Some industry observers have long said AT&T Inc.’s contract to carry the iPhone has resulted in a clogged network that doesn’t work as advertised. And, even though the Dallas-based company has deflected the criticism, it has been pumping billions of dollars into its technical infrastructure to deal with surges in data traffic.

“This is the mixed blessing of the iPhone,” says Barbara Lancaster, president of LTC International, a Richardson, Texas, telecom consultancy, referring to the huge revenue generator—and resource zapper—that the iPhone has been for AT&T. “The network is not keeping up with the demand for bandwidth.”

The issue, some analysts say, is that iPhone customers use so much bandwidth that the entire network gets affected. The result can be customers sometimes getting slower data-transfer rates than they expect or getting kicked off the network altogether, among other things.

Consider a study from earlier this year by CFI Group, an Ann Arbor, Michigan-based customer-satisfaction research firm.

In a survey of 1,074 consumers who own smartphones—wireless phones with computing capabilities—respondents were asked to rate their overall satisfaction with their wireless provider, along with their likelihood of recommending that provider.

AT&T came in last in scores on overall satisfaction, with a 69 for its iPhone users and a 73 for AT&T’s non-iPhone users. Verizon Wireless and T-Mobile led the way with scores of 79, while Sprint came in at 74.

In its study, CFI shied away from linking perceived technical issues on AT&T’s wireless network to the carrier’s showing in the survey. But it did find that AT&T’s scores were low in certain areas of carrier performance, including the ability to connect from any location and the ability to maintain a constant connection.

An AT&T spokeswoman, Sarah Andreani, said in an email that the company “cannot comment on a study that we’re not familiar with. We can tell you that AT&T was ranked No. 1 in customer satisfaction among smartphone owners, according to independent survey data from Neilson.”

AT&T’s View

Spokespeople for Dallas-based AT&T don’t dispute that the carrier has faced a big surge in data and bandwidth usage on its wireless network. But they maintain that the company is beefing up the network to handle the demand for so-called third-generation network technology, which, at the moment, is the latest and greatest available.

“Data traffic on the AT&T network has quadrupled in the past year,” said Jason Hillery, an AT&T spokesman. “That’s the trend we’ve seen for several years.” But, he added, the company still has—as it has advertised—the “nation’s fastest 3G network.”

In the past two years, AT&T says, the company has spent some $38 billion for its wireless and wireline network. Another $17 billion to $18 billion will be spent this year, AT&T says.

In North Texas, AT&T maintains that it has spent at least $50 million since last year on rolling out an upgrade to its 3G network to add higher-quality “wireless spectrum.” That spectrum, in the 850 MHz band, adds to the capacity of the network, allowing for better wireless connections and improved coverage in buildings.

In addition, the spectrum upgrade has nearly doubled the capacity of the North Texas network to handle voice and data traffic, AT&T officials say.

Beyond that, AT&T plans to roll out a new wireless technology called High Speed Packet Access 7.2—HSPA 7.2 for short—that purportedly will provide speed boosts to its network. The rollout of HSPA 7.2 initially will be in six large cities, including Dallas, with service expected by the end of the year.

Theoretical peak speeds of 7.2 megabits per second are possible, though real-world speed will undoubtedly be a bit slower than that, Hillery said. The version of HSPA in place today tops out at theoretical speeds of 3.6 megabits per second, he said.