Does the iPhone 5 need LTE wireless to succeed?

Limited LTE network coverage could hurt iPhone 5 sales, says one analyst, while another says customers won't care

When Apple announces its next iPhone as expected on Wednesday, many analysts predict it will have faster LTE wireless capability along with other improvements, including a larger 4-in. display, more powerful processor and overall design changes to woo expectant buyers.

But some analysts question how important LTE service will be to next-generation iPhone customers, since LTE deployments are not far along in many regions of the world and LTE isn't widely appreciated by the vast majority of U.S. smartphone users.

"The wireless industry's all wrapped up in LTE, but customers don't get it," said Jeff Kagan, an independent analyst. "Most customers don't know what LTE is, and they don't care. LTE is important, but it is not what will make the difference in a [smartphone] sale or not. Customers get bigger screens, but not industry jargon like LTE."

Rob Enderle, an analyst at Enderle Group, said that because LTE coverage won't be widespread on most wireless carriers for many quarters, even in the U.S., sales of the next-generation iPhone could suffer after an initial surge in popularity.

"These new iPhones will face high pricing and poor network penetration for their key LTE feature, which could slow down adoption a lot after the initial fourth-quarter sales wave," Enderle said. "If the iPhone 5 has any weakness, it is that LTE isn't where it needs to be."

To be sure, some LTE (Long Term Evolution) users love the faster service, which can offer a dramatic 10-fold speed improvement over widely used 3G CDMA or GSM networks. LTE speeds at up to 10 Mbps or faster hasten downloads of videos and Web browsing, as well as interactions on games.

The biggest LTE provider globally, Verizon Wireless, is based in the U.S., which would seem to give Verizon an edge in attracting LTE iPhone customers. But Verizon in June also implemented its Share Everything data service plan with free voice and texting that is now required for new and upgrading customers. With the plan, data services can be shared over 10 devices and sold in several different monthly data tiers that subject users to an overage charge should the upper limit be exceeded.

If Verizon sells the next iPhone, as expected, the Share Everything Plan could be a deterrent to new iPhone customers, some analysts said. "Buyers have already been balking at Share Everything and iPhone 5 customers will be forced into that plan," Enderle said.

AT&T, which has also rolled out LTE service but is not as far along as Verizon in its deployment, launched a Mobile Share plan in August that is similar to Verizon's plan, but voluntary for receiving free voice and texting with shared data plans.

AT&T also touts fast service over its HSPA +42 network that it calls 4G. The company claims its 4G network has a bigger footprint than Verizon's LTE.

Sprint, the third-largest U.S. carrier, still offers unlimited data service plans, and has shown a strong interest in attracting LTE customers with its new service launched July 15 and now available in 19 cities.

On Monday, Sprint announced it had plans to expand its LTE coverage in 100 more markets "in coming months," including major markets such as Boston, Chicago, Los Angeles, Memphis, Miami, Nashville New York, Philadelphia and Washington. The timing of the announcement was viewed by analysts as a clear attempt to woo next-generation iPhone customers, even though Sprint hasn't said when those 100 markets will have LTE service.

In July, Verizon had reached 304 U.S. cities with LTE, while AT&T had 47.

Market research firm IDC recently reported that Verizon had more than 9 million LTE subscribers in the first quarter of 2012. The next biggest markets were in South Korea and Japan, where South Korea's SK Telecom Co., ranked second with 2.75 million subscribers and Japan's NTT DoCoMo was third with 2.23 million.

While the interest in LTE by U.S. carriers is robust, IDC also noted spectrum shortages in Europe that could delay LTE deployments there. In addition to rollouts of LTE by Verizon, AT&T and Sprint in the U.S., T-Mobile plans to roll out LTE in 2013.

"It is imperative that LTE is an available option for each operator to compete in the [U.S.] market," IDC noted in a recent report. "Consumers will continue to demand high-speed data, and operators must be well-positioned in response to this demand."

While the level of LTE competition among carriers is high in the U.S., Kagan and other analysts are unsure whether the carriers will be able to convey LTE's value through marketing to their customers for the next iPhone. Perhaps the next iPhone's cachet and styling as well as its larger screen than its predecessors' will draw the customers despite LTE, the same way the first iPhone lured customers to AT&T fiveyears ago, analysts said.

The data sharing plans that Verizon and AT&T introduced during the summer were apparently in anticipation of a new iPhone as well as a slew of newer LTE-ready Android phones that will place greater demands on their networks, analysts said.

Apple first went to LTE with its new iPad in March, using two carriers in Canada and both Verizon and AT&T LTE in the U.S.. To roll out LTE service anywhere in the world, the next iPhone would need chips that can work over an estimated 40 LTE bands, so it seems fairly clear that Apple will focus on LTE where the markets are more mature -- the U.S., South Korea and Japan.

Amazon announced an 8.9-in. tablet called the Kindle Fire HD 4G LTE last week that will support 10 LTE bands, seemingly to provide connectivity anywhere in North America. It will sell for $499, the same as the starting price for the iPad.

When Amazon CEO Jeff Bezos announced the new Kindle Fire HD LTE last week, he touted the LTE capability as a key selling point, calling LTE the "ultimate tablet feature." On AT&T, customers using the new Kindle device will pay a discounted price of $50 a year for up to 250 MB a month, a big reduction in the annual cost for data with a new iPad on LTE. That kind of discount might be something AT&T has in store with an iPhone on LTE, some analysts suggested.

None of the major carriers are saying whether they will carry the next iPhone, even though all those currently selling the iPhone are expected to continue to do so. Carriers also are not specifically addressing preparations for data demands expected from the device. Those details are likely to come out shortly after Apple's announcement Wednesday.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His email address is mhamblen@computerworld.com.

See more by Matt Hamblen on Computerworld.com.

Read more about wireless carriers in Computerworld's Wireless Carriers Topic Center.

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Matt Hamblen

Computerworld (US)

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