Apple Might Become Its Own Cellular Wireless Service Provider Discussion

[Ryan Punzalan]

According to an expert, Apple's next big move may be to become a wireless service provider, like Verizon or AT&T. This would allow the company to dispense with the "middleman" and control the entire smartphone experience.

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[Drillbit]

Google is already toying the idea with an experiment in India, where a provider is giving free data to Android users courtesy of Google.

[Mi An]

More power to them. I'm very dissatisfied with the options at hand. I don't see myself signing up for iWhatever, but the industry could use a kick in the pants all the same.

[Adama D. Brown]

Frankly, I don't have much respect for this "expert" opinion. He talks up how Apple supposedly has this great infrastructure for direct sales via iTunes and the like, but he ignores the fact that they have no ACTUAL infrastructure. No towers, no access points, no existing network to build on, nothing. They have literally no ability to offer actual service independent of one of the other major carriers. Cell phone signal doesn't literally come out of thin air. They could set up an MVNO, but no major carrier is going to be okay with significantly undercutting existing prices, particularly for data. Likewise, they could buy one of the smaller carriers with that big pool of cash, say Sprint or T-Mobile, but that would alienate them from AT&T and Verizon, neither of whom is going to continue allowing Apple to soak up cash from iPhone sales in order to fund a competitor.

If Apple dumped their entire cash reserve, they might be able to create or buy and expand a national carrier to the point where it's serious competition. But why would they want to do that when they're making money hand over fist right now, without the major carriers being at war with them?

[Mi An]

Virtually all of the linked marketwatch article is about MVNO options. The patent mentioned here also relates to MVNOing. I wouldn't put any more stock in this rumor than any other, I'm just saying.

[hal]

Frankly, I don't have much respect for this "expert" opinion. He talks up how Apple supposedly has this great infrastructure for direct sales via iTunes and the like, but he ignores the fact that they have no ACTUAL infrastructure. No towers, no access points, no existing network to build on, nothing. They have literally no ability to offer actual service independent of one of the other major carriers. Cell phone signal doesn't literally come out of thin air. They could set up an MVNO, but no major carrier is going to be okay with significantly undercutting existing prices, particularly for data. Likewise, they could buy one of the smaller carriers with that big pool of cash, say Sprint or T-Mobile, but that would alienate them from AT&T and Verizon, neither of whom is going to continue allowing Apple to soak up cash from iPhone sales in order to fund a competitor.

If Apple dumped their entire cash reserve, they might be able to create or buy and expand a national carrier to the point where it's serious competition. But why would they want to do that when they're making money hand over fist right now, without the major carriers being at war with them?

I thought on the same guidelines. Apple's stronghold is essentially market end, not production end. Without the necessary utilities and infrastructure, they are still likely to open an MVNO option, and even with a reasonable stretch of prices that allows them to compete, but that doesn't null the fact itself that they don't have such infrastructure in the first place. I mean, they are not even willing to own the infrastructure to build their devices on their own, why would they move their business to an infrastructured-based one in order to provide connection?

That's why I think it's unlikely that they move into the condition of owning said infrastructure. One of the reasons of the profit margin of Apple is their managerial ability to juggle between design and production costs in order to own the most profitable parts of their business, and outsource the rest. Were Apple interested in offering connection, it's rather unlikely that they break this guidance in order to own the utility. That would take them precisely into the issues and misdemeanors they don't wanna live on the industrial phases of their products, like unions, and figuring out the shift and extra time wagers to machine operators, and combine efforts with suppliers, and so on.

Virtually all of the linked marketwatch article is about MVNO options. The patent mentioned here also relates to MVNOing. I wouldn't put any more stock in this rumor than any other, I'm just saying.

I believe that it's quite likely that Apple will attept an MVNO option in order to cover this subject. The MVNO segment is actually a collection of tech options that have been applied to the cellphone business for years, all gathered in order to allow the incorporation of a carrier whose infrastructure is absent. Cellphone operators and landline operators have figured interconnection fees in order to link amongst. Where a carrier lacks coverage, it can "rent" it from another carrier, in some places asking for it, in others (like in Mexico) demanding it by law, and follow established interconnection fees. Mobile carriers are now allowed to exploit the landline segment, essentially offering cellphone lines on a desktop device.

[Varjak]

Virtually all of the linked marketwatch article is about MVNO options. The patent mentioned here also relates to MVNOing. I wouldn't put any more stock in this rumor than any other, I'm just saying.

I agree; but I don't see how they will significantly undercut anyone in price and/or providing more services. Apple operates on a premium model, not a loss-leader model. I think Adama and Hal are right. It would likely be an MVNO, which would prevent any serious undercutting even if they wanted to.

[Adama D. Brown]

I could almost see Apple doing an MVNO for marketing purposes, but there's still serious problems there. For one, they'd need to choose a single carrier to work with, which would still alienate others. If they chose anyone, it would make sense to go with Verizon, but you also still have that large base of legacy iPhone users on AT&T who it might be hard to persuade to jump ships.

[Mi An]

For one, they'd need to choose a single carrier to work with, which would still alienate others.

Some MVNOs are multi-network, including Straight talk. The patent mentioned above sounds like it deals with multi-network MVNO tech or processes.

Apple filed a patent application in October 2006, shortly before the first iPhone announcement, with a diagram on how it would offer wireless service directly to customers using networks of several mobile operators. The patent application was extended in fall 2011. Bluestein said that the patent confirms that Apple has thought through how it would offer service directly to customers.

As to alienation, Sprint just made a massive multibillion sales gauruntee to get the iphone -- non-exclusively, apparently (I still wonder if they might get a small exclusive window on the ip5, it was just such a huge investment). ATT paid out the nose, but at least they got an exclusive. Not sure about Verizon. iPhone subsidies are higher than most of their Android counterparts. If they'll put up with all of Apple's demands thus far, I'm not sure I see the carriers that can afford iToys putting their foot down over one more quasi-competitor. Apple is sitting on a lot of leverage. Whether they have designs on it or not, I can't imagine there will ever be a better time to launch their own brand.

[Mitlov]

I don't see Apple pulling this off unless they buy out an existing provider. Apple stores have a physical presence in major metro areas and college towns, but not in much of the rest of the United States. And you need a physical presence in Peoria, not just Berkeley and NYC, if you're going to be a cell phone carrier.