The Multi-Carrier iPhone

With rumors circulating that soon Sprint and T-Mobile will be getting the iPhone, Apple will most likely secure all four of the major cell phone carriers in the United States.  Once that occurs, I no doubt think Apple will consolidate its iPhone into a single version that will run on all carriers.  It would be very un-Apple to have to go into the store, ask for an iPhone, and have to pick between four different hardware versions. You’d pick the universal version, and then pick which carrier you’d want to supply the service to the iPhone. If you ever wanted to switch in the future, your iPhone could simply be switched over without having to by an entirely new one.
However, even having a universal iPhone that can be serviced by multiple carriers is one step below where Apple should strive to be.  If they truly want to revolutionize the cell phone industry, I think they need a universal iPhone that can run on multiple carriers, at the same time…

How would it work?

Basically you would go into the Apple store, buy an iPhone, and sign up for an Apple supplied cell phone contract.  There would be no need to have any contact with the carriers, as Apple would in a sense become your cell phone carrier.  However, Apple itself would not actually be suppling the cell phone towers and infrastructure, they would contract for that behind the scenes with the various cell phone carriers.  You’d pay Apple, and Apple would then pay each carrier a percentage of that cost.  Apple would take the hassle of dealing with the carriers away, and you’d deal with Apple for everything.  An iPhone user would have no idea which carrier’s service they would be using at any giving time, as they could use any carriers’ service at any time, depending on demand.

The key to this would be how the iPhone would actually handle the data.  I think Apple would use some type of algorithm that would automatically switch an iPhone to whichever cell tower was currently able to supply it the fastest and most reliable data stream.  So if you are using your iPhone and it senses the AT&T tower is dropping data or slowed down for any reason, it would seamlessly switch you over to the Verizon tower, or the Sprint tower. Suddenly the iPhone would become the fastest and most reliable cell phone in the country.

Why would Apple want to do this?

First and foremost, control.  Apple is famously obsessed with controlling all aspects of the user experience, and having a closed system.  However, entering into the cell phone market, they have had to deal with outside companies (AT&T and Verizon) to supply a major component of their product.  If Apple was basically able to reduce those companies to mere commodities that supply data, they could have a much more Apple like experience throughout the process of buying and using an iPhone.  There would only be the official Apple iPhone cell plans a customer would be able to choose from.  Apple could control how much these plans cost, and create more simplified choices.  They could also control what features they would want to include in their phone, and not have to worry about carriers blocking them, such as when AT&T famously didn’t allow tethering for the longest time, even though Apple had implemented it into the OS.

Another reason Apple would want to implement this plan is money.  If Apple had its hand in the cell phone plans themselves, they could potentially make even greater profits from the iPhone.  Instead of simply making money off of the hardware, they could get a piece of the lucrative cell phone contracts.  It might be a small amount, and they would be spreading the profits amongst the carriers, but I have no doubt they could make the numbers work to their advantage.

Why would the carriers agree to this?

This might be the hardest part about Apple implementing this plan, having the major cell phone carriers agree to go along with it. However, I believe if any company has the clout to do something this revolutionary, its Apple. They have enough leverage with the immense popularity of the iPhone to force the carriers to go along.  It also might be advantageous in the long run for the carriers to go along with it.  The most basic reason would be the incredible bandwidth crunch carriers are currently dealing with.  The mass imposition of data caps shows how carriers just don’t have the bandwidth to keep up with the mass adoption of smart phones, particularly the iPhone.  Instead of building up their infrastructure, the carriers could go in on the multi-carrier iPhone and spread the data usage out amongst everyone.

The carriers would also be inclined to go along with this plan if they realized their profits could increase.  While they would get less money from each individual customer, they would suddenly double or triple their customer bases, which in the long run would increase their profits.  The small carriers would be the first to jump on to the plan for this reason, but if Apple could crunch the numbers, AT&T and Verizon could also be convinced.  I realize it would be a hard sell, but it’s possible.

Why would the customers want this?

