Is Apple After the Carriers?

I believe a number of elements are coming together to make it inevitable that Apple will go after the carriers, first with their own MVNO and then eventually with their own full-fledged carrier. I believe tight government regulation of the carriers is the one reason Apple will be hesitant.

First, Apple is now an iPhone company. I love my iPad and my MacBook Air, but the bulk of Apple's revenues and profits now come from iPhones. Apple has to find significant additional sources of revenue to continue to grow that business.

Second, the carriers are difficult. Despite mobile being a relatively new industry, the carriers are classical old-school, hidebound, squeeze out every dollar, mistreat the customer, industry types. Apple has to find a way to keep the carrier subsidies flowing, while managing a love/hate relationship with them. Add the fact that each country has its own carriers, and even connections do not help - T-Mobile US is distinct from T-Mobile Germany, despite the common parentage and brand - and Apple has a challenge in growing the business at its historical clip.

Third, Apple is acutely aware that if there is one part of the iPhone and iPad experience that is negative, it is the carriers. I can buy everything about my iPhone experience from Apple - and it is a pretty good experience - except for connectivity. Apple has definitely improved it, especially for the iPad where, at least in some countries, I can turn on and off data from within the iPad itself, but that is limited.

Fourth, Apple is aware that the world is becoming more global, and people cross borders more often, especially iPhone users. Swapping out SIM cards, dealing with roaming fees, giving out multiple numbers, these are all signs of a hidebound industry that damages the iPhone experience. Granted, the experience is just as bad as with any other phone, smart or feature, but it is still a bad experience.

Fifth, Apple has taken steps to upend the carriers cash sources. iMessage already cuts into SMS, from what I hear significantly, and makes the experience seamless. I can take out my AT&T US SIM, pop in an Orange Israel one, and iMessage just works, Apple-style. Next Apple added FaceTime. It only works over WiFi (for now), and requires video (for now), but adding 3G and audio-only would add an additional significant cut into carriers' minutes-based revenue.

Sixth, Apple sees companies like Free Mobile in France giving out low-cost plans without subsidies and succeeding. In order to cut them off at the pass, someone would have to offer a similar plan globally, but available only on Apple devices. Most read the Free Mobile story as a threat to Apple: without subsidies, the iPhone is too expensive, and so Apple loses. I see it as a threat. If customers could get a low-cost plan and an Apple experience, they would go for it. Apple will have to give up some iPhone margin, but will lock customers into Apple Wireless.

I see Apple starting a global mobile firm. It probably start as an MVNO and eventually become a full-fledged operator. It will probably offer two types of plans: high-cost monthly commitment with low-cost iPhone, or low-cost monthly no-commitment with full-price iPhone paid upfront. It will probably have a fairly reasonable data cap, with iMessages and FaceTime (and its audio-only equivalent MouthTime?) not counting towards the data cap. Finally, it will likely have no roaming fees, especially for Apple services such as iMessages and FaceTime.

Time will tell...