As cell phones take on more and more features, wireless carriers are struggling to keep up with data demands.

Whether wireless customers are watching videos on YouTube or uploading puppy pictures to Facebook, they want reliable speed. Upgrading the network is essential to meeting the needs of these customers, and each wireless carrier has its own plan of attack. Some are upgrading their existing third generation (3G) networks with better software before moving on to next generation networks. Others already have fourth generation (4G) networks up and running. In addition to transmitting high-definition video, these networks could alleviate traffic problems on existing networks, making service better for everyone–even folks who don’t plan on buying a new 4G-enabled device.

According to AT&T spokesperson Seth Bloom, wireless data traffic grew nearly 7,000 percent between the third quarter of 2006 and the third quarter of 2009. “We’ve been working tirelessly to support this growth,” Bloom says.

In 2008 and the first three quarters of 2009, AT&T invested approximately $19 billion on its wireless network. “We know there is work to be done, especially in New York and San Francisco. We have a plan to improve the experience; we are implementing the plan, and we are confident that it will work.”

While cell phone networks are constantly being upgraded and expanded, analysts say customer complaints have helped drive improvements over the last few years. iPhone customers were particularly vocal, with some complaining that the existing AT&T network didn’t provide enough coverage, speed, or reliability to meet their needs. “AT&T simply didn’t have capability to keep up with demand,” says Robert Rosenberg, president of the Insight Research Corporation.

AT&T and T Mobile both recently announced that they have completed upgrading their existing 3G cell towers with new software called High Speed Packet Access (HSPA) 7.2. The software speeds up existing 3G networks and allows for speeds of up to 7.2 Megabytes per second (Mb/s). That’s twice as fast as the old 3G network.

Godfrey Chua, a research manager who covers wireless and mobile infrastructure for research firm IDC, says the upgraded networks will technically be able to run faster, “but all the same challenges will still exist.” For example, if there are too many people accessing the same cell tower, people won’t actually experience the top speeds. Ultimately, this would mean that the wireless company would need to add more towers.

“Deploying more base stations is the most expensive part of expanding your network,” Chua says. “It’s also a challenging task, for sure.” A company can do all kinds of planning and research to determine the best location for a new cell tower, only to discover the city won’t allow it.

Certainly, it takes more than software to ensure the speed boost is felt by customers. Backhaul–that section of the network that carries signals from the cell tower to the telecommunications backbone–needs to be increased to support the faster speeds enabled by HSPA 7.2. Additional backhaul is already being deployed by AT&T in Charlotte, Chicago, Dallas, Houston, Los Angeles, and Miami as a part of the upgrade. Once these changes are complete, users should see a significant increase in data transmission speeds. Bloom says the added backhaul should also help prepare AT&T for its 4G network.

Fourth generation networks can be implemented using a couple of different approaches, notably Worldwide Interoperability for Microwave Access (WiMAX) and Long Term Evolution (LTE). AT&T has decided on LTE, which Bloom says could deliver speeds that are 10 to 20 times faster than its existing 3G network. AT&T plans to test the networks this year and deploy them in 2011. Bloom says this coincides with the availability of a “wide variety” of LTE-compatible devices.

Verizon will beat that timeline, however, with plans to launch its 4G LTE wireless network in 25 to 30 markets this year. By 2013, Verizon says, its 4G network should reach all 285 million people currently in reach of its 3G network. Verizon has no plans to implement HSPA 7.2 in the interim, however.

Sprint, in contrast, has opted for WiMax, which can provide speeds of up to 10 Mb/s. By leveraging its partnership with Clearwire, Sprint already provides a 4G service in 27 markets in the U.S., with service for five more–including New York and San Francisco–expected later this year.

T Mobile is currently focused on 3G, with plans to upgrade the software on its existing network to HSPA+ and speeds between 10.8 Mb/s and 18 Mb/s broadly available by the middle of this year. The company says that ultimately, it plans to go with LTE for 4G.

Chua says it’s difficult to say whether WiMAX or LTE is superior, because a lot depends on the way the network is set up. “Generally, the peak data rates that are technically specified for LTE are a little bit higher than WiMax, but you and I are never going to see those peak rates, because no network will ever be architected that way.”

“Consumers don’t care about technological underpinnings,” says Kelly Schlageter, a communications manager at Sprint Nextel. “They just want quality, affordable 4G services that work where and when they want. Today, our 4G network delivers unmatched performance, and people can experience 4G mobile broadband right now–without having to wait for the development of alternative technologies.”

Regardless of the wireless protocol implemented, 4G networks should improve network performance for everyone. Initially, Chua says, most 4G users will be accessing the network on laptops, because high-definition video won’t be much of a draw for folks using a small cell phone screen. “It’s the laptop users who are often clogging up the networks,” he says. “If you can move the laptops to 4G, then you can get more capability on the 3G network, and better serve the iPhones.”