Apple is preparing to take on the role of wireless services provider, longtime analyst Whitey Bluestein wrote yesterday, pitting it directly against the carriers who sell its gadgets. The company plans to package data service with iPads, according to Bluestein, then sell data and international roaming plans to iPhone users through iTunes. And “sooner than many think” it will strike wholesale deals with network providers, stepping onto the shaky playing field of MVNOs.
Bluestein offers up some evidence to back up his theory: Apple filed a patent for “Dynamic Carrier Selection” back in 2006 that would place it in the role of a services provider supported by connectivity to multiple network providers; it extended the patent application last year. And Apple has reportedly offered rival phone makers its design for a tiny SIM card that could conceivably be its key to controlling every consumer-facing aspect of the wireless ecosystem, relying on third-party networks for nothing more than connectivity.
Apple is all about the hardware
But I think the chances we’ll see an Apple Mobile are about the same as seeing, say, a line of Ugg smartphones. Apple has always used content and services simply as a way to sell hardware, and that strategy has worked tremendously well in mobile: Cupertino accounted for a staggering 80 percent of worldwide smartphone profits in the fourth quarter of 2011, according to Canaccord Genuity, and comScore data indicates the iPhone actually outsold all Android handsets combined in the U.S. during the first quarter of 2012.
Launching a U.S. MVNO won’t broaden Apple’s sales channel in the least because the iPhone is already available on the nation’s three largest carriers as well as a growing number of regionals. What’s more, Apple Mobile would only enrage those operators that already carry the iPhone, giving them one more reason to try to boost sales of non-Apple handsets. Instead of increasing iPhone sales, then, an Apple MVNO could well diminish them.
And while the mobile hardware business has been very good to Apple, the MVNO landscape is littered with the corpses of high-profile players who couldn’t make a go of it. ESPN, Disney and Amp’d Mobile, among others, spent vast sums of money only to retreat in haste. Those who have survived are largely no-name, prepaid players who scrape by on razor-thin margins generated by providing service to second- or third-rate handsets. That’s simply not a space the gleaming Apple wants to play in.
An unnecessary risk
There are plenty of other reasons to believe we’ll never see an Apple Mobile. While an MVNO would let the company “own” the consumer entirely – with branded voice and data service in addition to handsets and apps – it would also require Apple to stick its logo on a service that is actually provided by another company. Apple was never sullied by AT&T’s network woes because it never claimed the actual service as its own; that luxury would be gone under an MVNO arrangement. Finally, it’s worth noting that Apple has only begun to tap emerging markets such as China, where 3G penetration remains low but the user base is massive. Cupertino will continue to expand in those markets with its core business rather than become distracted with a boutique service provider offering in the U.S. market it dominates.
I fully expect Apple to expand beyond its current line of mobile offerings in the next year or so. I think the iPhone 5 – or whatever it will be called – will feature NFC technology to support an ambitious mobile payments initiative. I wouldn’t be surprised to see it buy its way into the mobile payment space with an acquisition of Square, as Mor Naaman suggested a few days ago. (I think Naaman’s idea to buy Foursquare would be misguided, however.) And I still think Apple would be wise to expand its iPad line to include a smaller, cheaper tablet to compete with the Amazon Kindle Fire, among others. But the company would be foolish to try to become a wireless service provider. And Apple doesn’t make foolish moves very often.