How Apple could screw the U.S. wireless industry

60 Comments

Apple Event 10/4 Apple LogoAll signs point to Apple’s (s aapl) unveiling its third-generation iPad on Wednesday, and while millions of consumers will follow Apple’s San Francisco event in anticipation, operators around the world will watch with trepidation. New reports emerge daily that the iPad 3 will be the first iOS device with LTE connectivity, but Apple hasn’t given any official confirmation. There’s a lot riding on that spec sheet. If the new iPad — and more importantly the next iPhone – doesn’t support LTE, then Apple will have struck a huge blow to the wireless industry and impeded mobile broadband’s progress.

The simple fact is that LTE is a much more efficient way of delivering mobile data than its HSPA and EV-DO predecessors. There’s much attention focused on the speed of LTE networks, and while 10- to 20-Mbps connections are nothing to scoff at, the hidden yet very real value of LTE is its ability to deliver a bit of data far more cheaply than previous-generation technology.

That means operators not only have more capacity to offer their customers but also can – theoretically at least – sell that capacity at a lower price. If we really are dreaming of having 100 GB monthly plans that don’t cost the equivalent of a house payment, we are going to need LTE to get there. Operators can’t fully make the leap unless Apple is on board and helping to push consumers on to next-generation networks.

LTE is a global phenomenon, but nowhere do operators have more to lose than in North America, where every single major U.S. and Canadian operator has either launched or is in the process of building these new networks. By the time of the new iPhone’s expected launch this fall, there will be five commercial LTE networks in the U.S. alone and another two in the process of construction. Those operators are selling plenty of Android LTE smartphones, but without the world’s single-most-popular smartphone and tablet connecting to them, the true potential of those networks won’t be realized.

What exactly is at stake

At first glance, this may seem like a minor setback for carriers – their mass transition of the iPhone to 4G will just have to wait another year – but the repercussions of a sans-LTE iPhone are far larger. Let’s name a few:

  • Operators would be forced to invest in older, less-efficient technology rather than new technology. The enormous data traffic a new iPhone or iPad would have placed on the mobile network doesn’t just disappear. It gets shifted to HSPA and EV-DO networks. Instead of pumping their capital investment dollars into LTE, operators would be forced to build new infrastructure to boost their 3G capacity in order to meet the data deluge of millions of new iOS devices.
  • Spectrum would be tied up in older technologies for years to come. Operators like AT&T (s t) have already overloaded their HSPA networks with iPhone traffic. If a new HSPA iPhone emerges, it will have to start adding new capacity by either tapping into spectrum it is reserving for LTE or cannibalizing its GSM networks. AT&T may already have begun the process of re-farming its PCS and cellular airwaves for HSPA. Once it commits those frequencies, though, they will remain HSPA. No operator can afford to build one network and replace it two years later. Likewise, Verizon Wireless (s vz) and Sprint (s s) eventually want to shut down parts of their EV-DO networks and repurpose those airwaves for LTE, but if millions of iPhones are still running over them, they will have little choice but to leave them be.
  • Data pricing could remain static. It’s a simple matter of math. Cellular networks are in essence shared broadband resources. The slower the connection your device makes with the network, the less overall capacity is available to the network as a whole. The prices operators’ charge for data is determined by how efficiently they deliver data. If the majority of smart devices on the network are making bad use of the network’s resources, then costs can’t come down.

Why Apple could pass on LTE

Apple has plenty of valid business reasons not to put LTE in its next wave of devices. The cost of LTE chips are still high, and LTE radios suck a lot more power than their 3G predecessors (though Motorola (s mmi) and Nokia (s nok) seem to have solved this problem by simply slapping bigger batteries into their LTE phones). LTE is still experiencing growing pains as any customer who has had to deal with one of Verizon’s numerous 4G outages can attest.

The biggest reason, though, is LTE doesn’t gel with Apple’s core go-to-market strategy. Whenever it has been able, Apple has produced a single version of both the iPhone and iPad, selling essentially the same device throughout the world. LTE’s adoption has been driven by North America and Asia, which account for the vast majority of LTE’s subscribers today. In Europe and the rest of the world, LTE networks are still few and far between. That’s a lot of territory where an iPhone’s or iPad’s LTE parts would just be extraneous silicon and antennas.

But Apple may be forced to change that strategy for LTE. The fragmentation among global LTE bands — with four being supported in the U.S. alone — means Apple will most likely need to come up with regional versions of the devices. If Apple does split the iPhone and iPad into separate SKUs, it will be hard-pressed to include LTE in any North American version.

