The new iPad, out on March 16, marks Apple’s (NASDAQ:AAPL) first foray into the murky waters of mobile devices connecting to “4G” LTE networks. This must finally be LTE’s moment to rise, when the nearly 24-month marketing blitz on the part of the U.S.-based telecoms finally comes to fruition and consumers jump ship from their relatively reliable 3G devices and move into the future.
Forget the fact that LTE networks aren’t actually 4G. This is the moment the mobile market’s been waiting for, when the faster network speeds become a strong selling point and the mobile boom enters its next stage of growth. Then again, maybe it isn’t.
The telecoms certainly want consumers and investors to think it is. They are doubling down, and in Verizon’s (NYSE:VZ) case, doing it aggressively. The telecom opened up its 203rd LTE market on Thursday. Number 200 was Dothan, Alabama.
The network now reaches approximately 260 million customers. Verizon also announced that it plans to expand its LTE network to 400 markets in the U.S. by the end of 2012, a rollout that will cost Verizon $2 billion, according to a Tuesday Barron’s report.
Aligning LTE service and subscribers
This came on the heels of AT&T’s (NYSE:T) Monday announcement that it was opening its LTE network to 12 new markets, bringing its total LTE footprint to 28 metropolitan markets. AT&T is moving from its previous high-speed network, which was on the HSPA+ standard, but the market’s push to LTE is too strong to resist. Even AT&T’s former betrothed, Deutsch Telekom’s (PINK:DTEGY) T-Mobile USA, is abandoning HSPA+ to deploy its own LTE network by 2013. Sprint (NYSE:S) is in the process of converting to LTE as well.
From one perspective, the LTE shift is working. LTE subscribership grew 8,000% in the U.S. between December 2010 and December 2011. The U.S. represents the largest base of LTE users in the world — 64% as of the end of 2011. Verizon’s aggressive expansion over the past year has in turn won it the lion’s share of that base too, accounting for 97% of U.S. LTE subscribers. (Not surprising, considering the density of its network compared to AT&T’s.)
On the other hand, some parts of the LTE puzzle are falling into place relatively slowly. Even though Verizon’s LTE network reaches 260 million potential customers, just 5% or 4.4 million of Verizon’s 109 million mobile subscribers actually use the network. In fact there are just 5.6 million LTE subscribers in the U.S. total including AT&T’s nascent network.
No, LTE’s moment hasn’t arrived yet. The new iPad and its LTE support are important landmarks, though. As of now, Verizon supports around 20 LTE smartphones and tablets, but devices like Motorola’s (NYSE:MMI) Droid Bionic haven’t exactly been huge hits with consumers.
Over the next year, as LTE Droid handsets with improved battery life — such as Microsoft (NASDAQ:MSFT) and Nokia’s (NYSE:NOK) high-end Lumia — and Apple’s iPhone 5 hit the market, then consumers will finally take interest. Verizon of course will have spent the money to prepare a network that can accommodate them. Note that for the time being Verizon is losing some money. It closed the fourth quarter with a net loss of $2.02 billion. When it can cool off on expansion spending, though, it will be well positioned to recoup those losses.