January Jones

Thursday, 12 August 2010

Regarding the idea that Apple may be preparing to launch a CDMA iPhone 4 on Verizon in January, DF reader email suggests there are two aspects to the story that lead to skepticism. First, the timing. Why launch in January? Second: the network technology. Why CDMA? The answers, I think, are related. What follows is pure speculation on my part.

Verizon is on the cusp of rolling out a next-generation 4G LTE network. Wouldn’t it make sense for Apple to wait for LTE and skip CDMA altogether? That depends on the timing, I think. If Apple is willing to wait another year, or, if it simply takes another year to come to terms with Verizon, then sure, maybe the first Verizon iPhone will go straight to LTE. But if they want to start selling an iPhone on Verizon soon — meaning January — then CDMA is the only practical solution.

The whole point of expanding to Verizon is to gain market share in the U.S. It’s about high-volume iPhone sales, coast to coast. A big part of the reason there’s so much demand for a Verizon iPhone is that so many people aren’t satisfied with AT&T’s coverage and quality. Even if their LTE rollout goes exactly as planned — a big “if” — LTE is going to be a niche technology in January, available in a few dozen cities. There may well be tens of million of Verizon customers in those cities, but Apple would want a Verizon iPhone to be aimed squarely at all Verizon customers. The message: “Everyone waiting for a Verizon iPhone: here it is.”

One thing I’ve gathered from DF reader emails regarding a hypothetical Verizon iPhone is that for all the press coverage about AT&T’s problems in cities like New York and San Francisco, there are also a lot of non-metro areas where AT&T doesn’t have any 3G coverage at all, but Verizon does. There are a lot of potential iPhone customers in those areas — and they’re not going to have LTE coverage in the first half of 2011.

CDMA is imperfect. Yes, it’s a dead-end technology. Yes, it doesn’t support simultaneous voice and data. Yes, Apple and AT&T have, in the past, made advertisements promoting the iPhone’s ability to use simultaneous voice and data over 3G. I just don’t see this as a big deal. I don’t see any complaints from Verizon Android users about their inability to use voice and data simultaneously. Things were even worse with the original EDGE-only iPhone. EDGE doesn’t support simultaneous voice and data, either, but with EDGE, if you were using data while a call came in, the call would go to voice mail. I personally missed a lot of calls that way. With CDMA, an incoming call will interrupt data, and the phone will ring. And, as with the original iPhone, Wi-Fi works just fine while you’re on a call.

Simultaneous voice and data is nice-to-have, not must-have. A Verizon iPhone in January would be targeted at a customer base that, by definition, doesn’t consider simultaneous voice and data a must-have feature.¹

The original EDGE iPhone is also a good example of Apple’s relatively conservative pace of adoption of cell network technology. AT&T (née Cingular) already offered 3G service when the iPhone was announced. But coverage wasn’t widespread, and Apple was concerned about its effect on battery life.

If the iPhone comes to Verizon, soon enough there will be a model that supports LTE. But Apple isn’t going to lead the way on that.

Which leads to the question of why launch a CDMA in January, rather than, say, waiting another six months and expanding to Verizon on the iPhone’s regular new-model-year schedule. In short: six months is a long time in this market.

I’m imagining a scenario like this. Release a CDMA iPhone 4 on Verizon in January. Sell it for six months, as a Verizon peer to the $199/299 iPhone 4 models at AT&T. (Maybe, though, Verizon gets one with 64 GB? Just to add a little spice to the debut?)

Then, come June, unveil the fifth-generation iPhone during the WWDC keynote. Maybe this phone works on all carriers. Qualcomm has already produced chipsets that support both CDMA and GSM. Or, maybe, the iPhone 5 will simply be offered in two flavors: GSM and CDMA. Either way, though, it’d be available on both Verizon and AT&T on day one. It’s hard to imagine a January Verizon iPhone followed by Steve Jobs on stage at WWDC in June showing a new phone that only works on AT&T. (Even better: availability on all four major U.S. carriers.)

Then, at that point, the iPhone 3GS hits end-of-life, and the iPhone 4 slides over and becomes the low-end $99 iPhone on both AT&T and Verizon. I.e., a CDMA iPhone 4 may only sit at the top of the Verizon line-up for six months, but it could have a long life after that as the base model. (And, a six month reign as the top-of-the-line Verizon iPhone would be a lot longer than that of any Verizon Android phone to date.)

Bottom line: If Apple’s goal is to accelerate iPhone market share, particularly in competition with Android, then they should finalize a deal with Verizon soon. And if they’re going to do it soon, that means CDMA, not LTE.

Update: Derek Powazek asks, on Twitter, “why not December for the holidays?” Good question. I do not know the answer, but here’s what I think. Sooner than January is December, and December means the holidays. But you can’t start selling high-volume holiday products in December. Apple generally gets its holiday products on the market by October — hence the annual September announcement events for new iPods. In theory, a September announcement of a Verizon iPhone 4 would work. But, from all evidence I’m aware of, the CDMA iPhone 4 just isn’t ready for that. Keep in mind that today, Apple still can’t make GSM iPhone 4 units fast enough to meet demand, and still hasn’t shipped a single retail white iPhone 4. If it can’t be ready by October, then it won’t come out until January. (Also possible: Perhaps Apple’s exclusivity deal with AT&T expires December 31.)