To be noted: this is written by Jean-Louis Gassée, former Apple executive and founder of Be Incorporated, which was at some point very close to be bought by Apple before Apple bought NeXT to get the foundation of what is now Mac OS X. (which also brought Steve Jobs back to Apple…)
I'm bringing this up not to say that this is insider's information or that it is thus more likely to happen, but just because in this case, the author is more significant than some rambling from a random blogger. That theme is not new, so it's interesting that he would bring it up.
Fails the three primary market advantages that Apple always goes for:
- Lots of opportunities to innovate (regulation and spectrum issues with the FCC, patents on the major wireless technologies involved, all the infrastructure equipment is produced/procured from 3rd parties)
- Large profit margin (carriers aren't generally 40-60% margin operations like the rest of Apple)
- Low ongoing overhead (lots of maintenance on a large, nationwide physical plant of towers)
Sounds to me like far more trouble than it's worth.
You could make roughly the same points about the iTunes / record label relationship. If it were enough of a strategic advantage it might happen. I wouldn't cross your fingers though.
I'm sorry, but only two of those points are true. When iTunes came out, there was nothing like it in the market. A great way to manage and buy new music all at one place? Plenty of room for invention.
The proof that is was such a unique experience? The labels spent the next 2 years fighting tooth and nail for 'control' of their music catalogs back from iTunes.
I agree. Imagine not looking at your cell phone and thinking about how some shitty company with a government-granted oligopoly is screwing you over and treating you badly.
That's hardly true. iTunes is/was based on SoundJam which Apple bought. Before iTunes was available on Windows Apple recommended a third-party package (the name of which escapes me) for using iPods on that platform. The iTunes Music Store had (nascent) competition, and it arrived after iTunes had been released for a while.
You mean MusicMatch? Yeah, I had MusicMatch, and it was horrid for connecting to ipods and other gadgets. Plus, the buying experience was a mess. I don't remember SoundJam too well, but I don't seem to remember that you connect devices to it to transfer music, and I'm completely certain you couldn't buy music from the software itself.
Remember, this is back during the heydays of Napster, Audiogalaxy and the free download craze for music. iTunes, along with mp3.com, made it completely easy to download legit copies of music, which hadn't been possible before.
Those problems are opportunities if one knows how to solve them, and Apple might.
- Apple knows how to pull strings at FCC (e.g. appearance of Apple's products of FCC's website seems coordinated with official announcements). Apple isn't scared of patent battles and is well armed in this field. They can make their own hardware and work with 3rd party vendors.
- Apple keeps high margins on their computers, while PC manufacturers are in the race to the bottom. Perhaps a "premium" carrier could pull that off too? (especially if they could do more innovations like visual voicemail).
It depends on how it works out, but I could see a model in the near future where the infrastructure and selling the service are split up. There's already a bunch of MVNOs (Mobile virtual network operators), and that will only grow. There will be a point where network operators are really just doing that: operating the network, not selling you minutes. That would allow network operators to focus on their core competence (or what should be their core competence), operating a good, reliable network. All too often now, the telecom industry feels like bait and switch or an extortion scheme...
On an aside note, there's a group of students here in the Netherlands that want to do that: setup a MVNO as a coop or a non-profit, that will essentially give you SIP/data of your calls, instead of handling routing from A-Z. See http://limesco.org/wordpress/, though most of it is in Dutch.
And getting back to Apple: an iPhone MVNO could work well. On the other hand, Apple has rules about selling iPhones on networks that make Apple like a carrier already: iPhone data has to be 2x as fast as any other comparable plan, etc. Apple has the carriers in their grip...
These sound like reasons for Apple not to do retail stores. :)
In fact, I think Apple has lots of room to win in these areas. From TFA, think how much waste there is in cell implementations for legacy/interop-- not to mention carrier overhead-- that could be eliminated if Apple made every single device on the network?
Apple is full-stack from today's perspective. What if tomorrow's "stack" includes the towers and the complete customer billing relationship? People might say this was an obvious step along the road to e-wallet phones.
I agree this feels a little far fetched. But so did AAPL becoming the world's largest company, and switch to x86, before the fact... :)
Also, Apple stands to gain even more dominance at the expense of carriers should next-gen wifi (802.22) ever take hold and make GSM data plans obsolete.
Apple would be spending half its cash pile to acquire a domestic company.
Nearly two-thirds (62%) of the company's sales are international [1]; furthermore, I would guess that much of the company's growth is in international markets, especially in Asia.
Unless Apple is seeking to improve its operational expertise in running carriers in order to buy up carriers throughout the world, this acquisition would be a very curious one.
There are plenty of reasons Apple won't buy a carrier (I think namely because it wouldn't be approved without concessions that Steve Jobs would never live with), but money isn't one of them. Interest rates are very near zero and Apple isn't exactly a credit risk. Not to mention Apple's stock value...
If you are acquiring a 39+ billion dollar company, money is a factor.
Considering Apple's capital structure, interest rates aren't really a key consideration here. "Apple's stock value" reflects the fact that they invest in relatively high return projects and that investors expect them to continue to do so. This type of acquisition would not be satisfactory.
This brings up some good points, but the title and structure are a bit misleading. For that who haven't read this yet, the middle section raises the reasons for Apple to acquire a carrier (most of which I thought were poor reasons, which almost caused me to stop reading). The author concludes with a rather coherent detailing of why it would in fact be silly for Apple to acquire a carrier (especially only US).
