Should Apple buy a phone company?

http://thenextweb.com/apple/2011/05/22/what-should-apple-buy-with-their-billions-their-own-carrier/

by Swannie • 15 years ago

26 30 15 years ago

Swannie• 15 years ago

I think it is unlikely that Apple would buy Sprint. It is an extremely US centric option, and whilst Apple's home is the USA, they are a global company.

Clearwire is a little more likely, but WiMax is just not matching the performance:power ratio that LTE is offering.

As the article points out, the expense of a network build is mostly in the land for towers (and the backhaul from tower site to network point-of-presence - sometimes 100s of miles of fiber/microwave links). Buying Clearwire still lands it with a lot of cruft that they don't need.

So the third way, unmentioned by the article, is that Apple goes into a joint venture with a cell co. Joint ventures for infrastructure sharing (site, tower, power on site, security, etc.) have long been established in the UK and other EU countries (site sharing is used everywhere, but often only on a site by site basis, with tower sharing not always happening).

Also in the UK market we've seen consolidation on the radio access network front. Everything Everywhere is the network operator for two UK cell co's. At the moment they still operate their own backend networks, but roaming between the two is free.

If Apple were to go to Sprint/Clearwire with a proposal to create a infrastructure or radio access network sharing operating company, this is a win for all - reduced costs for the existing service provider (giving a competative advantage) and access to Apple to build out their own iNetwork.

FrojoS• 15 years ago

Seriously? A company that takes pride in only having a handful of different products, buying huge amounts of infrastructure? Also, how likely is it, that this infrastructure is worth a dime in decade? Quite, likely I guess, but it would still be risky bet.

On top, as Swannie has pointed out, Apple has an international market.

stcredzero• 15 years ago

Also, how likely is it, that this infrastructure is worth a dime in decade?

If they buy Clear, they're possibly going to face obsolescence. Many folks think Wimax will lose out to technology like HSPDA+ and LTE in a few years.

btucker• 15 years ago

This article is light on factual research and chock full of daydreaming. Could apple buy up another piece of the mobile communication puzzle? Sure. But I'm certainly not holding my breath for this to happen. Apple is a product company, not a service one. And I see no factual indication in the article they're eager to change this by running around installing antennas in Starbucks. Google on the other hand...

pavlov2• 15 years ago

By the same logic, Microsoft should have bought AOL in 1998. There were millions of people using AOL's network on Windows machines -- obvious synergy, right?

AOL was a previous-generation network infrastructure company. Current mobile phone operators are in a similar position. Any IT company should stay away from making long-term bets on them: just play nice to get what you need from the operators now, and let these dinosaurs go extinct when the market eventually changes.

hollerith2• 15 years ago

Bad analogy. AOL didn't own anything essential like the spectrum owned by the mobile operators. I don't see WiFi as being a replacement for this spectrum and note that WiMax relies on it.

pavlov2• 15 years ago

The spectrum is immensely valuable, but it's fundamentally owned and controlled by governments who have the power to decrease its value by imposing more regulation on current operators and/or opening up new spectrum bands to new competitors.

Current operators appear to me as not unlike the railroad monopolies of the late 19th century. Immensely powerful and seemingly irreplaceable, but on the brink of being disrupted to irrelevance.

umtrey• 15 years ago

I can't find the article that originally referenced this... but the idea that Apple would buy a phone company was made obsolete with the AT&T service issues that were present in the United States. By commercially separating the Network from the Phone - a new concept for the carrier-lock in situation in the states - it removed a large segment of risk from the user experience. How many times have you heard "the iPhone is great, but AT&T has terrible service" or something else along those lines? It's a common argument.

People don't understand the difficulties of having lots of data on a large-scale network across thousands of miles of cities, countrysides, and elevation differences. They do understand if a computer or phone is slow, though. This way, there are problems, but it's not because of Apple and their immaculate product. Why tarnish your brand with something people won't understand?

cubicle672• 15 years ago

I think the iPod Touch is a sleeper product here. First gen was pretty much just an iPod. Apple added a speaker, then a mic and now front/rear cameras and facetime. The current $200, own outright, no contract iPod is already a feature packed video phone (y'know, from the future) with one catch: it requires wireless connectivity, something that's only going to become more ubiquitous.

All Apple needs to do is switch off video on facetime, find a way to add voip style phone numbers (like Skype et al) and then sell it as $200 phone, no plan required.

pagekalisedown• 15 years ago

yup, I'm already doing exactly that. I use my iPod Touch (4th gen) as a phone with a voip app and a voip subscription.

I'm always near wifi except when I'm in my car, and I have a pay-as-you-go cell for those times.

younata2• 15 years ago

If you're in your car (which implies you're driving, since it's YOUR car), you shouldn't be using a phone.