In a few days, we will have an answer. If LTE winds up in the iPad, it’s almost certain to make it into the iPhone. If LTE doesn’t make the cut, we might excuse Apple for not taking a business risk on new technology. After all, Apple has shown that skimping on radio technologies like 3G and HSPA+ in the past hasn’t done a thing to hurt sales.

But the point I’m making here is there’s a lot more at stake than just Apple’s billable cost of materials. Apple has a chance to show leadership by embracing the key technology driving the mobile broadband revolution forward. It may be late to LTE, but on Wednesday Apple could arrive just when it really matters.

60 Comments

Peter Sills

I know plenty of people who own tablets but I don’t know anyone who wants to connect that tablet to a wireless cell network. They either tether them to the plan the phone carries or they use a free hotspot. Are there people who are actually paying for a data plan for both phone and tablet? Huh?

Dries Grobler Jr

Great article about the future and not just focusing on what Apple will be releasing but how it affects the “world”. Thanks!

Alex Clark

Kevin,
“the world’s
single-most-popular smartphone and
tablet”…? According to a January 2012 Neilsen study, Android commanded just shy %40 market share globally. Apple came in just under %30. Popularity must be in the eye of the beholder these days. I digress…
LTE, just as EVDO/HSDPA+ before it and TDMA, will be the industry standard. Regardless how tech savvy people feel, its the masses that will beg for 4th gen cell tech, without actually knowing what it is, or how it works. Phone technology, for the everyday common man/woman/teeny-bopper, is created by a carrier’s marketing department not the manufacturer. Carrier’s are the ones who sell these devices that contain technology that is beyond the grasp of their largest core group of custy’s. As long as the every-man is somewhat satisfied with price and performance, us titans of tech and sultans of spec will be cast to the fringes as mere minorities and small voices. But one day, I’m confident, we shall have our day in the sun.

Michael Makary

i don’t think the ipad’s unveiling tomorrow will be an indicator whether or not apple is behind LTE or not. the ipad will lag the iphone. Apple could have released a retine display ipad in the ipad 2. it was a few months before the iphone 4, but it didn’t.

Also, the ipad is a device that, for most people, is used at homes, offices, coffee shops, where wifi is available…. it’s more of a home device, unlike the iphone where i need information at any given moment, and all i have to rely on is my carrier’s network, in which case i do support LTE.

If you really wanna get down down to it tho, people with iphones are practically married to that OS and divorce is EXPENSIVE. we rely on our phones in familiarity, in apps, in different apps that claim to have the same functionality until we’ve found the one that suits us…. no one is going anywhere…. it might be a bumpy ride.

Kevin Fitchard

I actually agree with you on all counts, Michael. I’m still skeptical we’ll see an LTE iPad tomorrow, but many of my colleagues in the tech media assure us we will. I want to believe them, but Apple has pulled some bait-n-switches before.

That said it’s far more important that the iPhone have LTE connectivity. It’s what’s loading down networks today and the expectations of mobility are far higher.

Mikey

The missing part of this article is customer experience. There is little value in adding a chip with limited connectivity and shortened battery life. The only win is for the carrier. If carriers want iOS devices to have LTE, the would need to strike a deal with Apple that iPad can get unlimited LTE for $15/month for 2 years (no contract). By then network should be built out to advantage customers. I doubt carriers are smart enough to see the long term benefit of such a deal, so I doubt LTE in iPad 3.

Ron

You Android/LTE flogs are so blind. Sure, if LTE is in the new iPhone I would be happy with the new bandwidth. BUT, I WILL NOT be happy if the phone is heavier and sucks it’s battery much faster. In fact, I would rather have longer battery life than LTE. And so would MOST consumers. MOST consumers don’t really care about tech specs like LTE. What they care about is that the phone is always ready for them, not dead in their pocket.

And let’s be honest, the carriers will NOT be lowering prices.

5

LTE equals fiber equals closer links to my non-mobile world, at a cheaper price (OPEX). I say promote LTE wherever possible.

Mike | HomelessOnWheels

LTE? Perhaps the carriers should put some effort toward making sure everyone has simple 3g service first. As faster and faster technologies are being deployed in the cities, suburbs and, especially, rural areas are stagnating with dialup-speed 2G or occasionally 3G that’s not much faster because of insufficient tower ensity and/or backhaul capacity.

Usable data service should not be an amenity available only to city dwellers. It’s time carriers start caring about ALL their customers.

