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New Wireless Carrier? Apple Could Face Grueling Uphill Climb

By John P. Mello Jr. MacNewsWorld ECT News Network
May 2, 2012 9:25 AM PT

Will Apple become a wireless service provider?

New Wireless Carrier? Apple Could Face Grueling Uphill Climb

Absolutely, contends Whitey Bluestein, writer of GigaOm's Apple blog. But that prediction has been met with widespread disagreement as well as some support.

In his blog, Bluestein outlined what he believes will be Apple's roadmap for getting into the wireless business.

First, it will start selling data packages for the iPad. Then it will move to data and international roaming offerings for the iPhone. Finally, it will start buying bandwidth from carriers and reselling it to its customers.

"How likely is this to happen?" Bluestein wrote. "[I]t wouldn't surprise me if Apple is already talking to mobile operators, nor would I be surprised if the mobile operators initiated the conversation."

Vicious Opposition

The potential ill-will that a move onto the carriers' turf could produce isn't a gamble Apple wants to take, according to Tim Bajarin, president of Creative Strategies.

"The carriers are very important distribution points for Apple and, more importantly, wireless partners," he said. "I just don't see Apple turning its back on those guys."

"While Apple has the money to become a wireless carrier, this would include an amazing amount of regulatory issues," he added, "and Apple is not going to go in that direction."

Apple may want to offer some wireless services to its customers, but that's a far cry from taking on the carrier industry, noted Michael Morgan, a mobile devices analyst for ABI Research.

"That's a big leap that will be fought viciously by every operator," he said. "Going against general operator interest is not a plan for success."

Data for iPad

Morgan acknowledged, however, that reselling data services for the iPad could be a good idea for Apple and one the carriers might tolerate. "On a scale of one to 10, I'd say seven on the probability of that happening," he opined.

That's because since its introduction, the iPads with cellular capabilities have been underutilized. They represent only 25 percent of iPad sales, and of those sold, only 50 percent have their cellular connections activated.

"Apple may want to step in and say, 'We're going to fix that problem our way,'" Morgan observed.

However, Telecom Industry Analyst Jeff Kagan contended that going beyond data packages for the iPad is a real possibility.

"If it were going to build its own network, I would not feel good about that at all," he said. "I would say that's a bad idea. I would think that would be the beginning of the end."

"If they want to become a reseller, though, it's going to let the companies that do the best job continue to do the best job," he added.

Too Much Headwind

Apple sees a great opportunity in reselling carrier services, Kagan argued. In two to three years, 97 percent of all traffic on the cellular networks will be data, he explained.

"That's the world that Apple want to get into," he said. "It wants to get into it because there's a profit-making opportunity for it. It also wants to get into it because it wants to control the ability of its customers to get quality and speed."

Talk of Apple becoming a carrier isn't new. There were whispers of it before the iPhone was introduced, but the company chose, instead, to partner with a carrier.

"The justification that Steve Jobs gave was 'We're going to do what we're good at, and we're going to let the carriers do what they're good at," explained Ross Rubin, an analyst with the NPD Group .

That decision makes it harder for Apple to get into the wireless services market now, he continued. "It would be difficult to get into the business without alienating its current carrier partners," he said.

Added Morgan: "This is highly unlikely. It will face so much headwind, it's just not worth it for Apple."

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