Apple went from being a company with niche product and small market share (that I loved) to a worldwide juggernaut that many thought would save us from the anti-consumer duopoly we have with AT&T and Verizon. While we did end up with better phones and software, developers just answer to a new master. While I find the closed model of iOS disagreeable and anti-consumer, what is worse is that Apple is taking the closed model of iOS and spreading it like a virus into the Mac. And since Apple, the company beloved by “all” can do it, it clears the way for everyone else.
So no, as bad as the current duopoly is, I don’t think Apple becoming a carrier will make it any better.
It's interesting, but I have not had too many issues with ATT coverage recently. It's almost like they fixed things. Maybe it's just my area (Bay Area - Peninsula), but I wonder if everyone else is still regularly experiencing the claimed problems with AT&T.
Given the length of time it takes to put up new towers, it is probably that the money they spent is finally showing some results. In ND they are in the middle of a transition from a local carrier they bought to themselves. It did not go smooth (total loss of network for a period and double billing customers), but the coverage is now getting better.
In far west Houston AT&T is an abomination. I quite literally drop 1-4 calls daily, especially around 3-8pm. In my house I'm usually at 1 bar or "searching" most of the time. I have complained and their excuse is that the large masterplanned community that dominates the area won't let them put up more towers. I am skeptical of this. Its a big neighborhood but they aren't that big.
I try to use mark the spot religiously but dunno if it loses it's impact when I'm marking it daily
Apple had every opportunity to sell the iPhone standalone, without any participation from the carriers. Given the iPhone's obvious lure, especially when first released, Apple might have succeeded in upsetting the long-lamented model where devices are locked to and subsidized by carriers. They could have easily directed customers to purchase the iPhone and direct customers to purchase service separately.
The original iPhone wasn't carrier subsidized - you could walk into the store and buy one, without a contract. You'd set up the contract when you got home, through iTunes.
It was locked to Cingular/AT&T, but that was, as the other commenter said, more of a Visual VM thing than anything else.
I'm thinking this started because Apple wanted to change the way phones were sold, but changed because selling a $599 (or $399 after the price drop) phone wasn't tenable in the US market.
The problem with selling a $599 phone in the U.S. market was that unlike in other countries where an unsubsidized phone will get you a cheaper plan (thus making it cheaper in the long run), IIRC the iPhone plans were actually more expensive.
To an extent... I always thought Apple went with non-carrier subsidized pricing on the first iPhone because they wanted sales now. The price even dropped $200, IIRC, only two months after launch. This supports your last comment because they fueled sales. My experience is that people wait until their contract obligation is complete before shopping another handset.
Experience in market and a totally different type of phone are reasons. I am pretty sure some features required carrier support (i.e. Visual Voicemail). The initial data plans were also a bit different than a traditional offering. The iPhone was not a sure bet even with the backing of a carrier.
Because they collaborated with then-Cingular to do Visual Voicemail. Also the thinking then was that they could earn a kickback from the carrier for exclusivity.
To me, the reason to do this has nothing to do with the business of actually running the carrier. The reason to do this would be to put pressure on the other carriers by providing data plans with reasonable pricing and terms. The terms of service for every wireless data plan out there today are completely ridiculous and terrible, and since wireless is an oligopoly there's no way that's going to change until a tech company that actually understands the internet buys a wireless carrier and makes them change.
I honestly doubt that would make things any better. The carriers are terrified of becoming dumb pipes between you and your content. Apple's latest strategy is to wedge itself in the middle as a distributor (iTunes, iBooks).
Considering Apple's control obsession, a telecom buyout is more likely to make things even worse. Wireless spectrum is a public good, what we need is a company that has zero interest vested in the bits going down the pipe.
Given the news last week that Apple's market cap was larger than the federal government's cash on hand, i thought this was going to be a request for an aircraft carrier.
Would it be possible for a carrier (Apple) to "serve one type of phone", as the article suggests? I guess the regulator would not allow that, requiring the use of standards (GSM, LTE,..)? On the other hand we do have SIM-locking already..
Second thought: Would a phone that doesn't support native apps, but HTML5, really be called a 'dumbphone'? Running Javascript even requires a faster CPU for the same experience.
I am with you. I don't see how you could call it a dumb phone at that point.
It is still a foolish idea. To keep costs down, you would probably use the same chip as your other iPhone / iPod Touch or the previous generation chip. You might have less flash, but the commodity chips have increased in size. The biggest cost savings would be to use the original iPhone LCD resolution. No significant cost savings for Apple comes from just having a browser phone. Plus, it would annoy app developers, increase support costs, and cost Apple their 30% cut. I see it as a no go.
Apple has no reason to buy a carrier as it has no reason to buy a power company in a country with frequent power outages.
Unless they have a magic way to make 3G/4g work for everybody and everywhere, they will just pick up all the consumer rage that at the moment AT&T and the likes are shielding away from them.
If Apple wants to get in the carrier game, it would make much more sense to become an MVNO so that they can just sell the iPhone and not get into regulatory trouble. They could also do this globally and get rid of things like roaming.
T-Mobile is a third rate carrier as it is. They can barely compete with AT&T Verizon at this point. The only reason wireless carriers buy each other is for infrastructure and customers to boost its bottom line. Apple has neither. To buy a wireless carrier would be suicide for Apple.
I'm bringing this up not to say that this is insider's information or that it is thus more likely to happen, but just because in this case, the author is more significant than some rambling from a random blogger. That theme is not new, so it's interesting that he would bring it up.
(http://en.wikipedia.org/wiki/Jean-Louis_Gass%C3%A9e)