Caru Ventures

My bet is Apple will skip on LTE in both the iPhone and iPad this year as the technology is too immature and the battery drain from the radio will be unacceptable. Check out http://bit.ly/yqVIeh

ausnote

Avoid apple guys, show them their pathetic legal move will cost them their customers base.
Imagine these pathetic legal move from apple

-swipe to unlock
-icon shape
-look and feel
-something about multitouch
-and many generic legal crap

I have been using Pocket PC and Tablets ten years ago and it is essential very similiar to devices today and yet apple has the nerve to own everything.

Adam C

Eh, Apple need not have to show leadership nor do they care.

They cared about user experience and what is best not what bloggers or geeks think is best.

Btw LTE is not mainstream yet so you can stop the rant. But if you sincerely think it is the best next to white bread than you should talk more to the android crowd.

Kevin Fitchard

It’s pretty mainstream here in the U.S. and it most certainly be when the new iPhone comes out.

I agree with you, Apple probably doesn’t care. But it should care because it affects its customers, the rates the pay and the speeds they have available to them. Unless LTE moves forward mobile broadband stays static.

Vox

What Apple should do is force the selection of a standard…pick one, and only one, LTE, and stick to it…let everybody else move to their chosen one, and let those who don’t want to move die in the vine.

Capitalism.

Kevin Fitchard

I suppose if any company had the power to impose an ad hoc standard on the wireless industry, it would be Apple :)

Tim Meyer

“Apple has a chance to show leadership by embracing the key technology driving the mobile broadband revolution forward.”

I think Apple shows leadership by holding off on half-baked technology. Note the number of times the VZW 4G has crashed over the past month or two.

The carriers, by urging device manufacturers to make 4G devices, just make them lose money and be their trial balloons. I feel sorry for Samsung and Motorola for becoming such suckers. But then again, as Sanjay Jha famously said: we do what operators tell us to do.

The fact that Apple can call their bluff shows who the better poker player is.

Kevin Fitchard

Hi Tim,

Well you could argue that a lot of 3G networks were half-baked when the iPhone 3G came out. How often did AT&T’s network basically go offline in your city. That was a capacity issue not a network signaling one, but the point is no network is every going to be ‘ready’ for the iPhone. But LTE is where the future is and Apple needs to be there. By Fall of 2012, when the new iPhone comes out, LTE is going to be as ready as it will ever be here in the U.S.

Matthew

I have had 2 Android devices, Samsung Charge/ LG Revolution that are 4G LTE devices. Both devices were so awful with power consumption, I would not even call them a phone (dead in less then 2 hours in standby mode, talk mode- 30minutes). To me this is unheard of that a Carrier could actually ship a products with such poor performance. When I turned off the LTE, the phones actually could handle standby mode for a bout 1 day….. Still not acceptable in my mind but at least usable without having to find a place to charge it every 10 minutes.

The iPad definitely gives more room for more batteries, but the product’s weight would go up significantly… Even though it is not discussed, the weight of the product is something that should be improved. I really think that the LTE problem is not really yet a handset manufacturers problem, but the chip set and the network…. I do not think Apple can solve it yet, but definitely hope if they do release an LTE product they improve the system. If not, I do not think they will launch an unusable phone like the Android Device manufacturers did. Apple’s products are a class above in this regard, and I do not think they would lower user satisfaction over running forward to have LTE. My two cents!

Kevin Fitchard

Thanks for commenting, Matthew.

If you ask me a lot of the LTE battery problems are Android vendors cheaping out on the battery cost. LTE needs a lot more powerful battery (at least for now). Now Moto and Nokia are starting to pack in lithium ion it’s becoming less of problem. Still, the three day phone charge is a thing of the past unless the fuel cell suddenly becomes viable for handsets

PhilH

Pretty big overstatement of Apples importance if you ask me. There’s a difference in being the top selling individual phone and being the top selling platform. As a platform its being outsold by a large margin by a platform that will probably be all LTE where ever available this year. They can stay behind and all the rest of the data will move on to LTE. Sales will only continue due to the tech media doing anything it can to claim LTE isn’t all its cracked up to be. And the only reason Apple hasn’t moved is because they can’t be first and need to figure out how to claim they’ve done it right.

Kevin Fitchard

Hi Phil,

I agree there’s a big difference between phone and platform, but in the case of the U.S. it’s both. That’s a huge chunk o traffic. What’s more Apple maintains it legacy devices for years. Even if we get an LTE iPhone 5, Apple is still going to sell millions of 4s and 4Ses in 2013

Kindroid

Apple’s legacy support of older iPhones is already causing them problems. Higher crash rates since the release of iOS 5. Older phones with lower hardware specs struggle with newer OS complexity. Developers face challenges sorting out how to support varying hardware specs and API updates. A frustrating form of fragmentation, where older iPhones become less stable. This is the primary reason Android phones are not as backward mobile…less legacy issue. With the added advantage of allowing new model hardware and Android updates to evolve faster.

