The iPhone is LTE's Killer App

There is no lack of innovation in the iPhone 5 -- the screen is big (but not too big), the phone is thinner and it's more powerful than ever. Also, it uses a single chip to integrate LTE supporting multiple spectrum bands into this "world phone" rather than the conventional approach to use two chips -- one for voice and one for data.

But I am more interested in whether iPhone 5 will create the next killer app for the 4G LTE networks being deployed by the world's leading mobile operators. Can the launch of iPhone 5 help operators better monetize third-party mobile video content and FaceTime video chat over their own 4G networks? So after Wednesday's announcement I spent some time with John Jackson, VP of research for CCS Insight , debating the impact on carriers' competitive positions around the world. John will be continuing the discussion at 4G World , Oct.29 to Nov. 1 at McCormick Place in Chicago.

The new iPhone delivers a "predictably successful marriage of iOS 6 features, design and hardware enhancements," according to Jackson. It will test the limits of the operators' initial LTE deployments in terms of data traffic, by enabling FaceTime over cellular and supporting 3-D GPS mapping, HD video and millions of apps.

Jackson expects a boatload of iPhone 5s to be sold in the fourth quarter of 2012 alone. Given the pent-up demand for the new device, Apple stands to shatter previous records in unit sales. In fact, J.P. Morgan's analysts have predicted that Apple could sell about 8 million iPhone 5 units in the final three months of the year with an average selling price of around US$600.

What does it take for Apple to add support for 4G LTE in the iPhone 5? Apple sold a single, global model of the iPhone up until it introduced a CDMA-only iPhone 4 version compatible with Verizon in 2011. When it introduced the iPhone 4S a year ago, Apple incorporated support for both GSM and CDMA networks, resulting in a "world phone," albeit one still locked by specific carriers. With LTE frequency bands so fragmented by carriers globally, no single phone could possibly bridge every LTE carrier on the globe. To cover its launch carriers' LTE services, Apple has announced three different models of iPhone 5.

Although only one of the three versions continues to support CDMA, Sprint will benefit from the decision to support LTE in Band 25 (1900MHz) and, the while the iPhone 5 will not support WiMax it is believed to use Qualcomm's fifth-generation MDM9615 baseband chip, which supports both LTE FDD and TDD. It is not clear if Apple is supporting TD-LTE (or China's 3G TD-SCDMA) in its existing iPhone 5 versions. This would dictate whether a separate model would be needed to support LTE service in China and India. However the MDM9615 does appear to be giving Apple support for new DC-HSPA+ and EV-DO Rev-B, making it likely that Apple's existing iPhone 5 models will eventually make it to a wider range of carriers.

But will the iPhone 5 lead to any significant market-share shifts based the strength of operators' 4G LTE coverage? I believe that operators with extensive LTE coverage and capacity could leverage the more advanced iPhone 5 to increase market share, but Jackson argued that consumers don't care as much about 4G, LTE or 3G networks, they care more about the iPhone 5. Jackson believes that aggressive sales of the iPhone 5 could lead to market-share shifts in some countries, although operators will have parity on the iPhone portfolio and price ranges. He expects that mobile operators will have their hands tied about how much they can promote the distinction between their 4G LTE networks. For example in the UK, Everything Everywhere Ltd. (EE) will have an iPhone 5 available first on LTE, but may not even promote this advantage given its limited coverage.

Operators would have to differentiate themselves more based on 4G LTE usage policies in order to gain share. For example, Sprint could offer unlimited FaceTime for all iPhone users, while AT&T plans to limit FaceTime cellular to those that step up to the new "Mobile Share" package that provides unlimited text and voice while supporting up to 10 devices. Jackson believes that other carriers could use the iPhone 5 to force new or upgrading customers into shared data plans that would drive the minimum ARPU from $56 to more than $110 per month, and more than doubling usage from an average of 1-1.3GB per month to between 3 and 5GB per month. He suggests that Verizon may prefer to serve fewer customers with higher usage and ARPU, revenue and margin, while AT&T would prefer to attract more moderate-usage customers.

This debate will continue during the 4G Device Strategies track at 4G World 2012, the highlight of which will be a keynote "Ecosystem Roundtable on 4G Device Innovation" with panelists Fared Adib, product chief and VP of product development at Sprint, and Tony Lau, director of handset product at MetroPCS.

For more

• Cover Sheet: iPhone 5 News & Views

— Berge Ayvazian, Senior Consultant, Heavy Reading