Blog Post

Apple enters the 4G age; will carriers return the favor?

Apple(s aapl) finally gave the wireless industry the 4G device it’s so long been craving. Even more importantly, LTE connectivity in the new iPad virtually assures similar treatment in the next iPhone. Apple has stepped up. Now it’s the operators’ turn to reciprocate by lowering mobile data prices.

On Monday, I wrote that if Apple failed to include LTE in its devices, it would have essentially impeded the mobile broadband revolution, letting business considerations override progress and the interests of its customers. 4G isn’t just a boon to the industry because it supports faster data. LTE also is a much more efficient mobile broadband technology, allowing carriers to build higher capacity networks for less investment and run them at lower operating costs. Translation: LTE is a much cheaper way for operators to ship you bytes.

By moving its mobile portfolio to LTE, Apple will precipitate an enormous migration of traffic from operators’ 3G EV-DO and HSPA networks to their LTE networks, which are much better equipped to handle the load, especially as they add capacity to those networks in coming years. That will not only save carriers a lot of operations cash; it will also let them avoid spending millions more on adding capacity and spectrum to those old 3G networks — money much better spent on their LTE rollouts.

Apple may not exactly be visionary when it comes to embracing new radio technologies, but it’s latching onto LTE when it really matters here in the U.S. And make no mistake, it had to make some sacrifices to do so. LTE still issues a powerful suck on device batteries. Apple had to account for that in the latest iPad design, though it seems to have largely overcome the problem. SVP of Marketing Phil Schiller reported the new tablet will run for 10 hours on HSPA+, but LTE would only cut that performance by an hour. The iPad also has to deal with LTE’s flaws as a brand-new networking technology. Verizon’s LTE network has gone down at least five times in the last year. Apple went ahead with LTE, warts and all, knowing full well that new 3G-only iPads and iPhones would have sold just as well.

Operators need to return the favor by dropping prices. It won’t happen immediately — it will take some time before Verizon Wireless(s vz, s vod) and AT&T(s t) can move the majority of their data traffic over to the LTE, even with new 4G iOS devices. In fact, the pricing plans that both carriers announced for the new iPad are exactly the same as those of its 3G predecessors. But eventually operators need to start cutting prices to reflect the new efficiencies built into 4G devices and networks.

I’m not naive enough to think carriers are suddenly going to slash data plan rates tomorrow out of any sense of duty. But they may be forced to. By the time the new iPhone launches, there will be five live LTE networks in the U.S. and another two on the way. At some point, competition is going to take over. With more spectral efficiency and network capacity  to play with, one of them will start offering buckets of cheap data, triggering a price war. We’re already seeing the minutest evidence that operators are treating LTE capacity as more of a commodity than HSPA or 3G. Under AT&T’s new throttling policies for grandfathered “unlimited” subscribers, the ceilings are set at 3 GB for HSPA, but 5 GB for LTE.

Unlimited plans won’t suddenly make a comeback. But the price per gigabyte will come down incrementally. If it doesn’t, operators will have a different problem. Apple kicked off the mobile-data revolution when it launched the first 3G iPhone in 2008, and since then average data consumption has skyrocketed. There’s an underlying expectation that data rates will fall as usage ramps up. If that’s not the case, then Apple will take its revolution elsewhere. In some ways it already has, as evidenced by the vast majority of iPad customers that use their tablets solely over Wi-Fi.

Featured image courtesy of Flickr user Aidan Jones.

8 Responses to “Apple enters the 4G age; will carriers return the favor?”

  1. tim jones

    Apple finally enters the 4G age- yup, Apple has never been in the cutting edge. In fact, with the AT&T iPhone 4S, Apple has to lie to get people to think it’s 4G.

    The vast majority of iPad customers use their tablets tied to Wi-Fi, because iPad customers would have to have really wide butts to have pockets for the not-mobile iPad to fit in. The wireless industry for people with wide butts, finally has the 4G device it’s so long been craving. Like Zuckerberg says: “iPad’s not mobile”

  2. Kemosabe

    Text messages were a cash cow for wireless carriers, until new messaging apps undercut them by offering the same benefits within the cost of a data plan consumers were already paying for. It is likely that the carriers will see 4G LTE the same way.

  3. It’s a joke, 4G?
    We all know the carriers will throttle down the speeds. I upgraded. My downloads are slower if anything. We all know they will charge more. I’ll skip iPhone 5.

  4. Cold Water

    The real issue is that sensible people don’t want to buy separate buckets of data for every device they use on the same network. Gigabytes here, gigabytes there, it’s all coming from the same user, just like I pay the same electric rate for lights and plasma TVs, or gas to keep the pipes from freezing or to heat my jacuzzi. Only wireless companies get away with these shenanigans, and it’s insulting.

    Before the federal government got involved many moons ago, cable companies could and did charge monthly for every outlet. They tried again with broadband, but eventually lost the war against routers before the law could step in to stop it.

    I think we’re past due for the same in wireless, but good luck getting this Congress to do anything about it.