Monday, December 26, 2011

Are 4G Sales Slow or Not?

What adoption curve will fourth generation mobile networks take, especially the new Long Term Evolution networks? Right now, only one service provider in the United States, Verizon Wireless, has a full year of operation to talk about. 

Of course, Clearwire has been in operation since 2005, but key differences in business model and markets render the comparison inexact.
Clearwire, which mostly has grown on the strength of its WiMAX 4G network, ended the second quarter 2011 with approximately 7.65 million total subscribers, up 365 percent from 1.64 million subscribers in the second quarter 2010. Clearwire subscribers 

But some would note that Clearwire has made significant changes in its business plan, from fixed to mobile, from rural markets to all markets, and from a mix of retail and wholesale to wholesale-only. Along the way, Clearwire also has merged its spectrum with that of Sprint. All of those changes make an "apples to apples" comparison challenging.

So keep in mind that Clearwire had a five year to six year period where its growth was rather measured, not to mention that it began life offering a fixed-only wireless alternative to fixed network broadband. The inflection point for growth didn't come until 2010, when a variety of factors, ranging from Android adoption to overall smart phone growth to arguably better marketing seem to have made a difference.

The Clearwire subscriber base consists of 1.29 million retail subscribers and 6.36 million wholesale subscribers. The key point is that although the analogy is not precise, since Clearwire started out as a fixed network alternative, and only later changed to mobile broadband, early demand might not be reflective of what might have happened if it had focused on mobile broadband, or if Clearwire had been able to focus on mainstream mobile customers rather than largely-rural potential customers.

The initial focus on smaller and more-rural markets would, in and of itself, been the cause of slower growth than a nationwide smart phone mobile service, at a time when smart phone adoption is robust.
One year after its launch, Verizon Wireless's 4G LTE network has failed to capture the imagination of the public, who still seem to prefer the slower-connecting Apple iPhone by large margins, argues Paul Kapustka of Sidecut Reports. Sidecut report

With data-download speeds up to 10 times faster than previous technologies, it might seem that Verizon's "fourth generation," or 4G wireless network, would be a hot commodity in a mobile device-crazed world, says Kapustka.

But lack of a compelling new "4G-only" application is one possible reason why Verizon had sold fewer than two million 4G LTE-capable smart phones during the first nine months of 2011. he argues. Some of us also would argue that 3G is quite good enough for most smart phone users, at the moment.

The other complicating issue is that it is in most cases the rule that devices drive subscriptions, and the popular Apple iPhone only works on 3G networks. As it has been the case that ability to get the iPhone seems to drive the subsidiary choice of service provider, so it might continue to be the case that overall demand for iPhones, which only work on 3G networks, is affecting the choice of network, though less so service providers, these days.

By way of comparison, more than four million people bought the new Apple iPhone 4S the first weekend it went on sale, from Verizon as well as from AT&T and Sprint, Kapustka argues.

One might not consider Verizon 4G sales "slow," in the context of rather-slow 3G adoption, and the long run-up of Clearwire 4G sales.

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