Simplicity.  I’ve never met anyone that enjoys dealing with cell phone carriers.  They are always trying to upsell you on plans and the plans they do have are usually extremely hard to understand.  It takes having a masters degree to read a cell phone bill most of the time.  If Apple took over that aspect of things, I believe they would do it in typical minimalist Apple fashion.  I suspect the data would be unlimited (which carriers would be more likely to go along with if the data is spread out over all carriers), and text and voice plans might only be two or three options.  Better yet, Apple might try to simply phase out voice and texting and have those services simply be supplied by your data plan, although that would be an even harder sell to the carriers.

Customers wouldn’t have to choose between four different carriers, each with countless plans.  They’d simply go into the Apple store, buy an iPhone, pick one of 3 or 4 plans, and be done.  If they had problems with their iPhone or their cell plan, they’d simply contact Apple.  No more going to AT&T about your iPhone plan, but Apple Store about the iPhone itself.  It would all be consolidated, and a much smoother customer experience.

I doubt you’d find any customer, especially people that enjoy the Apple way of doing things, that would not prefer an Apple exclusive cell plan.

What are the potential problems?

One problem implementing this plan is whether it is even technically possible to run an iPhone on multiple networks at the same time.  I’m not a cell phone technician, so I’m not sure if this is currently possible.  However, I believe it would be technically possible, if Apple worked with the cell phone companies and completely redesigned the iPhone chip set.  There doesn’t seem to be a technical reason it couldn’t be implemented at some point in the future.  If anyone is versed in the technical aspects of this, please comment.

Another major problem would be the subsidized nature of the iPhone.  Right now the carriers give Apple hundreds of dollars in subsidization for each iPhone, provided the person buying it signs up for a two year contract.  If Apple itself was providing the plan, would carriers still be willing to provide subsidizations? I say yes, and Apple could work out deals to spread out the subsidizations across all the carriers, each chipping in smaller amounts than they currently provide.  An even more interesting proposition would be for Apple to simply reduce the cost of the iPhone, basically subsidizing it themselves, and making up the costs through money they would make with their own cell plans.

Conclusion

I’m not sure if Apple will ever go in this direction with the iPhone, although I presume they would jump at the chance.  I think the carriers would be the ones preventing this, and may continue to prevent in for years into the future.  They have their entire business plans riding on the way things have always been done, so making such a radical change would scare them.  However, I believe Apple needs to do something to take control away from the carriers.  Why they could easily simply buy a cell phone carrier with their cash hoard, I believe having an Apple exclusive cell plan, provided by multiple-carriers, on a single iPhone would be a more elegant solution.

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4 thoughts on “The Multi-Carrier iPhone

  1. You do realize the carriers pay a price higher than the contract price that charge the owner who takes out a 2 year deal, right? The carriers aren’t paying Apple subsidies, they’re paying a wholesale cost for the phone to Apple (price based upon the purchase volume commitment made by the carrier), and then charge the customer full retail, rebating back the discount for a new contract agreement.

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    1. I understand, the carrier pays Apple $600 for the iPhone, but only charges the consumer $300. So the carrier is basically subsidizing the cost of the iPhone by $300. They aren’t actually paying Apple the subsidy, but that is in effect what is happening, because Apple gets the wholesale price and the carrier is charging a large discount to get people to sign a 2 year contract.

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      1. Nope, because the rebate isn’t paid to apple, it is paid to the consumer. AT&T or Verizon uses that rebate to entice the consumer into locking into a 2year deal. Of all phones available, the iPhone is the most desired and draws the most new subs and renewals to the carriers. Otherwise, Apple would simply sell them directly to consumers at full retail.You’re making it seem as if Apple needs AT&T or Verizon to do them a favor with subsidies. That couldn’t be more removed from reality.

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      2. I realize this is an old comment, but just to be clear, Apple does need ATT and Verizon to do them a favor by selling iPhones at a discounted rate. When Apple introduces a new iPhone, it tells consumers the subsidized cost, not what it’s actually charging the Carriers. If the Carriers did not offer the subsidized price, Apple is not going to sell as many iPhones if the consumer has to pay $500 or $600. Its true AT&T and Verizon are also both profiting from offering the subsidized price, but so is Apple. It’s a mutually beneficial relationship.

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