Could Apple Be Your Next Phone Company? // I believe I would like this
Posted on March 7, 2011 by admin
Apple’s plans to once again change the dynamics of the mobile world are becoming clearer. Bloomberg reported today that the device maker has plans for a universal SIM card that I first reported on in October, and Apple is seeking a way to make it possible for consumers to pay for mobile access from multiple carriers via iTunes. The result of that hardware shift and business model change turns Apple into its own mobile virtual network operator (MVNO) and puts Apple, instead of the carrier, in control of the customer relationship.
Apple is working on a technology called a Universal SIM, which would let iPhone users toggle between GSM networks without having to switch the so-called SIM cards that associate a phone with a network, according to one person. This would help cut the cost of distributing and managing millions of SIM cards. The new features could also give Apple an advantage over mobile carriers in influencing customers. The device would be affordable without a carrier subsidy, so buyers would not need to agree to terms, such as termination fees, that carriers demand in exchange for subsidizing the cost of the phone. Apple has also worked on redesigned iPhone software that would let customers choose a network and configure their device on their own, without relying on a store clerk or representative of a carrier, according to the person.
Wow, it sounds exactly like what I described back in October after hearing from some panicked European wireless carriers about the hardware. At the time, sources described the Universal SIM as being a project Apple was working on with Gemalto, a SIM card maker as follows:
The Gemalto SIM, according to my sources, is embedded in a chip that has an upgradeable flash component and a ROM area. The ROM area contains data provided by Gemalto with everything related to IT and network security, except for the carrier-related information. The flash component will receive the carrier related data via a local connection which could be the PC or a dedicated device, so it can be activated on the network. Gemalto will provide the back-end infrastructure that allows service and number provisioning on the carrier network.
Wednesday, Apple Insider reported that Apple was granted a patent on software that would allow a phone to “collect rate information from participating wireless networks within a region and automatically select or allow users to select the best option.” That patent, plus a Universal SIM, or even the dual-mode CDMA and GSM iPhone Apple is currently selling to Verizon users today, makes the idea of an Apple network plausible.
Would carriers go for it? So far, the reaction to the thought among major operators has been fear and loathing, but Apple has managed to push the envelope in the past, such as cutting the carrier out of its revenue-sharing model on its app store and keeping the carrier software off its phone. It’s possible there are carriers who would welcome the opportunity to have iPhone users hop on and off its network in exchange for a chunk of the revenue those high-data users provide. Sprint, for example, has talked about embracing such a wholesale model in the past. LightSquared, which hopes to build a wholesale LTE network in the U.S., is another potential network that might want to play this game.
The Bloomberg article also discussed a smaller and cheaper iPhone as another project at Cupertino. Bloomberg says it could cost about $ 200, as compared to the current iPhone price of $ 649.99 for the low-end, 16 GB model. That smaller handset could work well with this MVNO model, because it would be cheaper for the end user and less reliant on carrier subsidies. In the U.S., carriers tend to offer phones at less than their cost in exchange for the subscriber signing a contract. Of course, if the subscriber is hopping from network to network in search of the lowest rate or best quality of service, a carrier subsidy no longer works, which means Apple has to offer a cheaper phone.
In a world where carriers lose their exclusivity and have to compete not just every time a customer buys a new handset or renews a device, but every minute solely on their network and price, a true competitive market for mobile broadband could emerge. As an MVNO, if it can lower the price for service with a compelling and cheap handset, Apple wins and wins big. Who would want an Android phone if it doesn’t come with competitive data access? As for carriers, their dumb-pipe nightmares are just beginning.
For more on this topic, check out An Apple Integrated SIM: What It Could Mean.
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