Knowing that I was going to purchase an iPad2 when it was released, I needed to decide if I would buy the WiFi only model or the one with 3G.  Going the 3G route meant deciding between AT&T and Verizon but it also meant being locked into 3G technology when 4G is around the corner.  I tried a Verizon mobile hotspot, but was disappointed with it.  It took too long to start up, and who wants to carry yet another device.  Before the 14 day limit on return was reached, Apple released iOS 4.3, which supported the personal hotspot feature on the iPhone 4.

The Personal Hotspot update inlcuded in the March iOS 4.3 update turns the GSM based iPhone 4 into a portable router and unlike the MiFi type hotspots, this is something you are going to be carrying with you anyway so no need to remember to carry a 3rd device.  This feature supports up to 3 devices via standard WiFi, plus one via USB tethering and a one via BlueTooth.

Setup and use is very easy.  You first need to signup for the tethering option for the iPhone 4.  Assuming you already have the $25 a month data plan, this will increase to $45, but with the extra $20 you get an additional 4 Gb of data.  This data is something that can be used for all access from that iPhone 4, whether directly or as a hotspot.  You can use the hotspot with any device.  This compares with the AT&T plan for the iPad which costs $25 and gives you 2 Gb of data that can only be accessed from the iPad.  The tethering plan was not only $5 cheaper but provides a lot more flexiblitly.

When I called up AT&T to activate, they confirmed you can change your plan as you wish, without penalty.  So if you wish to have the hotspot only during certain months, you can revert back.   If you have an limited data plan on your iPhone, something AT&T no longer offers, you will lose that when you switch to the Data Pro plan, something you need to be on before you can switch to the tethering plan.

Once you have your account setup to allow tethering, launch Settings and then tap General/Network/Personal Hotspot.  After the first time you use this, this option will appear on the top level of the Settings dialog box, making it very easy to turn it on and off.  Note that if you are using an iPhone 3Gs you are limited and can connect only using tethering or bluetooth and not via WiFi, as you can with the iPhone 4.

Once enabled, the screen will show a passcode.  From the iPad, or other device, just choose to connect to the network, which has the name you gave your iPhone 4, and enter the passcode.  The hotspot relies on WPA2 security, making this much more secure than using an open WiFi connection some local eating establishment. Most all devices now support WPA2, but if you have an very old device, such as an old iBook, you will not be able to connect via WiFi.

A blue bar appears at the top of the screen when a device is connected to the hotspot.  Tap on the bar to open the Personal Hotspot setting screen.  The bar displays the count of connected devices.  If no devices are connected by any method (WiFi, tethering or Bluetooth) then the hotspot will power down in 90 seconds.

I did a test running speed test from a connected Early 2011 Mac Book Pro computer.  I found when using the iPhone 4 from my home I had very good connection speed, considering that I do not live where there is a very strong signal from AT&T.  Before I returned the Verizon 5Spot portable hotspot, I did the same test using it and had poorer results.

Using the iPhone 4 as Hotspot

Using Verizon 5Spot

If a phone call comes in while you are using the hotspot feature, because AT&T uses GSM, the iPhone 4 continues to keep the data connection while you accept the phone call, unlike the CDMA system used by Verizon.

If the iPhone 4 is itself within range of a previously connected WiFi network, with the Personal Hotspot feature turned on and with one device connected to it, the iPhone will force a connection to the 3G network and maintain the hotspot connection.

I found using the Personal Hotspot feature did run down the battery on the iPhone 4 much quicker, so you may want to turn it off when you are not actively using it.  If your iPad is on and you are just reading previously downloaded material, it will maintain the WiFi connection so the iPhone will not automatically turn off the hotspot, even though now data is being transmitted.

One concern is burning through your data limits, especially if you connect a personal computer to the device, which will not have the limits that are imposed on the iPhone itself, such as limiting the size of a file download.  If you connect a computer and your email is setup to download all attachments, that will use a lot more data than checking your mail on your iPhone 4.  So you will want to keep tabs on your data usage.