Smart Phones: Vampire Squids of the Wireless Network?

Matt Taibbi, writing about the investment bank Goldman Sachs in Rolling Stone magazine, called it "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

A classic opening line for a story.

I am beginning to wonder if AT&T is starting to view the iPhone, and other wireless carriers their smart phones in general, as being giant bandwidth sucking vampire squids.

Yesterday, the Wall Street Journal reported that AT&T announced that it would resume sales of the iPhone in New York City after suspending sales on its web site over the weekend. AT&T has offered no official rationale for the move, but the speculation is that AT&T's network has been unable to support the added data traffic iPhones have added to AT&T's wireless network in the New York region because of increased holiday sales.

Earlier this month, in another WSJ report, Ralph de la Vega, head of mobile communications at AT&T, said that 3% of smartphone users were using 40% of AT&T's network capacity. He also said that the company was looking at "incentives" - i.e., higher fees - to curb their usage.

Also earlier this week, there was a report in the Financial Times of London that O2, the UK's largest mobile operator, was apologizing to its London customers over O2's poor network's performance since the summer when iPhone and other smart phone users started to ramp up their usage. O2 customers "have periodically been unable to make or receive phone calls, or download material to their handsets, because the network was clogged up by smartphones," Ronan Dunne, the CEO of O2, told the FT.

Things will improve, CEo Dunne promises, as O2 pours more and more money into trying to improve its network.

Verizon, who has been touting its network's coverage and bandwidth capacity against that of AT&T in a major ad campaign, came under fire earlier this month when it announced that it would be adding a $350 early termination fee to its smart phone contracts, in yet another WSJ story.

Verizon justified the fee - which is double what most other carriers charge -  because it "reflects the higher costs associated with offering those devices to consumers at attractive prices, the costs and risks of investing in the broadband network to support these devices, and other costs and risks."

In other words, all that sucking by smart phone vampires is eating into Verizon's profits.

And on one more "cheery" note involving wireless, ComputerWorld reported on Monday about how easy it was for hackers to listen into GSM phone calls. All it takes is $30,000 dollars of equipment and some open-source software to crack GSM A5/1 encryption in real-time.

No doubt, in a few years, the cost of the hardware needed will drop to next to nothing.

Something to look forward too.

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