AT&T's Time Square Hotzone

AT&T (T - Analyst Report) has reportedly launched a pilot Wi-Fi (wireless broadband) project in Times Square, New York City, which will enable the residents and vistors to stay connected in one of the busiest places on the planet.

Ma Bell has installed a massive Wi-Fi hotspot (“hotzone”) in the north-central part of Times Square to reduce the mobile data traffic congestion. The carrier continues to be challenged by serious traffic congestion as a result of high-bandwidth demand on its network due to excessive data usage by the iPhone customers. AT&T is making significant investments on 3G network infrastructure improvements across highly congested areas to offload traffic from its overcrowded network.

The new hotzone will enable 32 million eligible AT&T customers Wi-Fi access using any compatible smartphone, 3G LaptopConnect card or high-speed Internet plan. The carrier plans to expand hotzones in other parts of the country that are affected by network congestion.

AT&T boosted its Wi-Fi coverage with the acquisition of Texas-based Wayport Inc., a leading Wi-Fi service provider, in December 2008 for $275 million. Besides providing support for the carrier’s Wi-Fi enabled handsets (such as iPhone and BlackBerry), the acquisition increased its Wi-Fi hotspot counts in the U.S.

AT&T is the undisputed leader in Wi-Fi in the US with more than 20,000 hotspots. The carrier currently has 125,000 hotspots globally. AT&T remains focused on expanding the number of Wi-Fi hotspots available to its customers and enhancing connectivity for its high-end smartphone users. AT&T is expanding its nationwide Wi-Fi coverage across venues such as hospitals, retail locations, restaurants, coffee shops, sport arenas and airports.

Wi-Fi represents an important strategic opportunity for the operator, as the number of Wi-Fi enabled wireless handsets is expected to increase by 175% through 2011.

Wi-Fi access for AT&T’s smartphone and integrated devices customers has dramatically increased in recent times. The carrier had 53 million Wi-Fi connections on its US network in the first-quarter 2010, representing a five-fold increase compared to 10.7 million a year ago. Roughly 69% of these connections were made from smartphone and integrated devices, up from 35% a year ago.

AT&T’s aggressive Wi-Fi expansion strategy will further solidify its competitive position against its archrival Verizon (VZ - Analyst Report) which has so far demonstrated a blasé attitude in this area