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AT&T has admitted that it insisted that 3G support was removed from the much anticipated SlingPlayer Mobile application for the iPhone, which allows users to watch video streamed from a Slingbox set-top box on the handset. The product had been eagerly awaited, but disappointed on two fronts - it could only be used over Wi-Fi, and it cost a hefty $29.99 in the App Store.

AT&T argued a 3G version would consume too much network capacity and potentially damage quality of service for other users. SlingPlayer for iPhone launched last week but in order to gain approval for the app, Sling Media was forced to disable 3G streaming capabilities.

This is the latest move a cellco has made to protect its network from bandwidth hogging applications and highlights the general dilemma that operators face, between supporting popular video apps that consumers demand, and protecting their networks from falling over. The controversy also points to another bone of contention around the iPhone App Store - though operators chafe at the iron control Apple maintains on the branding and revenue, Apple allows AT&T significant influence on what products get behind the storefront, diluting some of its open access claims.

"Slingbox, which would use large amounts of wireless network capacity, could create congestion and potentially prevent other customers from using the network," AT&T said in a statement. "Applications like this, which redirect a TV signal to a personal computer, are specifically prohibited under our terms of service." In fact, the signal is redirected to the iPhone, suggesting AT&T classes this as a PC, at least when that is convenient. "We consider smartphones like the iPhone to be personal computers in that they have the same hardware and software attributes as PCs," AT&T told Engadget - emphasizing yet another dilemma for mobile broadband operators, given that more and more of their growth is coming from 'PCs', whether these are 3G netbooks, dongles or phones with PC capabilities.

The SlingPlayer for Mobile client runs on 3G on some other handsets, notably BlackBerry and Windows Mobile models, which has prompted speculation that there may be another reason for AT&T to cripple the iPhone app. Sources say it is preparing its own rival product, called i-Verse. This would go with its U-Verse TV and DVR service and allow for remote viewing of the content from handsets.

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