The new AT&T has been on a roll recently. It got regulatory approval to acquire BellSouth, and its Cingular Wireless unit (soon to be renamed AT&T) got a lot of ink for its deal to provide the network for Apple's iPhone. Still, the company faces a number of challenges.

Some of those challenges are highlighted by the iPhone deal with Apple, The iPhone will use AT&T's Edge wireless data network for Web surfing and e-mail and other data services. But, notes Michael Voellinger, VP of telecom consultancy Telwares, "AT&T's Edge is slow. AT&T and Apple are definitely playing catch-up [in terms of speed], but they will catch up."

AT&T does have an exclusive deal to market Apple's iPhone, due to be in the hands of consumers in June. And that has generated a lot of attention for AT&T. What's unclear is whether all of that hype will fade away once customers have to deal with the slow Edge service, which offers speeds that are closer to dialup speeds than broadband speeds. Edge usually provides data speeds of around 75 kbps to 135 kbps, much slower than data services offered by competitors and much slower than a faster data service AT&T is starting to roll out in some cities. The iPhone also will have Wi-Fi capability, but users will have to find a hotspot to use it.

Voellinger says the AT&T-Apple alliance is really about content. "They are not going to pull users with speed," he says. "They will do it with content and because of the content, it should be very successful."

The iPod and its associated music features are an example of the superior content the AT&T-Apple combine is expected to generate for the iPhone. And faster speeds are on the way. AT&T has several other high-speed wireless data services in use and under development and Voellinger expects AT&T to eventually upgrade to faster services.

Apple seemed to say as much Wednesday at an analysts meeting. Tim Cook, Apple's COO, said the firm is initially utilizing Edge because of its widespread deployment and indicated the firm will upgrade to a faster service when the technology is widely available.

AT&T has said that its acquisition of BellSouth will enable it to be more efficient with its bundles of services. Voellinger points out that the firm can now market a bundle that includes voice, broadband, wireless, and cable TV.

"Consumers love bundles," he said. "They save money -- maybe as much as 20% -- and consolidated billing is good for both consumers and the company."

Video and TV services also may plan a big role in the company's future and the success of the iPhone, Voellinger says. AT&T's IPTV service wasn't affected by the package of concessions the firm made to obtain FCC approval of its acquisition of BellSouth. But Voellinger says it's too soon to say how big a role TV content will play in the wireless world, but it could be an asset for both AT&T and Apple.

"The heat will now be on Verizon," said Voellinger, noting that the other major former Baby Bell has to deal with Vodafone, its partner in Verizon Wireless, and such combinations can be cumbersome.

Addressing the wave of consolidations that have been sweeping through the telecommunications industry, Voellinger said they help in efficiency and innovation, but a reduction in the number of competitors can dampen price competition for consumers.