A Rude Awakening for Ma Bell's iPhone Dreams

Nothing can kill the iPhone. Not connectivity problems. Not Research In Motion's (Nasdaq: RIMM  ) "Crack"Berry. Not even AT&T (NYSE: T  ) , though Ma Bell tried for a time.

No longer. Last week, at the Web 2.0 summit in San Francisco, a senior AT&T executive said that tethering would come to the 3G iPhone in the not-too-distant future, solving a public-relations fiasco created over the summer when Apple (Nasdaq: AAPL  ) pulled tethering software called NetShare from its iPhone App Store.

Tethering is both highly useful and highly controversial. Useful, because it allows a smartphone to share its connection to the Web with other devices, thereby enabling access anywhere the phone finds a cell. Controversial, because it's the sort of enhanced service that Ma Bell would prefer to charge for, as the company does with those who own tethered handsets from Motorola (NYSE: MOT  ) , Nokia (NYSE: NOK  ) , and RIM.

NetShare creator Nullriver didn't have a deal with AT&T. Rather, it let its software loose in the digital wild so that iPhoners could tether often -- without paying a penny to AT&T. Old Ma apparently didn't like that and had the software pulled for violating the iPhone's terms of service.

But that was AT&T showing its age and, frankly, a lack of understanding. The iPhone has become a full-scale platform with more than 6,000 downloadable enhancements available via the App Store, a ten-fold improvement over the 600 it launched with in July. With so much interest, tethering was inevitable.

Ma Bell, asleep for far too long, has finally woken up to that reality. Welcome to the real world, AT&T.

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