Mata said the updated software, which shipped to upbeat users this week, should give the 200 iPhone users on the college's staff the ability to transform the device into a modem, which could replace US$60-a-month air cards now installed on the laptop computers of those users.

"The most compelling enterprise feature [] is the tethering capability," Mata said in an e-mail to Computerworld. "This would replace the need to issue mobile broadband cards to our phone users."

Scott Forstall, Apple's senior vice president of iPhone software, said that while tethering is built into the iPhone 3.0 software, it's up to the carriers to implement it.

Van Baker, an analyst at Gartner Inc., said that it's too soon to predict how AT&T, the exclusive U.S. iPhone carrier, will use the tethering feature and whether and how much it would charge for it. "It's likely AT&T will implement tethering, but it won't be totally free," Baker said. "Why would any carrier do it for free?"

Baker added that free tethering will suddenly cut sales of air cards, which would affect revenues at AT&T and the 25 other iPhone carriers in 80 countries outside the U.S.