Verizon, LTE, and the iPhone’s Future

Steve Wildstrom / May 4th, 2012

At PCmag.com, Sascha Segan argues that Verizon Wireless may be pushing customers toward Android phones rather than the iPhone because it so badly needs to move customers from its overburdened 3G data network to its new and lightly used LTE network. This explains why Verizon is pushing Apple very hard to include LTE in the next iPhone, expected this fall.

Verizon hasn’t been shy about its preferences. It banished the iPhone from its booth at the Consumer Electronics Show because it was displaying only LTE models and I expect it to do the same at the CTIA Wireless show next week.

I argued back in March that Apple should leave LTE out of the iPhone for now because the iPhone does not badly need faster data and the LTE still imposes an unhappy battery life/processing power/size tradeoff. I suspect that reflects the thinking at Apple, which has never been very happy on the bleeding edge of technology.

But I’m not sure that even mighty Apple can resist the pressure it is getting from the most important carrier in its most important market. We’ll know in the fall.

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.
  • “I’m not sure that even mighty Apple can resist the pressure it is getting from the most important carrier in its most important market.”

    I think that the iPhone will have LTE in the Fall, but I don’t think it will have anything to do with “carrier pressure”.

    First, Apple has already put LTE in the iPad. It would be awfully strange if their flagship phone didn’t follow suit some six months later.

    Second, Apple only puts out one new phone a year. People were screaming for LTE all the way back to the iPhone 4. Many critics call the current iPhone 4S “antiquated” because it doesn’t have LTE.

    If Apple passed on LTE this Fall, then their first phone with LTE wouldn’t appear until September 2013. That would put the iPhone way, way, behind the technological curve and that would put the iPhone 5 (or whatever) at a huge competitive disadvantage.

    Finally, and perhaps most importantly, I don’t think that Verizon’s shunting the iPhone aside has anything to do with LTE. I think that Verizon would love to free itself from its self-inflicted iPhone addiction. They are desperate to sell their Verizon branded Droid phones. It has virtually nothing to do with LTE. It has everything to do with independence from the iPhone.

    • steve_wildstrom

      The iPhone has been behind the curve since birth; it didn’t support 3G until 2008. And Apple doesn’t give a damn what critics say. Battery life and the maturity of LTE chipsets remain an issue as does the availability of LTE services outside the U.S. “4G” claims for the iPad have already caused regulatory problems in some countries.

      • “Battery life and the maturity of LTE chipsets remain an issue as does the availability of LTE services outside the U.S.”-steve_wildstrom

        Agreed. The iPad has the advantage of size. If the technology is not there, Apple will not force it.

        But notice that Apple added LTE to the iPad even though it is only available in certain countries/locations.

        Finally, I return to my original point. I just can’t see Apple waiting until September 2013 to introduce LTE. Far too long a lag behind competing technology.

        • steve_wildstrom

          Well, we’ll never know who’s right here, since we disagree about motivations but agree on the outcome–the next iPhone will be LTE. (I suspect AT&T is quietly pushing for LTE too. But AT&T’s 4G marketing and its stance on spectrum are both so muddled that it is difficult for the company to say anything credible in public.)

          • I think your article was correct in all essentials.

            As for motivation, that was mere speculation on my part. But here’s how we may one day know whether I was right or wrong. If Verizon continues to push their own phones over the iPhone at this time next year, then we’ll know that, whatever their motivation, LTE only played a minor part in it.

          • TheEternalEmperor

            I have to agree with you. Verizon sold more iPhones than all smartphones. If they don’t blunt that curve, they’ll be EVEN more beholden to Apple. We’ve seen remarkably few concessions from Apple to any carriers. I would argue that the worst one is AT&T’s “4G” change.

            If Verizon had the might to force a change as dramatic as LTE, then there is no doubt in my mind that they would have forced a at least a few apps on the phone.

            However, I don’t think being behind the tech curve is the motivation either. Three OS releases before copy and paste, four before multitasking, Apple has no problem being “behind” the curve.

