Apple's next big move will be to provide wireless service directly to its iPad and iPhone customers, according to veteran wireless industry strategist Whitey Bluestein. Google is not too far behind and may also become a mobile virtual network operator (MVNO) some time later. The biggest question is whether actual operators will let the newcomers in.
"In time, Apple will strike wholesale deals with one or more mobile operators so that Apple can provide wireless service directly to its customers, as Apple Mobile. [...] First, Apple will sell data packages bundled with iPads. Then they will sell data and international roaming packages to iPhone customers, through iTunes," predicted Whitey Bluestein, a wireless industry strategist.
Apple Could Become the World's Largest Network Operator
Mr. Bluestein told an international gathering of wireless operators, resellers and suppliers at the Informa MVNO industry summit in Barcelona that Apple has all of the critical elements to become the largest MVNO in the world - the world's leading brand, distribution through 363 Apple Stores, digital content (music, video and apps) - which will allow it to exploit its 250 million iTunes accounts with credit cards on file.
The analyst noted that Apple has a patent-pending network architecture to enter the wireless industry as a service provider. Apple filed a patent application in October 2006, shortly before the first iPhone announcement, with a diagram on how it would offer wireless service directly to customers using networks of several mobile operators. The patent application was extended in fall 2011. Bluestein said that the patent confirms that Apple has thought through how it would offer service directly to customers.
Will mobile operators like AT&T, Vodafone, Telefónica and others "play ball?” Many in the U.S. were surprised when AT&T announced that it would be the first carrier to offer the iPhone six years ago, but it turned out that it was a brilliant strategy that has continued to pay dividends to AT&T. Mr. Bluestein said in the last quarter, four out of five smartphones AT&T sold were iPhones. Apple has changed the formula of the relationship between operator and handset vendors.
"Mobile operators would have a hard time saying 'no' to the world's largest and fastest growing company. Any reluctance on the carrier's part to offer Apple a sweetheart wholesale deal would be outweighed by the huge business opportunity presented. [...] The carrier's biggest fear is that if they say 'no', the business and growth would go to a competing carrier and they would be left out of the growth," explained the analyst.
Google to Follow Apple with Virtual Network Strategy
At a presentation at the Informa MVNO Industry Summit in Barcelona, which he also chaired, Bluestein said:
- Apple will in the near future begin providing cellular service, data, voice and roaming, directly to its customers;
- Apple will begin by offering mobile data plans bundled with iPads (vs. current practice of selling WWAN-enabled iPads with AT&T data and CDMA iPads with Verizon data plans);
- Apple will then offer iPhone customers activation, data and international roaming plans through the iTunes Store;
- Apple will provide voice, data and messaging plans directly to its iPhone customers, on an ala carte basis as an alternative to their current mobile operator and then as wireless service provider directly to customers;
- Google, while behind Apple in technology, distribution and back-office capabilities, will nevertheless follow in lock-step behind Apple and provide wireless data services directly to its Google Tablet customers
"The battleground is set, but Apple will be the first mover. Google will have to scramble because it lacks retail distribution, experience with subscriber services and the iTunes ecosystem of content. iTunes and the iTunes Store provide Apple with one-click buying and customer care. Google can acquire most of these capabilities, as it has before, but it is not a core competency of the company," said Mr. Bluestein.
Bluestein also predicted that Google will acquire a back-office provider to help it get into the mobile business. He said that Google is accustomed to such acquisitions, having acquired 79 companies in 2011.
Whitey Bluestein has been a prominent strategic advisor to the wireless/mobile industry for more than two decades. Prior to his current advisory practice, he spent much of his career at MCI Communications, then later at NorthPoint Communications and Visage Mobile. Since then he has built a strategic advisory practice helping young and established companies enter the mobile space or launch new mobile initiatives.