Will Apple's iCloud service crush 3G networks?

One key announcement Apple (NASDAQ:AAPL) made Monday at its Worldwide Developers Conference was iCloud, Apple's cloud services platform.  Users' mobile applications, documents, photos and music will be stored in the cloud and shared across multiple iOS devices. But will this new service have an impact on cellular networks? According to analysts, it appears that the impact will be minimal since most data traffic from iCloud will go over Wi-Fi networks.

The company's iCloud Backup service will back up content like pictures and apps daily over Wi-Fi. When users change a document on any device, iCloud automatically pushes the changes to all their iOS devices. Users will get 5 GB of storage for documents and will be able to buy more for an unspecified price. Further, Apple's Photo Stream will automatically upload the photos users take or import on any of their devices and wirelessly pushes them to all iOS devices as well as computers.

An Apple spokeswoman declined to comment on the network aspects of iCloud beyond what the company said in its press releases, which is that iCloud Backup and Photo Stream services will use Wi-Fi. An AT&T Mobility (NYSE:T) spokesman declined to comment, and a Verizon Wireless (NYSE:VZ) spokeswoman did not immediately respond to a request for comment.

According to CCS Insight analyst John Jackson, Apple must have concluded that users of their products have access to Wi-Fi networks with sufficient regularity that the service will be broadly accessible.

But what happens if a user doesn't have access to a Wi-Fi hotspot? Will traffic get routed over the cellular network? Or will the cloud upload just be put on hold until users get in range of a Wi-Fi access point? Apple isn't saying. "If it's not in iCloud 1.0, it will be in iCloud 2.0, and the masses will worship Steve Jobs again," Recon Analytics analyst Roger Entner said of the ability to upload data to the cloud via cellular networks. Until then, he said, users will "run around like nomads in the desert trying to find that Wi-Fi oasis."

Entner said that he believes the majority of people will do their cloud syncing at home or in a Wi-Fi location. "Do you really need it to sync with your five iOS devices every second? No, not really," he said. "It makes a lot of sense to do that from a few locations but not on the fly." 

And yet, Apple could presumably have an easy fix for this problem, said Gartner analyst Michael Gartenberg. Currently, iOS 4.3.3, the latest software version for AT&T's iPhone 4, allows users the option of pushing content like movies, apps and books over cellular networks when Wi-Fi is not available Gartenberg said he could envision Apple doing this for iCloud and iOS 5.

Gartenberg said that customers who are grandfathered into unlimited data plans might not mind background cloud syncing to go over cellular networks, especially if they are light data users in general and primarily want to store content like documents and calendar appointments. Apple already requires certain large files or apps to be downloaded only over Wi-Fi networks. "There is definitely concern for people to go over their data allotments," he said. "But I think they have made it pretty granular" so that it should not be too much of a problem. 

Entner said each carrier will have to decide how much traffic it wants to be pushed over Wi-Fi and how much on its macro network. For example, AT&T, which has an extensive Wi-Fi network with more than 24,000 hotspots nationwide, will  likely want to make as much use of that as possible. Verizon has said it will use Wi-Fi offloading techniques to handle increased data traffic on its EV-DO and LTE networks in homes as well as crowded hotspots such as hotels, airports and stadiums. 

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