Will Apple Become a Mobile Service Provider?

By Gary Kim May 01, 2012

Apple will provide wireless service directly to its iPad and iPhone customers, argues consultant Whitey Bluestein. In his hypothetical scenario,  Apple first will sell data packages bundled with iPads. Then it will sell data and international roaming plans to iPhone customers through the iTunes Store. 

Over time, Apple will strike wholesale deals with several mobile operators so that Apple can provide wireless service directly to its customers, as Apple Mobile, Bluestein predicts. As “crazy” as that might sound, it might be a fairly common tack taken by any number of device, service or application providers, eventually. In fact, it fits well with the general thinking that, over time, mobile and fixed network service providers will increasingly want to sell services to third-party business partners as well as end users.

The general idea is that, no matter how well executives manage their voice, text messaging and broadband access and video businesses, those product lines are maturing or mature, and will have to be replaced by other revenue sources. The solution, in part, will come from services sold to business partners. Selling wholesale access and services to business partners such as Apple then would be a logical and necessary step.

In other words, as wholesale capacity deals with mobile virtual network operators have been a staple of the mobile industry for decades, so Apple and others would simply become wholesale customers. That isn’t to say service providers would prefer to do so.Most service providers tend to operate as retail providers with direct customer relationships. But changing market circumstances will require more business-to-business sales. 

The challenges are similar to what Best Buy faces with online competition. As consumers switch to use of mobile phones as the primary way they "use" voice, their need to buy landline voice keeps dropping.Likewise, consumers looking for the latest in gadgets increasingly buy from Amazon.com, though using Best Buy as a place to check out those products. 

That "showrooming" problem is not going away.Some analysts think Best Buy's long-term future might rely on turning its business model upside-down and embracing “showrooming,” and there are glimmers of insight for telecom service providers as well.

The radical notion is that, Instead of selling electronics gear, Best Buy could gradually become a supplier of  instruction, service, support, connections, returns and pickup. All those things are tricky or less satisfying operations online, some argue.

In a communications service provider context, the analogy might be a shift to greater reliance on providing "big data mining" and support for third-party partners who want access to huge service provider audiences.

As Best Buy shifts to third-party services for consumer electronics manufacturers, becoming physical support locations for those partners, and de-emphasizing product sales, so telcos and mobile service providers could grow their "big data" service businesses.

Best Buy could embrace being a showroom, welcoming price-checking shoppers into the store to play with the latest electronic gadgets, then helping them buy online, even from another seller. As crazy as that might sound, Best Buy executives say they make more profit from electronics product supplier payments than from the sales of gear.

In a similar way, communications service providers might someday find they make more money from services sold to business partners than to end users. That isn't to say it would be easy. But there are precedents.

Retailers can lease space to third parties. Think Apple Stores that already are inside Best Buy. Telcos know about wholesale. It's the same concept.In that vein, a move by Apple to become an MVNO would not be so shocking.

Edited by Juliana Kenny

Contributing Editor

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