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Apple Rapidly Moving to Become Direct Mobile Service Provider, Predicts Veteran Wireless Strategist

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.

Bluestein told an international gathering of wireless operators, resellers and suppliers that Apple has all of the critical elements – 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.

He also 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.

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 GSM 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,” said Bluestein. “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.”

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.

What has been holding Apple back from becoming a wireless provider already, according to Bluestein, are the enormous handset subsidies paid by mobile operators (AT&T, VZW and Sprint in the US), which amount to about $381 for each iPhone sold today. That has been a short-term stumbling block for Apple, but the company has its well-known cash reserves and could seize the initiative at any point.

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.

For additional details of Bluestein’s briefing, please visit his website (www.whiteybluestein.com), especially http://whiteybluestein.com/apple.html.

For a copy of the presentation, click here: Are Apple and Google About to Become MVNOs?

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