Thomson in New York at athomson6@bloomberg.net; Todd Shields in Washington at tshields3@bloomberg.net.

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