          • Good post. I’ve often enjoyed your writing although I don’t think I’ve ever had the decency to say so.

            The carriers and Apple are at an interesting juncture in their relationship. Last quarter the pundits were arguing that there was going to be a carrier revolt. I vigorously argued that the carriers were in no position to lower their subsidies. I still think that’s true but the carriers can push alternative phones. That leaves me of two minds.

            On the one hand, I think that’s very dangerous for Apple. Apple has its own retail stores but a lot of phones are sold at the carrier. If the carriers start bad mouthing Apple, that could seriously damage sales.

            On the other hand, the carriers are carrying the iPhone and paying those high premiums because a) the iPhone sells; and b) it reduces turnover (churn). Downplaying the iPhone is just as stupid as refusing to carry it – it’s counter-productive.

            Thoughts?

          • TheEternalEmperor

            Thank you. That’s some complement. To me, you’re a standard for reasonable discourse, one I try to model.

            I only have my instinct to guide me. I think that Apple is beyond damage from the carriers short of actively, publicly impugning the device. I don’t think that “not recommending” it is enough to damage it anymore. I think its too big for this. It hurts Windows Phone, but I don’t think it can harm Apple. I mean, they’ve been pushing Android since 2009. I think this is old news.

            During the earnings call , Tim Cook made what I thought was a great point: The subsidy is not that much when considered the spread over the two year contract, but(and this is the good point) when you consider the difference between the subsidies of the iPhone and a different phone, it is even smaller.

            I think that this is a lot of media noise. You’ve stated several times that Apple is in uncharted territories. I think that no one really knows how to write about Apple. I think they fill compelled to be “objective” by being contrarian. “This is too good. It cannot last. What will stop it? Commoditization is old. How about carrier subsidies?” To me, it is right up there with the various *-gates that show up within the first two weeks of an iOS release. I don’t believe we’ll see this carrier issue come up at the next earnings, but there will be something else taking its place.

            I’m with you on ‘b’. As long as the iPhone makes them money, they’ll carry it. As long as the likes of Comcast keeps saying things on their commercials like “View X-finity on your PC, your iPhone and your iPad”, it’ll stay on top and keep making them money. Virtuous circle.

          • Yeah, I’m leaning towards believing that the carriers are in no position to stop the iPhone momentum even if they want to. But I’m not positive, so I’m going to try to keep an open mind on the matter.

            I really like your point about the “too good to be true” phenomenon. I loved your statement that the media feels it is being objective by being contrarian.

            In his ASYMCO blog today Horace Dediu pondered upon why Wall Street does not believe that Apple can have sustainable growth. The “It’s too good to be true” meme seems to be a big part of the reasoning. As Horace put it:

            “Since there have been almost no companies that are consistently disruptive, those that do disrupt are seen as accidentally successful.”

            Part of me sympathizes with the masses. Since no one (or few) have done it before, then it must be a fluke, an exception an anomaly. On the other hand, honesty, how can anyone conclude that Apple was “accidentally successful”?

          • benbajarin

            Gentleman, fantastic dialogue, I have enjoyed reading the dialogue. This kind of intelligent conversation is exactly what I hoped for when I started this site so, seriously, thanks for the fantastic comments.

            Second, I am glad Horace wrote the post he did. I concur that there is a “too good to be true” mentality. Our firm does a lot of custom analysis for some large Wall St. firms and I am constantly shocked at how many of them are just waiting for this run to end. I try my best to get them to understand that Apple can not be analyzed like any other company in this industry. They are unique and in an entirely separate class of their own. This is in fact by design not an accident.

            Apple is roughly an industry by itself due to their vertical integration and 3+ business all in one. I also get the sense that there is a belief that closed can not win, however, closed works in many other industries just fine. This is why I try repeatedly to write, speak, and provide analysis as often as I can about why history is not going to repeat itself and open crushes closed in consumer markets. I think the success of closed systems is unique to consumer markets but perhaps its more mature markets.

