Apple has introduced its first 4G LTE-enabled device, the new iPad. But will the speedier network connectivity drive sales of carrier-enabled iPads? Probably not.
At its event in San Francisco today announcing the new product, Apple said the new version of the tablet will operate on 4G LTE networks from Verizon, AT&T, Rogers, Bell, and Telus. The 4G LTE network connectivity is significant because it means that users can stream movies or download files at network speeds between 5Mbps and 12Mbps, even when Wi-Fi isn't available. But at current prices, most consumers will still likely opt for the Wi-Fi-only version of the device, limiting when and where they can use their devices.
"4G LTE network connectivity is a better fit for a larger device, such as the iPad, where there is a richer Web experience," NPD Group analyst Ross Rubin said. "But the pricing of the device and the services will continue to be an issue for consumers."
Rubin added that this is particularly true, now that Apple is offering its Wi-Fi-only 16GB iPad 2 for $399.
Since Apple first introduced the iPad in 2010, the company has sold two versions of the device: a lower-price Wi-Fi-only version starting at $499 and a higher-price carrier-connected 3G version starting at $629. The obvious benefit of the 3G version of the iPad has been that it's able to connect to the Internet anywhere a 3G cell phone signal is available, giving consumers near-ubiquitous access. Meanwhile, Wi-Fi-only iPad users are limited to connecting their devices to the Internet only where Wi-Fi is available.
Even though ubiquitous wireless access is preferred over limited access, the fact is that most consumers have bought the Wi-Fi-only version of the iPad instead of a carrier-enabled 3G version. According to IDC, more than 70 percent of all iPads sold last year were Wi-Fi-only versions. And even among those consumers who have bought carrier-enabled iPads, only a fraction of them have actually activated the devices on a carrier network, Rubin said.
The reason why comes down to one thing: pricing. For one, consumers must pay a $130 premium to even get a carrier-enabled iPad. In addition to the hefty price tag of the device, users also must pay a monthly data service fee. Verizon's data packages start at $30 a month for 2GB of data. AT&T offers a less expensive package starting at $15 per month, which only offers 250MB of data per month. It also offers a $30-per-month plan with 3GB of data per month.
While a contract is not necessary for these data plans, Verizon also charges a $35 activation fee to start using the data service, which means that starting and stopping service comes with a penalty. At this point, it's unclear whether AT&T or Verizon will change the pricing of service plans either upward or downward for the new iPad.
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Another factor that could prevent consumers from buying a 4G iPad is the fact the devices are still locked to specific carriers. In other words, consumers still have to make a choice between an AT&T and a Verizon Wireless version of the iPad, even though the devices use the same 4G LTE technology.
The reason why is that AT&T and Verizon are using slightly different bands for their LTE networks, and the devices still must connect to 3G services where 4G is not available. And AT&T and Verizon use different 3G wireless technologies.
Retail giant Best Buy CEO Brian Dunn said during a keynote panel at the Mobile World Conference in Barcelona last week that the premium pricing for these tablets and the fact that they're locked to specific carriers is creating another type of digital divide between the network haves and the network have-nots.
"Consumers need affordable and easy-to-understand service plans," he said. "And they shouldn't have to pay a premium (for a carrier-connected device.)"
He went on to criticize the data plans that carriers offer. He said they are far too complicated for most consumers to understand.
Apple iPad (2012)
"Consumers don't think in terms of megabytes," he said. "And there's a limit to how many $15-a-month fees someone can pay. "
But at the end of the day, iPad consumers aren't buying the latest-generation device because the carrier version now has LTE, said Michael Gartenberg, an analyst with Gartner.
"If you're getting the new iPad, you're buying it because of the retina display and the faster processor," he said. "The 4G connectivity is just icing on the cake."
That said, the addition of LTE on the first Apple product is a significant milestone, especially since Apple claims that the faster network connectivity won't affect battery life much. In general, 4G LTE devices tend to have poorer-performing batteries than devices operating on 3G networks only. But Apple claims that the 4G LTE-enabled iPad can get 9 hours of use on LTE, compared to 10 hours of use while not using LTE. These are similar to the battery life specs for the iPad 2.
It's likely that the new iPad is only the first Apple device to get the 4G LTE technology. Perhaps later this year, Apple will introduce an LTE version of the iPhone. And if that happens, analysts say it will be a game changer.
"It will be a much bigger moment for LTE, and the carriers that offer it, when Apple puts LTE into the iPhone, simply because of the sheer volume of iPhone sales," said Avi Greengart, an analyst at Current Analysis. "People are making a big deal out of the new iPad for a good reason. It's changing personal computing. But the addition of LTE really takes a backseat to the other features on the device."