As far as iPhone 5 LTE and battery issues…the Razr Maxx has proven the battery life of LTE devices does not have to be dismal. As far as LTE speed is concerned…Android user who have LTE phones are pretty much universal in their praise of LTE speeds. And as far as data usages are concerned…if it comes down to not getting as much done because of slow 3g speeds and not getting as much done because of 4g data caps…I will take the 4g data caps. At least what I do get done…will be faster.

Alex Satrapa

LTE is going nowhere until the carriers put in the towers and the back haul to handle the load that will be imposed by people actually using as much bandwidth as the carriers are selling.

Since they can’t cope with 3G traffic as it is, why do you think LTE will be better? Sure, LTE is cheaper per bit transmitted over the air due to more bits per second, but those towers need to be supported by decent back haul.

I do not mourn the passing of “unlimited” plans, those were a Tragedy of the Commons in the making. As it stands, I barely use 1G of data per month due to the terrible infrastructure offered by Optus here in Australia. Well, that and I am not streaming movies 24×7.

LTE is a tick-box feature, and IMHO Apple will be making a mistake to head down that path. LTE might have a future for fixed networks that cannot connect to wired broadband (rural communities, for example).

I do not know anyone who actually needs to stream HD movies while driving.

Kevin Fitchard

Hi Alex,

Actually almost every LTE site here in the U.S. is connected via fiber. Is that not the case with HSPA+ and Optus? If that’s the case, I see your point. Mobile broadband is pretty useless if there’s a bottleneck in the transport network.

As for the movies to the phone I agree entirely, but the case I’m making for LTE isn’t speed to the device. It’s for more efficient networks, which ultimately will make mobile data cheaper

fanfoot

Kevin,

The numbers I’ve seen are that 70% of the macro sites in the US are connected via Fiber. Not “almost every”. Microwave companies wouldn’t be selling so many products if what you say were true…

Kevin Fitchard

Hi Fanfoot.

Well, fiber or fiber equivalents is what I meant. Microwave isn’t quite the same as a fiber Ethernet link, but it’s a lot better than T-1s, which is what almost all 3G sites were fed with until recently.

m0g

It’s true that Optus’ sales model seems to be to compete with the more data-competent Telstra by throwing data at its plans it knows you have no hope of using, due mainly to its lack of coverage.

sve

Missing LTE could be a problem – unless they’re advocating for something like a micro-WiFi network in its place.

Kevin Fitchard

Hi Sve,

Wi-Fi is definitely part of the equation, as small cells and denser network builds. But ultimately if data costs are going to come down macro networks have to become more efficient.

fanfoot

Kevin,

Well, since a lot of the issues with congestion have to do with signal/control congestion which has nothing to do with the available bandwidth, many operators plan to fix that by deploying a lot of ‘pico-cells’ where they take an existing macro-cell using 3G and divide it up into a number of smaller cells for 4G deployments–putting enodeB’s on light poles for example. They all still end up back at the macro-cell so it still matters how it is connected and what kind of network access it has, but improving that bandwidth isn’t the only solution at hand.

H. Murchison

Just give me shared data. Throttling has caused my “unlimited” plan to become useless. I’m ready for an LTE future.

Mukesh Aggarwal

Just FYI, LTE will not make carriers offer ‘unlimited’ again.

Daniel Blois

You can tell the future? what will tomorrow’s lottery numbers be? You have no precedent to base this on.

KenG

In theory, I think you’re right about LTE’s more efficient use of bandwidth. However, I don’t think it will matter, as the carriers will spend as little as possible on their network, and then blame lousy performance on the incredible adoption of LTE devices like the ipad3. It will be like Katrina all over, with spokespeople for the carriers saying “nobody could have foreseen it”.

It’s sad that I continuously lower my expectations for big companies, and yet they manage to crawl under the bar every time.

Kevin Fitchard

Hey Ken, I figured you would chime in on this post :)

I appreciate your skepticism, but I look at this way: removing older technology barriers removes excuses.

KenG

Just keep throwing me that batting practice, and I’ll keep swinging…

OK, I’m with you on getting rid of an excuse. And I think it’s a good idea, as why wast spectrum on 2G. But when it comes to the carriers, I’m from Missouri.

Daniel Blois

Ken the link you just posted proves you wrong. In that case Verizon is not just making an excuse – they are looking to spend more on their network.

KenG

Daniel, they’re looking to buy spectrum, yes, but that doesn’t mean they will spend money to actually use the spectrum. That will cost more money. They want to buy the spectrum so nobody else uses it.