            In regards to LTE, I fully expect this next iPhone to have it. My talks with carriers reveal that they are strategizing more and more every day on how to make data more valuable than voice since they know its inevitable. In regards to how Apple pulls LTE off elegantly just look at the work Qualcomm did for them with the iPad, as well as the Verizon Jetpack to get a sense of good chip integration coming from Qualcomm.

            There is so much to be said on this topic of Apple’s run and the fundamentals that support it. These kind of conversations help me shape the topics we cover here on our site so again, it is greatly appreciated.

          • “This kind of intelligent conversation is exactly what I hoped for when I started this site…”-benbajarin

            Let me return the compliment. I come to this site because I know that I can engage in this kind of intelligent conversation. And on today’s internet, that is saying a LOT.

          • benbajarin

            See my response to FalKirk as it is for both of you.

          • TheEternalEmperor

            Thank you. It’s a great site. I check it constantly.

  • Chong lee

    As a Verizon sales rep, I can tell you it has nothing to do with Verizon.
    It has everything to do with some androids phones being cheaper and better.

    Any person telling me iPhone 4 which cost 100 dollar is comparable to droid razr which also
    Cost 100 or iPhone 4s 32 being comparable to razr max which both cost 300. needs their head examined

    Battery for lte phones is less of an issue then it was with lte phones that came out a year ago.

    If next iPhone is not lte. Apple just committed sucide

    • “Chong Lee, Thank you for sharing your insights. It is interesting to get an insider’s take.

      “Any person telling me iPhone 4 which cost 100 dollar is comparable to droid razr which also
      Cost 100 or iPhone 4s 32 being comparable to razr max which both cost 300. needs their head examined”-Chong Lee

      Hmm.

      So, half of Verizon’s customers need to have their heads examined?

      Source: “iPhone Again Represents Over Half of Verizon’s Smartphone Sales in 1Q 2012”, MacRumors, Apr 19, 2012

      So, the reviewers at the Verge need to have their heads examined?

      They gave the Droid Razr Maxx a 7.4 but they gave the iPhone 4S an 8.6. Why those Apple fanboys even had the effrontery to try to hide their bias by giving the Verizon Galaxy Nexus an 8.7.

      Source: http://www.theverge.com/products/compare/4143/4810/2783/3604/1670/4624

      So, user satisfaction ratings don’ matter? Only Chong Lee, in his infinite wisdom, can tell us what we do and do not like?

      Source: iPhone satisfaction at 75%; closest competitor at 47%, TheLoop, Jan 9, 2012

      And I couldn’t help but notice that you didn’t mention the $199 iPhone 4S when you were comparing it to the $299 Droid Razr Maxx.

      I’m sure the Droid Razr Maxx is a very fine phone and it may be the exact right phone for you and for many of your customers. But saying that it isn’t “comparable” to the iPhone simply means that you need to get a good dictionary. The word “comparable” does not mean what you think it means.

      • Chong Lee

        Its very obivious your a fanboi.
        If you can’t figure out why
        4g LTE phone, running 1.2 duel core processor, 1024 mb of ram 16 gig storage expandable. 8 mega pixle camera (Droid Razr)
        is better then
        3g phone single core 800mhz processor running, 512mb of ram, 8gig on static storage, with 5 mega pixle camera (iphone 4)
        you need your head examined.
        To sit here and blather on and on about how great the iphone is when reality is so stark… blah blah blah
        You know what your right, iphone is the best, heck if apple pulled a red brick from my house and claimed it can make phone calls I bet it better then any android phone in the market.
        There you go fanboi I agree

        • FalKirk

          When people run out of logic and facts, they resort to insults. An insult is not an argument. The more you call me names, the less weight your argument has.

    • TheEternalEmperor

      Sure. Apple’ll be okay. While battery life MAY be better(after all, the larger phones allow for larger batteries), you guys had no problem hawking phones with truly awful battery life and those companies are doing okay.

      Well, maybe not okay, but don’t act so superior when you’re pushing awful phones on people.

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