Saturday, February 19, 2011

Apple is the future iPhone carrier too

A lot has been made of the Apple business model for selling iPhones:
  • Sell it the the Carrier supporting the network that it will run on, for abou $600
  • The Carrier sells you the iPhone for $199 or less but with a 2 year contract adding up to $1500 or more
  • Let the Carrier charge you for Call minutes, SMS/MMS and Data all separately.
As a result the iPhone have been available upfront for a relatively cheap price but costing so much more at the end of your contract. This cannot last forever and I think Apple has a plan to dramatically decrease the cost of owning an iPhone over it's life time.

I have noticed several things over the years since the iPhone was introduced that made me realize the approach Apple could take.

The first one was a patent that was sublimed in 2006 but just recently granted to Apple. It detailed how an iPhone could make the different networks it can bid for the service on the device. This is done so by dynamically comparing the cost for calling each available network on it's location and choosing the one with the better offering. Apple detailes in the patent that all this will be transparent to the user. Needless to day even now, such un approach will be seen and almost imposible due to the level of cooperation Apple has to receive from the different networks to make this happen.

The second thing that cough my mind was the eagerness of adoption of iPhone/Apple relationship by the carriers internationally, even when they were multiple ones in the same country. So eager were they and so few iPhone could Apple produce initially that it was left with no choice but to establish exclusivity arrangements until it can cope up with demands by establishing factory and parts supplier relations. Apple did have a substantial power over exclusive relationships and in all cases that yielded some sort of innovative services to customers, like visual voicemail. But even when multiple carriers started selling the iPhone, it seams Apple was in no pressure to reduce prices but only to increase availability.

The third news that made its way quickly into the blogosphere was the rumor that Apple was planning to ditch the SIM card in future iPhones. This leak has obviously resulted from talks with the Carriers. Apple was trying to take control of them and at the time that must have caught a huge backlash and the next set of rumors was that Apple abandoned the idea...for now. The SIM card is the one piece if technology that it put into your phone by the carrier. You cannot use your GSM phone without it.

The forth piece of the puzzle came with the experience of using my iPhone for the past 4.5 years. I do not know how much exactly I have spend trough iTunes and its App Store but it was a great byung experience. I know I consciously made every purchase. This day iTunes has keeps a detailed record of everything I ever bough even allowing me to see only totals on a monthly basis. I do however trust the system and I would be happy if I can pay everything with my iTunes account and drop Paypal and the likes.

The fifth piece of news was just a few months ago and it was a segway to the patent awarded to apply in my first point. This is however called a Mobile Virtual Network Operator (MVNO, where a company buys call minutes from the big carriers in bulk and resells them to it customers. How many other companies are there with 100 million smartphone customers? Apple could easily become the biggest MVNO in the world since it's iPhone users generate so much data traffic by default.

The final piece has been there all along. Apple want to have a full control all aspects of buying, using and servicing your device so it can provide the best possible experience. Apple is all about creating the best products and services on the planet. They compete only with themselves and would not even give you a chance to ruin your experience, let alone the phone carriers. AT&T in the States has become infamous for its phone service and are by far the biggest and worst example.

So there you have it. One day 5 years from now, Apple would have been selling iPhones everywhere and have carrier partnerships with most if not all telecoms in the world. They will be buying minutes in bulk not just from one Carrier but from all and create a global pool of data traffic available to any celular equipped Apple device. Your future iPhone will not have a SIM card but will intelligently talk to Apple servers in the cloud. When you want to make a call or use data or send an SMS, the intelligent software will make a chice of network for you based on best reception only as all traffic will be data. Apple could provide you with plans or give you the option to pay as you go. There will be a standart fee per MB of data in the same way all apps cost the same throughout the world. iTunes will handle all payments. You will have one number on all your devices. That will be in your choice just like it is now for Facetime calls. Best of all, this will work anywhere on the planet.

How cool that will be.

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