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Apple Doing Own Cellular Service Doesn't Make Sense, at Least Not Today

While it is clearly tempting to want to cut out another middleman, the fact is carriers do a lot of Apple's dirty work.


Ever since Apple debuted the iPhone, there has been speculation that Apple would offer cellular service directly to consumers by buying capacity in bulk from one or more of the major carriers.

The appeal is tempting, of course. Apple would then fully own the relationship with the customer rather than leaving that job to one of the “orifices,” as Steve Jobs famously labeled the wireless providers.

Google is in fact doing just this with its Google Fi effort, where it offers service starting at $20 per month using the networks of both Sprint and T-Mobile. But the service is fairly limited. It’s offered only on a single Nexus 6 phone and its designed to keep the service more of a test than a true national rival.

As for Apple, there are a number of reasons why offering its own cellular service may not make sense, especially at this moment in time. For the record, Apple denies it is testing such a service in response to a Business Insider post saying the hardware maker was in talks to do.

It doesn’t make sense for Apple for a number of reasons. First it has a tough time doing things small — Apple currently represents a huge part of the carriers’ business, and some of the carriers’ most lucrative customers are its iPhone owners. So the carriers aren’t going to be eager to hand that over to Apple.

Even if Apple could convince them to do so, it might not be in Apple’s long-term interest.

First of all, consumers today are benefitting from four carriers heavily competing against one another, with a resurgent T-Mobile and an increasingly desperate Sprint both putting price pressure on AT&T and Verizon.

Also, carriers spend a fortune to keep their networks strong enough to handle increasing demands and to swiftly upgrade to faster technologies. If they become truly a dumb pipe just selling gigabytes to Apple, the incentive to differentiate on customer service or speed is reduced, as would be the amount of capital they would have to invest.

Over time, that could mean both Apple and consumers would lose.

Plus, if it is Apple’s name attached to the service, it would have to take on the role of customer support and the perceived blame when the service doesn’t meet customer expectations.

“That’s a lot to bite off, and I can’t see Apple wanting to do it,” said Jackdaw Research analyst Jan Dawson.

Now, that doesn’t mean Apple isn’t interested in seeing more value come to it over time.

With iMessage, for example, Apple took something that consumers value — their text messages — and made it a feature of their phone rather than something tied to their carrier and phone number. There are reports Apple would like to do the same thing with voicemail.

Apple also introduced on the latest iPads a SIM card that works across different cellular networks so customers don’t have to choose a carrier when choosing a device. Apple could do something similar with the next iPhone.

These moves make sense. Whether Apple has dreams of eventually offering cell service or not, it is to their advantage that consumers are more tied to their iPhone than they are to being a customer of AT&T or T-Mobile.

Do such moves also open the door to Apple offering its own cell service some day? Sure.

And it would be foolish for Apple not to constantly consider whether such a move makes sense. But, at least for now, the downsides likely outweigh the benefits.

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