The iPhone 12 is not the first 5G smartphone available in the United States, but it is a major deal for the wireless industry. It promises to get customers to upgrade to pricier unlimited data rate plans for 5G. It could also be a chance to get consumers to switch carriers, something that’s become especially tricky during the pandemic when fewer shoppers are coming into stores.
“Finally we have every player in the ecosystem now represented in the 5G era,” AT&T Communications CEO Jeff McElfresh told CNN Business. (AT&T owns CNN parent company WarnerMedia.)
However, it’s not clear how much this stepped up competition among the big carriers will pay off, at least in the short term.
“There’s always a flurry of promotional activity around big new phone launches,” said Craig Moffett, senior research analyst at MoffettNathanson. “The question is: Will this be the so-called supercycle? … I think it’s hard to imagine that when the most important feature of the phone just isn’t ready for prime time, that that will be enough to drive a supercycle.”
The battle for 5G customers
How successful each carrier will be at scooping up iPhone 12 buyers may depend in part on their 5G build-out strategy.
“(If) Verizon could actually make a proof case that (high-band 5G) works, that could be a game changer,” said Michael McCormack, research analyst with Guggenheim Partners. “But the experience will be a lot different in the suburban and rural areas.”
Mid-band spectrum is likely to provide “the best of all possible worlds,” Moffett said, adding that as other carriers get their hands on more mid-band spectrum, it will likely enable more effective and useful 5G networks.
The carriers acknowledge that it will likely take several years for 5G networks to reach their full potential.
“It’s not like a lightswitch,” AT&T’s McElfresh said. “It takes a lot of capital and a lot of investment to make this a reality everywhere. I’d say that we’re at the beginning stages of that right now and it’s exciting.”
As the networks expand and more consumers start using them, developers will be drawn to create services using 5G, Verizon CTO Kyle Malady said during an interview at an industry trade event last month.
“The first thing is, we put the networks out, then we continue to grow the networks, we continue to put more capability in,” Malady said. “And the ecosystem and the app developers, it all evolves and we start seeing new and great applications.”
Will 5G make money?
It’s not clear how much carriers will profit from the battle to secure customers for their 5G networks.
As more consumers move to unlimited data plans for 5G, carriers say that will likely raise their average revenue per user. But some analysts are skeptical. They say 5G revenue is more likely to come from the carriers’ enterprise businesses.
“We’re waiting to see what happens here, whether you can actually monetize the network,” McCormack said, adding that a bump in speeds may not be enough to get consumers, especially in suburban and rural areas, to spend more on unlimited plans.
Moffett said the 5G build-out creates a “prisoner’s dilemma” for carriers.
“Nobody expects to make very much money on this,” Moffett said. “But everybody is afraid that if they don’t do it, they’ll lose share to the people who did.”