[Update: We’ve updated this article since it was originally posted to make it current with important new details. After the iPhone 5 shipped in the United States, it became clear that the model sold by Verizon Wireless has its GSM nano-SIM slot, including AT&T. This  in place for one of the frequency bands that Verizon purchased at auction to use with LTE. In any case, it may affect what phone you choose to buy. Read on.]
The iPhone 4S was simple: a single model covered the whole world. The iPhone 5 comes in two models, however, with three potentially significant variants based on activation. The iPhone 4S can be used worldwide; the iPhone 5 can too, but not for the fast LTE networking flavor everywhere you go. If you’re trying to break this down to figure out which iPhone 5 model or activation to purchase, let me pick apart how it works.
The iPhone 4S’s supported networks can be explained with a bit of effort. If purchased unlocked from Apple or from a GSM-based carrier or under contract to a GSM carrier, the iPhone 4S will be GSM forever, and will work on all 2G, 3G, and 4G GSM bands nearly everywhere in the world. An identical iPhone 4S can be sold to a Verizon Wireless or Sprint Nextel customer and activated for CDMA, and then used outside the United States with the proper SIM (the GSM subscriber identification module) on 2G, 3G, and 4G networks.
Once activated for GSM, however, an iPhone 4S can never be used for CDMA. If an iPhone 4S is activated for CDMA, GSM remains available, although apparently not in the United States.
The iPhone 5 has all the iPhone 4S GSM and CDMA support, and adds LTE. It comes in three flavors, via two models (explained):
The A1428, which is sold for AT&T in the United States, and Bell, Rogers, and Telus in Canada. It includes LTE support for two spectrum bands that are used among those networks. (Canadian providers also have other spectrum bands they use for LTE.)
The A1429, which is like the iPhone 4S in that it can be activated for either a CDMA network (Verizon and Sprint in the United States or KDDI in Japan) or a GSM network (10 GSM networks across 7 countries), and then never switched.
Here’s the complicating factor. The A1429 activated for CDMA supports two U.S. LTE bands and three bands used in combination across the other 10 carriers supported outside the United States. But when it’s activated as a “world” GSM phone, LTE support drops to include just the 10 international carriers’ LTE deployments. (Neither model includes two bands that will be used extensively in Europe in upcoming deployments.)
There’s another complication, too. CDMA phones, once activated for a given carrier, can’t then be used with other CDMA carriers. If you purchase a Sprint iPhone, you can’t transfer it later to Verizon, Cricket Wireless, or other regional carriers. A GSM phone, so long as its SIM slot remains locked (through encryption), can’t be used with other carriers either. But there’s a twist.
Verizon Wireless sells its CDMA flavor of the iPhone 5 with the GSM SIM unlocked, possibly due to FCC regulations that govern the use of the spectrum band it employs for LTE. That specific band carried a requirement that prevents carriers from offering handsets that lock a phone to a network, or restrict the use of legitimate devices (even those not sold by a carrier) on a network. This means that a Verizon-activated iPhone may be used immediately with any GSM network, including AT&T (2G, 3G, and 4G) or T-Mobile (at 2G and EDGE rates). It can’t use AT&T’s LTE network or those of the Canadian carriers. (It’s unclear whether this will force Verizon to let you use the phone on another CDMA network, because that requires the other CDMA providers to allow its use, and they aren’t required to do so.)
The unlocking policy for other American carriers varies. Sprint allowed the iPhone 4S’s SIM slot to be unlocked after 90 days of service. AT&T won’t unlock a SIM slot until well into a two-year contract if it’s a subsidized purchase, and I’m unaware of a stated policy about if or when a phone purchased from AT&T at full price may be unlocked.
So how do you figure out which model and activation to buy? The calculus has everything to do with how much you travel and where, and whether you care that you’re achieving LTE speeds when you travel. (There’s also a timing issue: two LTE bands being aren’t supported by the 7-country GSM model, which may have to wait for an iPhone 5S or 6!)
I live in an LTE-supported country (the United States or any other), and I don’t travel at all.
Pick the best service plan, as whatever iPhone 5 model you pick will be dependent on that. AT&T and Verizon will, by around 2014, have comparable LTE networks, but Verizon is ahead on its footprint for now. Worldwide, most LTE networks are in the early stages of being built out. Check with individual carriers for coverage maps.
I live in the United States, and travel frequently to Canada, but rarely elsewhere.
AT&T is the best option for an iPhone 5, because you’ll get LTE support in the United States and Canada, and AT&T has roaming add-ons for Canada as well as a  that’s surprisingly affordable. It may be worthwhile to purchase a fully unlocked iPhone 5 (which  as carrier-supplied phones in the United States), and use separate AT&T and Canadian carrier SIMs. However, it’s unclear whether Apple will offer that for sale, or when carriers will make nano-SIMs available on a pay-as-you-go or subscription basis.
I live in the United States, and travel all over the darned globe.
AT&T is a poor choice, because it won’t unlock SIMs (at least initially, see above), and you have to pay its high voice and data roaming fees outside the United States. Opting for Sprint (unlimited U.S. data) and getting the nano-SIM slot unlocked or Verizon (best U.S. coverage for voice and LTE) with its SIM slot unlocked at purchase is the optimum solution so long as you are in an LTE coverage area for most of the time you use it in the United States.
I live in Canada, God’s Country, the Great White North (’ noise here) and travel beyond its borders regularly.
The only option is the AT&T/Canada (A1428) iPhone 5 to get LTE speeds, but that won’t allow you to use LTE when traveling further afield than your neighbor to the south. You can purchase an unlocked iPhone 5 from Apple in Canada, or get an iPhone from a carrier, each of which has varying policies for unlocking. An unlocked 7-country (A1429) iPhone 5 would keep you from having LTE access at home, but enable it in those roaming countries.
I don’t live in the United States or Canada, and may or may not choose to travel much.
Apple or a domestic carrier may be willing to sell you only the three-band (A1429) GSM/LTE model. Unlocking a SIM for use outside your carrier’s home country depends on its policies and those of the national regulator’s. You will not be able to use this model with any LTE networks in the United States or Canada.
I just want to buy an unlocked iPhone 5.
We’ll have to wait and see what Apple offers, and how readily available nano-SIMs become for travelers to foreign lands.
For a carrier-by-carrier examination, read. He travels extensively around the world, which gives him better insight into the costs of roaming data.
(If you don’t care about LTE speeds, and the new features of an iPhone 5 aren’t compelling, pick an iPhone 4S if you need a new phone, since those are the same great devices as a few days ago, but now cost less.)
There is one more special case I’ll mention. Our own Joe Kissell and his family are returning from five years in France this winter to live in the United States. Joe would dearly love to purchase an iPhone 5 when it goes on sale, but the unlocked, plan-free model he can purchase in France likely won’t allow him to use LTE when his clan returns stateside, and it would stick him with AT&T as a carrier and no choice for voice and data. My advice to Joe: wait until you’re back.