Could Apple become its own cellular carrier?
Google’s announcement earlier this month that it would be launching its own cell phone service wasn’t perhaps a total shock—rumors that the company would enter the carrier market have been about for some time, and the Mountain View giant has already made inroads in home broadband with Google Fiber.
But that got me thinking: If Google can roll out its own cellular network, then what’s to stop Apple?
The case for
I can think of a few reasons that Apple would be tempted to launch its own mobile virtual network operator (MVNO), but the overriding one is philosophical. Apple’s a company that notoriously likes to control everything related to its business. In its earliest days, that meant creating both hardware and software to form an integrated whole, but in recent years, that’s increasingly meant the whole shebang. A to Z. Soup to nuts. I mean, this is a company that hired metallurgists for the Apple Watch, invested heavily in a (now mostly defunct) firm to make sapphire glass, and, of course, launched its own hugely successful retail stores in an era when that seemed like pure folly.
Nowadays, the iPhone is the biggest chunk of Apple’s business by far, and the carrier experience is in turn the biggest part of that not under Apple’s direct control. That experience can also vary widely from carrier to carrier, with features that don’t work on one network or another, no doubt providing a level of frustration for a company that is focused on presenting a unified front to its customers.
Controlling the network would open up a lot of possibilities for Apple. They’ve been down this road before with technologies like iMessage. Sure, the iPhone could receive and send text and multimedia messages before iMessage’s launch, but by bringing the feature under its own control, Apple could develop features not supported by SMS: delivery and read receipts, audio messages, and so on. An Apple network could, for example, rely entirely on data, routing voice calls over FaceTime Audio by default. This is the kind of thing that raises the ire of those who believe everything in technology should be an interoperable open standard, but it’s also the experience that Apple’s customers seek out.
Apple also has the advantage of a limited product line. Google’s launching Project Fi with support only for its own Nexus 6, but given the many third-party Android phone makers, it seems likely that will expand. Apple, on the other hand, need only support the iPhone—possibly even just a newer model, if it launched the network alongside a product release. That means it could fine-tune performance and capabilities to the iPhone itself.
And let’s also keep in mind Tim Cook’s favorite metric: customer satisfaction. Very few folks are enthusiastic about their wireless carriers, and on occasion that bleeds over to their phones. So I imagine it must be galling for poor Tim and Co. to hear complaints about poor service and slow speeds when the problems lie with the service, not the device. (Not to absolve Apple of problems in those areas.)
The case against
You know, I’m almost starting to talk myself into this being a great idea. But even with all of the factors in favor of Apple launching its own cell phone service, I think it unlikely, for a few reasons.
First off, as an MVNO, Apple would still have to strike deals with the companies that own the actual infrastructure—the very same ones that are currently its partners. While those companies would still rake in money from Apple, they’d have less direct access to subscribers, preventing them from upselling users on additional plans, branded content, and so on.
Google’s network, in an unprecedented move, is actually based on both T-Mobile and Sprint’s towers, along with support for Wi-Fi calling—the system automatically detects which is the strongest signal, and switches your phone to that. I’d imagine that an Apple MVNO would do something similar. But no matter how good T-Mobile and Sprint are, they’re still the smallest of the big four networks. Without access to Verizon and AT&T’s towers, Apple still loses out on a lot of reach, especially in less populated areas. And the big two are much less likely to make these deals, because they have far more to lose than the smaller players do.
Apple would also potentially then lose access to the carriers’ retail locations. And while this age of Apple Stores and online shopping means that hurts less than it used to, keep in mind that there are more than 2300 Verizon stores and 2200 AT&T stores throughout the U.S., compared to 265 Apple Stores. And that doesn’t even take into account all those authorized dealers, mall kiosks, and third-party locations. Granted, Apple Stores tend to have prime placement, especially for the segment of the market Apple aims at, but there are plenty of folks who aren’t going to buy a phone sight unseen and can’t easily reach an Apple Store.
There’s also the issue of international support. In the most recent quarter, Apple posted huge growth in China and respectable improvements in the rest of the Asia-Pacific. But the iPhone’s available in dozens of countries, and if Apple wanted to bring its own carrier experience to the rest of the world, it would have to renegotiate its deals in all of those countries. Which is not to say it couldn’t simply stick to the U.S. and selected other countries, as it’s done with services like iTunes Match, but it kind of flies in the face of that very idea of “a unified front.”
Plus, some of the features Google’s rolling out with Project Fi aren’t ones that Apple needs. For instance, Google touts the ability to “use your phone number with tablets and laptops too” receiving your text messages and calls on non-cellular devices. Apple already offers similar functionality with its Continuity features.
Finally, to me, there’s the elephant in the room: Apple’s history with services. The company’s record when it comes to services is unreliable at best, with snafus for MobileMe, iCloud, the new Photos Library, and even the usually stable iTunes Store. I don’t dispute that Apple could improve if it invested in talent there the same way it did in other sectors where it didn’t have expertise, but it’s starting from a position of disadvantage.
None of these obstacles make becoming a carrier impossible, but all of them point to the sheer complexity of the company expanding to fill this kind of role. It’s certainly not something that happens overnight.
Still, if there’s a time to do it, that time might be now. Much like the video content market, the wireless industry is running right into a period of upheaval, as people shift increasingly from voice to data, the smaller carriers like T-Mobile keep trying to chip away at the larger ones, and people simply demand more from their wireless service.
Somewhere at Apple, I’m sure this idea has been discussed, mulled over, and analyzed from every angle. But we may have to see how Project Fi does before Cupertino decides whether or not the time is ripe to enter the thorny world of cellular service.