Apple's next iPad may be a 4G game changer

SAN FRANCISCO/NEW YORK Tue Mar 6, 2012 6:02pm EST

A man walks past an iPad 2 advertisement in Shanghai February 23, 2012. REUTERS/Aly Song

A man walks past an iPad 2 advertisement in Shanghai February 23, 2012.

Credit: Reuters/Aly Song

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SAN FRANCISCO/NEW YORK (Reuters) - Apple Inc is betting a 4G-equipped iPad will tempt more U.S. consumers to pay extra to watch high-quality video on the go, and in turn, give Verizon Wireless and AT&T Inc a revenue boost.

Until now, Apple's fan legion has been reluctant to shell out extra money even for iPads with 3G connections. The cheaper Wi-Fi-only model -- with more limited Web access -- is by far the top-selling one today.

The newest iPad will be capable of operating on a high-speed 4G "LTE," or Long-Term Evolution network, according to a source familiar with the product. At speeds roughly 10 times faster than current 3G technology, that may go a long way toward banishing the sometimes shaky video quality of older devices.

Such a juiced-up device would help boost the telecoms market if consumers catch on and can be enticed to pay more, some analysts said. The global tablet user base already reached 67 million in 2011, according to researcher Strategy Analytics.

"It's going to dramatically improve video consumption," said UBS analyst John Hodulik. "This is the device people want. They want the fastest speed. They want high resolution."

Apple, AT&T and Verizon declined to comment.

The Cupertino, California-based consumer device company is gearing up to unveil the iPad 3 on Wednesday, a faster and better-equipped version intended to thwart increasing competition from rivals such as Samsung Electronics Co and Amazon.com.

The new iPad will be "critical" to Apple if it is to continue to dominate the global tablet market, said Frost & Sullivan's analyst, Phil Harpur.

"A lot will depend how receptive the market is to the new features offered by iPad 3, two of which are believed to be quad-core processing and 4G-LTE capabilities," he said. "While iPad 2 offered only minor incremental upgrades, this time the market will be expecting a lot more."

The unveiling at the Yerba Buena Center for the Arts in San Francisco, where the company also introduced the last two iPad generations, will be Chief Executive Tim Cook's second major product launch, after the iPhone 4S unveiling last year at the company's headquarters.

The smartphone was initially a disappointment as it was perceived to be mostly a software upgrade, but "Siri," its voice-enabled personal assistant technology, helped to make it a bestseller.

Cook will again be flanked by Apple's top cadres on Wednesday, when he kicks off a typically tightly choreographed show scrutinized by investors and industry insiders. On hand will likely be Apple's top marketing executive Phil Schiller, its head of Internet services Eddy Cue and software chief Scott Forstall -- the standard cast for major launches following the death of founder and consummate showman Steve Jobs last year.

UPGRADE TO APPLE TV IN WORKS?

The company, legendary for keeping its agenda under wraps, has not said what it plans to reveal but invited speculation with its cryptic event invitation, graced by a partial image of an iPad screen and the tagline: "We have something you really have to see. And touch."

Some predict an upgrade of the Apple TV, one of the rare company products that has not seen mass adoption.

Jefferies analyst Peter Misek said the "see and touch" reference was "very curious."

"An upgrade of the Apple TV set-top-box is possible as well as a remote chance for an iTV television set due to a reference to a large screen size," Misek said in a note to clients, adding that it was possible that Apple could also announce an actual TV despite not having a finished product.

Until then, it is the iPad 3's 4G capabilities that may be commanding the firmest speculation.

iPad sales doubled in the December quarter to 15.43 million units. The company has sold about 55 million iPads since it was introduced in 2010, and recorded more than $20 billion in sales and related services and accessories in fiscal 2011.

But dozens of new devices are set to launch this year, so Apple needs to stay a step ahead of its deep-pocketed rivals.

Handset makers including Samsung and Motorola Mobility already have LTE-capable tablets available, so in a way Apple is already late to the game.

The Samsung and Motorola tablets run on Google Inc's Android software, which is fast gaining ground on Apple's iOS.

Market share of Android-based tablets in the fourth quarter rose to 39 percent from 29 percent a year ago, while the iPad's market share slipped to 58 percent from 68 percent, according to Strategy Analytics analyst Neil Mawston.

But the early high-speed tablets have not caught on. They accounted for a mere 1 percent of total tablet sales in 2011, partly because they were expensive, Mawston said.

While Apple is not breaking new ground with LTE, it may play a big hand in the technology's take off on tablets, because of the popularity of its iPad platform. The iPad 3 may also be helped by recent expansion in the availability of LTE services, according to Mawston.

Both Verizon and AT&T have been upgrading their networks with LTE but since Verizon Wireless had a head start in rolling out LTE -- its first markets came on line in late 2010 -- it should have an advantage over AT&T, which launched its first LTE markets last Summer.

Verizon's LTE network covers markets with a population of 200 million while AT&T's covers 74 million. Sprint Nextel, the No. 3 U.S. operator, will offer LTE later this year.

One impediment to the success of the iPad 3 with the faster connectivity could be rising data service charges.

Carriers charge customers for data on a per-usage basis, which can quickly add up. For example, watching 30 minutes of video a day on Verizon could add up to almost twice as much data downloads as its monthly $30 service package provides for.

If people really like how the new device works, UBS's Hodulik said they may not mind the charges. Even if only 10 percent more iPad users bought the 4G instead of the Wi-Fi version, it would help service providers, which do not subsidize the price of the iPad, Macquarie analyst Kevin Smithen said.

"Generally it should be incremental revenue for the carriers," Smithen said.

So far the most popular version of the current iPad is the cheapest -- the one that works only on Wi-Fi, a short-range wireless connection, and does not connect to service providers networks. So it could still be an uphill task to convince most buyers to pay for iPad services even with faster speeds.

"It's very important for a decent size subset of the users, probably somewhere in the 10 to 15 percent range," Gartner analyst Van Baker said. "For 85 to 90 percent of people, it's just not going to matter."

(Additional reporting by Yinka Adegoke in New York, editing by Edwin Chan and Maureen Bavdek)

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Comments (5)
butchyon wrote:
4G LTE iPads might be great for the uber-rich, but the data caps wireless companies now impose on ther customers will certainly deter almost everyone else from taking advantage of these new 4G devices. Just a few hours of streaming video will blow away your entire month’s worth of data allowance, and to exceed that allowance will cost you BIG bucks. IMHO, the wireless companies with their data caps have effectively KILLED the video streaming business model in America.

Mar 06, 2012 11:45am EST  --  Report as abuse
Jeepgirl wrote:
I would like to get a new iPad when they become available, but I do not want one that is tied to a carrier. I prefer the wifi version. The wireless companies are just too unreliable on bandwidth and cost, plus they change costs any time they want.

I was grandfathered into a unlimited contract with AT&T and have been with them for almost 20 years. That will change if they so much as think about throttling down the performance on my cell phone. I will go back to using citizen band and 2 meter for communications away from home, and just keep my one home line.

They have to be making huge profits. I may not be paying them for long.

I will keep my cable internet for a tablet and just hope Apple iPad is affordable. If not, there are other brands that will work for me.

Mar 06, 2012 12:14pm EST  --  Report as abuse
dannymac63 wrote:
Wow Reuters, no mention of the thing that people actually care about, the increase in resolution to 2048×1536…do the people that write these articles live under rocks?

Mar 06, 2012 1:54pm EST  --  Report as abuse
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