Feature Article

May 23, 2012

Do Rumors Make Sense Even for Apple's Reality Benders?

A friend of mine constantly chides me about being a critic and a filter at my own events. For example, I refused to let a forum have a session about a technology I knew was screwed up. But on the other hand, I have let interesting strategies speak freely when they represented a different way of viewing the world.

I bring this up because Whitey Bluestein is quoted as saying that Apple (News - Alert) intends to crush the carriers by buying an operator. Bluestein said, “Apple has the distribution channels, digital content portfolio and customer base to make the move, and it also has more than 250 million credit cards on file for iTunes users who could be billed directly for wireless service.”  

My general thought is “So what?” Just because Apple has 250 million credit cards on file (two of which are mine), what does that have to do with becoming an MVNO?

My answer is it doesn’t. And if Apple wants to be an MVNO I would say that it's time to put in a short.

But I don’t believe it and here is why:

  1. Apple wants a universal service. The company went with AT&T (News - Alert) first because it was using a GSM strategy. GSM gave Apple a world market- not just a U.S. market. One of the reasons AT&T still kicks butt on sales is because GSM is more universal. If Apple becomes an MVNO at a time when LTE (News - Alert) is making radios specific to each carrier, Apple would have to master software defined radios, and so far, that has not been its expertise.
  2. AT&T, Verizon (News - Alert) and especially Sprint have given away their stores to make Apple happy. And the usage plans have not had the negative impact one might imagine. So why bring the network in house? If you do and MVNO goes worldwide that is adding a lot of management requirements to the internal organization and frankly, I think the profit will be less as an MVNO than as a subsidized phone.
  3. Speaking of subsidies; as an MVNO are we looking for amortization of the phone? Would the fact that Apple provides the service make the monthly cost higher and the upfront cheaper? I don’t remember seeing Apple bill this way. Is there some internal study that says the customers are ready for this change?
  4. If they want to buy something with all that cash, wouldn’t a satellite network make more sense? Or implement the TV technology they always talk about? Why waste the money on a service that represents less than 20 percent of the usage of a smart phone. That’s right, we spend 60 percent of our time on our smartphones, on the Internet, and only 20 percent of our time talking. So why go for mobile? Particularly given the universal solution of Wi-Fi? Why not get on board with the On-Load IEEE (News - Alert) work and go that way?

So forgive me for being a skeptic, but it strikes me as a fool’s errand. Don’t get me wrong, I think some carriers can be picked up for a song right now, but candidly I think they would still make more money on iTunes.

Edited by Stefanie Mosca

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