The iPhone 5, though only an incremental advance as a device, portends sea changes in cellular network usage as millions of new consumers sign on to faster 4G LTE networks.  The question now is whether the networks can handle the demand.

Carriers have been preparing. Stung by the 3G congestion debacles consumers faced in recent years, they’ve spent billions of dollars to expand networks. At the same time, they instituted tiered pricing based on how much data consumers use, which has the effect of tamping down runaway demand.

“None of the 4G networks that I know of are offering unlimited data plans. Put another way—they saw this one coming,” says Carl Howe, a vice president at Yankee Group, a Boston-based research firm. “They decided to make sure there was a way, at least if the network is overloaded, that they will get paid to get it fixed.” Network investments over the past couple of years have totaled tens of billions of dollars, he adds.

But given that there are only 12.7 million LTE users in the United States right now, a sudden rush of millions of iPhone 5s and other devices could create network problems, says Bill Moore, CEO of Rootmetrics, a company that analyzes carrier data performance. The iPhone’s U.S. announcement Wednesday (see “Apple Unveils a Skinner, Lighter iPhone”) came on the heels of other LTE phone announcements, including a Windows 8/Nokia Phone ( “New Smartphones May be Nokia’s Last Stand”), new Droid Razrs by Google/Motorola (“Motorola Shows off First Smartphones Under Google”). They join models from Samsung and others offering 4G LTE connectedness.

The 4G LTE networks are up to 10 times faster than the older 3G network, and LTE will certainly use far more data than 3G users, the firm says.  “IPhone users should, in theory, see a big improvement in speed, performance, and overall experience,” Moore says. “However, we’re not hearing much discussion about the implications of mass-user adoption of the iPhone 5 in a short period of time and the potential issues this could create.”

He adds that “the massive shift to LTE on the iPhone5 could lead to slower speeds for current non-iPhone 5 LTE users because of increased network congestion.” Rootmetrics on Thursday posted a blog post describing the issue. Users who want to monitor their carrier’s performance can install this app on their phone.

The iPhone 5 is likely to emerge as the number one selling device in the closing quarter of the year, several analysts have said. Howe expects 10 million to sell, worldwide, before the month of September is out, as the phone gets rolled out.

Verizon, one of the three carriers that will offer the iPhone 5, along with AT&T and Sprint, has had its 4G LTE network up and running for nearly two years and has been promoting the network for all sorts of things (see “Verizon Envisions 4G Wireless in Just About Anything”).  “We always build our networks to handle what we expect demand will be for various devices,” says a spokeswoman, who went on to predict smooth performance.

AT&T is similarly confident, though, and said that it, like other carriers, had done extensive infrastructure work. 

Chetan Sharma, an independent wireless analyst in Seattle, believes that carriers are ready. “Networks around the world are better prepared, unlimited plans are mostly gone, so I don’t expect any major issues,” he says.

Also, although LTE is faster and thus prompts more data usage, it can be 30 to 40 percent more efficient at conveying that data than 3G technology is, so carriers can handle more traffic for a given number of cell sites and spectrum.

Whatever happens in the short term, demand is expected to explode in the next few years. Bell Labs has estimated that mobile data traffic will grow by a factor of 25 by 2016; Cisco says it will grow 18-fold over that time period. 

As the latest step to help ease the strain, the U.S. Federal Communications Commission says it is planning to make more spectrum available. On Wednesday, FCC chairman Julius Genachowski, acknowledging the challenges posed by the flood of new devices, said that by the end of the year the commission would take steps to make spectrum available in the 3.5 GHz band—now set aside for military use—so that it can be used by wireless broadband networks. And carriers are pushing the FCC to free up even more.

The extra spectrum could be used in a radio technology, growing in popularity among carriers, called small cells (see “Tiny Transmitters Could Help Avert Data Throttling”), the FCC says. Many carriers are starting to install various kinds of small cells worldwide. Rather than relying only on installing more big centralized towers, carriers add many pint-sized transmitters, especially in populated areas, to efficiently and flexibly increase capacity, often shunting signals directly from the cells to Internet backbones, limiting congestion on the airwaves. 

But radio spectrum is a finite resource, and a spectrum crunch looms even with such approaches. Longer-term, new technologies such as cognitive radios—which flexibly detect and exploit nooks and crannies in the airwaves as they become available—will be needed to provide additional capacity to the system (see “Frequency-Hopping Radio Wastes Less Spectrum”).