BackInAction

The other thing to consider is that many? most? very large percentage? of users do NOT use that much wireless data. So, while the vocal (online) minority would complain about the lack of LTE, most would be unaffected by it.

Daniel Blois

But you are missing an important point – as wireless speeds increase, become less expensive, and easier to do – more and more people will start to use more bandwidth. That is a fact.

John Harrington, Jr.

That is unless they are incapacitated by their cellular provider…or “throttled”. Many unlimited-data users are seeing their 4G connections reduced to 2G connections from just what your talking about–using more: http://bit.ly/yNe0lZ

Gary

This was really interesting. Thanks for writing a post about it.

jai

Actually, if Apple doesn’t put LTE in it’s next gen devices, they are effectively “jumping the shark”. Android is already eating market share, and are putting LTE in almost all of their devices. Apple has to keep up.

Constable Odo

Apple does not have to follow everywhere Android leads. I doubt that Apple will be copying the Samsung Note anytime soon.

Kevin Fitchard

Hi Jai, Hi Odo,

I don’t think it’s a question of Apple following anyones lead. It would sell millions of iPhones if they were connected to the network by tin cans and string. It’s a question of working with the industry and advocating the interests of their customers (faster connections, cheaper data).

rick gregory

Kevin,

Do you honestly see any of the carriers dropping their prices because of LTE? None have done this so far. 5 year from now we might see more bandwidth per dollar, but come on… the carriers won’t drop prices.

As for advocating the interests of their customers… I doubt many of us care about LTE. The Spec geeks are on Android where they get all hot about the Tegra chipset being used, etc. Apple knows that I’ll be pissed if my new iPad is 50% heavier just due to LTE or if my 10 hour battery is 4 hours all of a sudden. Aside from specwars, I still haven’t seen anyone demonstrate a real customer advantage for LTE.

Whyrless

Rick, An order of magnitude increase in the average user’s peak and avearge speeds with LTE, coupled with both a 2x spectral efficiency improvement and more radio for the money are significant motivators.

cheese

@Kevin
Empires are born and empires die. Apple is the emperor today and for good reason. If, as you mention, LTE is killer tech, and Apple decides to ignore it, rest assured, emperors will die. Sony was an emperor. So was Microsoft. And a hundred others.

That said, *if* LTE is killer tech, then your question begs to be asked. In any case, there are 2 answers 1) LTE might not turn out to be the manna we hope it will be. 2)There could be other solutions such as a dongle propping up. Or an iPad4 and the next iPhone.

Kevin Fitchard

Hi Rick,

I know it sounds naive, but I honestly do think operators will drop prices if their networks are more efficient. I don’t think they’ll do it out of the goodness of their hearts, but once there are four nationwide LTE networks, Sprint or T-Mobile with initiate a price war. AT&T and Verizon will resist, but eventually they’ll have to follow.

Kevin Fitchard

Hi Cheese,

I don’t think LTE will be the killer tech per se, but it will be a necessary one to move the efficiency of networks forward. But you’re right, there is a lot out there besides the air interface that will drive the trend of cheaper broadband.

rick gregory

Whyrless – motivators for WHO? Me? Not at all. LTE right now gives me 1) Faster speeds and 2) crappy battery life. I don’t want the second and I don’t care about the first because

a) aside from streaming HD video, I don’t need faster speeds for what I do (email, twitter, facebook, etc).

and

b) I’m capped at 2gig. I can’t use faster data to any appreciable extent without blowing past that cap.

Combine a) and b) and I don’t see any consumer advantage to LTE right now. I’m sure there will be in the future, but tech has to improve to the point where I won’t kill my battery in a few hours, the higher speeds actually enable me to do things I can’t right now and using those new capabilities doesn’t blow me past my bandwidth cap.

slacker711

Qualcomm has said that 1/3 of their chipsets will be LTE enabled exiting 2012. The only way the math works is if Apple goes LTE in a big way this year.

PhilH

With just about every Android device coming out now with LTE I don’t think it matters to Qualcomm if Apple is even in the picture.

richsadams

I don’t think it matters to Apple if Qualcomm is in the picture.

slacker711

You are right, if you never leave the US. Most of the rest of the world has barely started rolling out their LTE networks and their handsets reflect that. Look at HTC…a LTE version of the One X for the US, and a non-LTE version for the rest of the world.

Qualcomm will be shipping >60 million LTE units a quarter by the end of the year. The absolute only way you can get to those kind of unit numbers is if Apple ships a LTE iPhone this year.

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