The announcement reverses a decision by AT&T last spring not to allow the Sling iPhone app because it would increase congestion on its 3G network. In Thursday's announcement, AT&T noted that Sling has developed its wireless app to "make efficient use of 3G network bandwidth" and to "conserve the finite wireless spectrum available to the wireless industry."

Overwhelmed AT&T

AT&T and Sling are saying that the new app has been optimized for its network, the result of a cooperative effort between both companies. AT&T mobility CEO Ralph de la Vega has indicated that his company will be working with developers to make data -intensive apps more "bandwidth-sensitive."

The Sling app is only useful for consumers with a Sling box. The app allows the user to watch streaming TV from cable, satellite or DVRs from the Sling hardware over the Internet, as well as control the TV sources.

AT&T's bandwidth capacity has become an issue with consumers recently, so the carrier wants to make clear that it is paying attention to bandwidth in adding new video-player capability for the iPhone.

In late December, blogger Dan Lyons -- aka Fake Steve Jobs -- promoted an effort to overwhelm AT&T's network by having thousands of users run data-intensive applications at the same time. The intent was to protest the network performance, but the protest was called off after a warning from the Federal Communications Commission.

iPhone Is 'Test Case'

According to industry observers, AT&T may have underestimated the iPhone's appeal and the bandwidth needs of those customers. The initial projections by the real Steve Jobs, CEO and cofounder of Apple, were that his company would consider the device successful if it took one percent of the global market. It now has 14 percent.

In addition, there are more than 140,000 apps easily available through Apple's App Store for the iPhone, many of them data-intensive. AT&T Operations President John Stankey has admitted the carrier "missed our usage estimates."

Significantly, when Apple announced its iPad tablet computer, AT&T remains its carrier partner for data, but consumers will be able to move to another carrier if they are dissatisfied with the service.

Avi Greengart, an analyst with industry research firm Current Analysis, noted that "AT&T is actually a bit advanced, compared to other carriers" in dealing with the bandwidth crunch. He said this is because "there are more smartphones on AT&T than on other networks, and the iPhone is the test case for usage models going forward."

In adding Sling's "bandwidth-sensitive" player to the iPhone, Greengart said, "AT&T is clearly trying to find a balance."