Why is AT&T delaying rollout of iPhone tethering, MMS?

On Monday, Apple announced at its Worldwide Developer Conferences in San Francisco that it plans to finally add data tethering to the iPhone, which will turn the device into a wireless modem to connect laptops to 3G networks.

(Credit: James Martin/CNET)

Updated at 4:09 p.m. PDT with a link to a Boy Genius report and a clarification on when AT&T expects MMS and tethering service to be ready.

iPhone users across the U.S. were disappointed Monday to learn that AT&T, the only operator in the country offering the iPhone, won't immediately support a couple of key new features in Apple's new 3.0 operating system that will be available starting next week. But AT&T says these features are coming.

On Monday, Apple announced at its Worldwide Developers Conference in San Francisco that it plans to finally add data tethering to the iPhone, which will turn the device into a wireless modem to connect laptops to 3G networks. It also announced that the new 3.0 version of the iPhone operating system will support multimedia messaging messaging.

These features have topped iPhone users' wish lists since the phone was launched two years ago. But millions of iPhone users in the U.S. will have to wait a little bit longer. That said, AT&T says the features are coming soon.

"We will be offering a tethering plan and MMS for the iPhone," Mark Siegel, AT&T's spokesman, said by phone. "But we haven't announced a date."

Siegel was short on details about when these features would be offered, which devices they would be offered on, and how much it plans to charge for the services. Siegel confirmed that the MMS functionality will be offered by the end of the summer, but he wouldn't give any indication as to when tethering will be added.

Apple currently supports two versions of the iPhone on its network: the original iPhone, which went on sale in 2007 and operates on AT&T's 2.5G EDGE network, and the iPhone 3G, which was introduced last summer and operates on the faster 3G network.

Starting next week, AT&T will get another version of the phone called the iPhone 3G S. This device will come in two flavors--a 16GB model that will cost $199 with a two year contract and a 32GB model that will cost $299 with a two year contract. AT&T and Apple will also continue to sell the 8GB iPhone 3G announced last year for $99 with a two year contract. Older 16GB iPhone 3Gs will be available for $149 with a two-year contract until stock of that device runs out, Siegel said.

Siegel couldn't say whether MMS and data tethering will be available on older versions of the iPhone. But if Apple is offering the features as part of the software upgrade, and AT&T offers the service for the iPhone 3G S phones, it would make sense for the company to offer the features on all iPhones supporting the upgraded software. But Siegel couldn't say for sure if this was the case.

While a delay of a few weeks or even a month or two might not seem like a big deal to some people, it seems strange given that AT&T already offers MMS and smartphone data tethering on several other devices. MMS is practically a standard feature on many new phones sold today. MMS messages cost 30 cents to send and receive. And MMS is included in the carrier's messaging plans, which iPhone users already subscribing to those plans are actually paying for a service they can't yet use. Those plans start at $5 a month for 200 messages, and an unlimited plan costs $20 a month.

AT&T also already offers data tethering on several devices. In fact, AT&T's Web site lists no fewer than 11 smartphones that can be used to provide wireless Internet service to laptops. Phones that offer this functionality, include the recently launched Nokia E71m, the Samsung Propel, and the Palm Centro. AT&T also supports data tethering for BlackBerry devices, including the Curve, Bold and Pearl.

According to AT&T's Web site, smartphone tethering plans, which offers Web connectivity for a laptop plus personal data usage for a smartphone, cost an additional $65 a month. The BlackBerry tethering plan costs $60 a month. Both services include 5GB of usage per month. Customers who exceed the allotted bucket of data usage are charged for overages on a per kilobyte basis.

It's difficult to understand why AT&T would need additional time to offer these new features on the iPhone, since it's clear that the company already offers the services and has established rate plans for them. Siegel wasn't able to elaborate or offer any explanation as to why AT&T would need more time to activate these services.

But I wonder if AT&T is worried about overloading its network. iPhone users download games, video and other Web data at two to four times the rate of other smatphone users, according to comScore. So if they also send mobile messages and use tethered data connections at much higher rates too, AT&T might feel some pain on its network.

Even though AT&T has made a lot of noise lately about upgrades to its 3G network, poor network performance is one of the biggest complaints from iPhone users (myself included.) At this year's South by Southwest conference in Austin, iPhone users complained of delayed text messages, poor Web access and dropped calls.

I'm not really sure how a few weeks or even a couple of months would help AT&T overcome this problem, but perhaps the company needs a little bit more time to prepare its network for what could be an onslaught of activity.

The Web site Boy Genius Report referenced an anonymous source who said that AT&T must manually remove all the "Opt Out MMS codes" on each iPhone account to activate MMS. I'm not sure how true this is, since 29 other operators around the world are planning to have the MMS capability ready when the software launches.

Regardless of the reason behind the delay, one thing is certain. AT&T isn't winning any fans among iPhone users for not making these features available when the software is released.