Kylekramer• 15 years ago

And burn their very profitable relationships with carriers? I already do this with my iPod, but there is no way Apple is about to make it easy to make calls with an iPod when they make so much more off of iPhones.

jfb• 15 years ago

No.

lysol• 15 years ago

Not gonna happen. Service companies are the whipping boy of every muttered complaint under a user's breath. Not to mention the antitrust issues that would inevitably come up.

amorphid• 15 years ago

I don't see Apple buying a phone company. Maybe they will buy a competitor. Amazon is "only" worth $90 billion, which means Apple could pay out of pocket with cash very soon!

jimbobimbo• 15 years ago

"We cannot allow your website on our AppleNet, because it doesn't follow our AppleNet rules". insert Yao Ming laughing rage face here

neworbit2• 15 years ago

Bizarre thinking to say "Apple would charge $35/month for unlimited usage". When has Apple ever gone the route of price competition? They'd charge $99/month or more and people would gladly pay it.

lotusleaf19872• 15 years ago

An iPhone costs $50-$199 on contract, same as Android phones like Nexus S or Galaxy S. iPods don't cost more than Zunes. And iPads are cheaper than their competitors.

latch• 15 years ago

When has Apple ever gone the route of price competition?

The ipad.

neworbit2• 15 years ago

Not really sure I agree, they're more expensive than more powerful windows laptops in the same size class. And I think I recall hearing that the ipad breakdown per unit is plenty profitable.

But I certainly do have to give you that nobody seems to match them in the same form factor, so that's reasonable enough.

Meh, I would have to say in retrospect that itunes music pricing is (or was) there as well, though not by Apple's decision necessarily.

Ok, I guess I should rephrase. Apple does not cut prices to beat competitors. They may set a price point initially that only works at scale, and rely on competitors not being able to match. But if Dell comes out with same-but-cheaper, Apple doesn't do price wars, and if Apple enters a market it's generally at a premium to existing brands. I still wouldn't expect cheaper wireless from Apple.

hugh3• 15 years ago

Incidentally, did folks know that Virgin Mobile is now offering prepaid unlimited data + text + 300 voice minutes for $25 a month on a prepaid plan? It's an insanely good deal.

Anyway, the days of $99 a month phone plans are presumably coming to an end.

stanmancan• 15 years ago

Not in Canada. I pay about $80/m for 350 minutes, free evenings and weekends, 1GB of data, and "My 5 Nationwide". We need some more competition up here.

lotusleaf19872• 15 years ago

No, a phone company doesn't scale. A national phone company doesn't help Apple globally.

aneth• 15 years ago

Can anyone imagine Apple operating, supporting, maintaining, and upgrading a national or global commodity telecommunications grid? Strikes me a small distraction from Jobs' vision - create great products.

The idea is completely contrary to what Apple is good at and what they want to do.

_pius• 15 years ago

No, but Google should.

phil• 15 years ago

Yes, they could charge $35/mo and still make the subsidyback... provided it costs nothing to provide the phone service.

Back in the real world, why would anyone want to own a phone company? Even the phone companies don't want to be phone companies anymore.

anactofgod• 15 years ago

Jobs drives towards elegant, uncluttered solutions. Much of his "vision" stems from his ability to say "No." to crappy stuff (http://blogs.forbes.com/carminegallo/2011/05/16/steve-jobs-g...).

This being the case, if I were Jobs - and if I wanted to own and operate a network - I'd want to build my own. But licenses for bandwidth are scare resources, and building a mobile network from scratch takes a long time. The most apparent way around this is to buy a carrier, as the author points out.

So, if Apple were to buy a carrier, yes, it'd be under very specific conditions. Basically, the Apple M&A team would be using a due diligence period to slice and dice the deal (and the carrier) in such a way to make sure Apple skims the cream, and is able to slough off the rest to someone else, and recuperate money off the divestiture, in the process. They would know how they were going to get this done, before they sign any contract, or there wouldn't be any deal.

The problem is, it's hard to see why another carrier would buy the legacy mobile infrastructure from Apple, w/o all the shiny new bits. Also, it's not clear that Apple would want to have to operate, manage, and upgrade a wireless network. I can't see Apple wanting to own a utility company.

So, on a different track, I think the author discounts the "soft carrier" approach too easily. In addition to saying "No." to crappy stuff, Jobs wants to enter markets where Apple can change the game. So, how would one change the game as a wireless carrier, not just as a mobile device manufacturer?

If I were Apple, I'd license spectrum from multiple carriers, depending on who has the strongest coverage in a particular geographic area.

Apple is already using the chips/antennas in the iPhones that support both the CMDA & GSM standards across all freqs. With licenses to operate AppleNet over multiple carriers, Apple would be uniquely situated to create smartphones and other mobile devices that could seamless operate over a multi-spectrum/multi-protocol virtual wireless network. Ultimately, Apple could license spectrum from multiple carriers in the same market, and have their iOS devices automagically switch from one to another without the customer noticing the handoffs. Plus, Apple can do the same in different markets, scaling AppleNet globally. Customers would have one AppleNet account, with "local" billing, regardless of where in the world they are.

Now, that would be a mobile market game changer. Again.

Of course, this multiple-licensee "soft carrier" approach to an AppleNet is probably a pipe dream, as well. The roadblock to innovation in the wireless industry, as always, are the wireless carriers. While stupid and slow, the carriers are cunning operators. They would likely see this move by Apple as being against their long-term interests, and resist Apple treating them as the utilities that they really are. Apple may be able to overcome their concerns by appealing to their short-term profit interests (a weakness of any publicly traded company), just like they did with AT&T and the original iPhone. But this time, if Apple were to make it happen, the short-term bait wouldn't be a shiney iPhone. It'd be good, old-fashioned, cold, hard CA$H monies.

Should Apple buy a phone company?

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