Has AT&T (NYSE: T ) found a magic bullet to kill its network problems?
The Apple (Nasdaq: AAPL ) iPhone has been exclusive to AT&T for nearly three years now, and perhaps the biggest complaint raised against the ultra-sleek phone has been the quality of AT&T's service. Dropped calls and crawling data connections have inspired even diehard Apple fanatics to trade their beloved iPhones for Google (Nasdaq: GOOG ) Android handsets or Research In Motion (Nasdaq: RIMM ) BlackBerry phones on a less exasperating network.
While dropping the iPhone deal would certainly alleviate the pressure on AT&T's radio towers, Ma Bell is working hard on some much-needed network upgrades as well. The company just selected Alcatel-Lucent (NYSE: ALU ) and LM Ericsson (Nasdaq: ERIC ) as hardware suppliers for its upgrade to 4G network standards. Since 4G can deliver about 10 times the connection speeds of a 3G network, and the back-end connections should be built to handle that kind of traffic, AT&T's slow days should be over.
Not today, though. The actual upgrades won't roll out until 2011, giving AT&T haters ample time to bemoan the problems they see today. That also means you'll have time to invest in wireless infrastructure leaders Ericsson and Alcatel if you see them benefiting from a co-exclusive supplier deal with the largest network in North America. Ericsson also handles support and services for the new 4G installations, which probably means the Swedes get the lion's share of this contract.
AT&T is running about a year behind archrival Verizon (NYSE: VZ ) when it comes to converting to the Long-Term Evolution (LTE) standard for 4G connectivity. On the other hand, Verizon is switching from one family of technologies to another, incompatible one, while AT&T is upgrading within the family. In other words, Verizon's LTE benefits will come in fits and starts, while AT&T's 3G networks gain strength from the 4G upgrade.
Of course, you'll need a 4G-capable iPhone in order to fully appreciate AT&T's new networks, so there's another upsell for Apple. By and large, AT&T is keeping up with the Verizons (Joneses?), and I'd be very surprised if the company didn't renew its exclusive iPhone deal for another handful of years.