AT&T doubling 3G capacity

Essentially miniature Internet-centric laptops, the netbooks come with 3G DataConnect plans, just like its PC Card and embedded laptop services, but as AT&T starts offering more specialized data devices, its billing models will change, Lurie said. A customer won't pay for a $10- to $20-a-month data plan simply to upload a digital photo wirelessly from a camera to a picture frame, Lurie said, but that customer may pay a set nominal fee per photo. These new data models will have to "break some rules," Lurie said, discarding the notion of a steady monthly subscription. "This may be the single biggest opportunity in the wireless industry today going forward: growing incremental revenues," Lurie said.

Sprint was the first operator to test these types of per-transaction billing when it partnered with Amazon to launch the Kindle e-book reader. While the Kindle remains constantly connected to the Sprint EV-DO network, much like a smartphone, the customer never incurs a monthly data charge. In fact, the customer usually isn't even aware of the Sprint network. Whenever he or she purchases a book or a magazine or newspaper subscription from Amazon, the customer is billed only for the purchase, while Amazon compensates Sprint for use of its data network. Verizon, too, has launched its own open developer program to encourage new types of devices and business models on its 3G networks, though the results of those efforts haven't been so public. Most of the devices the program has certified so far have been machine-to-machine devices used in industry, and the few consumer devices on the network are being sold by third-party service providers.

Lurie didn't offer any specifics on what types of devices besides the netbooks will come out of the program, but he said AT&T is working with multiple vendors big and small to certify their products. "We're talking to OEMs coming out of the garage with duct tape on their devices, and we're talking to $100 billion companies," Lurie said.

THE ROAD TO LTE

While AT&T will continue to upgrade and expand its 3G network into the foreseeable future, AT&T is taking the initial steps toward 4G. McElroy said AT&T is now in the process of selecting vendors for its future long-term evolution (LTE) network and plans to have its first test markets up in 2010.

When LTE goes commercial in 2011, it will initial be a very data-focused network, utilizing LTE's high capacity for bandwidth-intensive devices like laptops, but eventually AT&T plans to scale LTE support down to handsets, extending voice services to the network using VoIP.

AT&T will use both its 700 MHz and advanced wireless services (AWS) spectrum to launch LTE, McElroy said. Even if AT&T fills up both bands, it still has reams of cellular and PCS spectrum it could eventually allot to LTE if demand for 4G broadband balloon. Once voice starts migrating over to LTE, AT&T's 2G and 3G channels could be repurposed for LTE.

"We feel very good about our spectrum position," McElroy said. "And we say that with full understanding of what the data demands will be."