death-star-att-1AT&T announced today that it has finally finished upgrading all of its 3G towers, speeding up its network while adding to its capacity. For now, it says end users won’t see any change in service, which could be bad news for the company considering how many users have expressed frustration with slow and failed connections.

Already, AT&T is struggling to keep up with user demands. Its one ace in the hole is iPhone exclusivity, but not even this is a sure thing for long. Rumors are swirling that Apple is looking into a contract with Verizon. AT&T could see many of its users migrate elsewhere — if it doesn’t pick up the pace soon and put an end to the droves of dropped calls that have attracted so much negative PR.

To smooth these concerns, AT&T has been vocal about further upgrades expected in the next two years, including the launch of its High Speed Packed Access 7.2 network, which should improve service considerably for average mobile phone users. This will require improvements to the fiber connections between towers, and should go live first in Charlotte, N.C., Chicago, Dalls, Houston, Los Angeles and Miami.

The 3G upgrades are also a key move toward next-generation 4G/LTE broadband technology, which could reach data speeds that are 10 times quicker than the fastest 3G networks. This is incredibly important for AT&T, which is already behind Verizon in this respect. The latter plans to deploy LTE in 2010, while the earlest AT&T will manage it is 2011.

Based on all this, it might sound like AT&T is limping behind its pack of competitors, but it actually accomplished a lot in 2009. Not only did it bring five times the number of backhaul connections online that it did the year previous, it also sunk $19 billion into expanding network capabilities, improving network infrastructure, and buying a bunch of new spectrum.

However, these 3G improvements will likely not be the end of dropped or failed connections for iPhone users. Recently Scandinavian carrier  Teliasonera finished its 4G/LTE network in Oslo and Stockholm, with the first users being able to use the networks in early 2010. We will wait and see how the iPhone will fare there to see whether the 4G promiseland should be taken seriously or not.