Additional Background on Apple and Google as Mobile Service Providers

"In time, Apple will strike wholesale deals with one or more mobile operators so that Apple can provide wireless service directly to its customers, as Apple Mobile," Bluestein told an international audience of mobile operators, vendors and MVNO, or Mobile Virtual Network Operators, assembled in Barcelona, Spain. MVNOs all over the world today offer their own branded wireless service to market segments, but none as large as Apple.

Will mobile operators like AT&T, Vodafone, Telefónica and others "play ball?” Many in the US were surprised when AT&T announced that it would be the first carrier to offer the iPhone six years ago, according to Bluestein. But to others at the time, and especially in hindsight, it was a brilliant strategy that has continued to pay dividends to AT&T. Bluestein said in the last quarter, four out of five smartphones AT&T sold were iPhones. Apple changed the formula of the relationship between operator and handset vendors, with Apple having more bargaining power than the operator for the first time in the then 25 years of cellular.

Today, according to Bluestein, "Mobile operators would have a hard time saying 'no' to the world's largest and fastest growing company." He added, "Any reluctance on the carrier's part to offer Apple a sweetheart wholesale deal would be outweighed by the huge business opportunity presented. It's a classic case of 'The Prisoner's Dilemma,'" Bluestein said. The carrier's biggest fear is that if they say 'no', the business and growth would go to a competing carrier and they would be left out of the growth."

And it's no secret that Apple has been thinking about such a strategy for some time. According to Bluestein, Apple filed a patent for "Dynamic Carrier Selection" on October 10, 2006, just a few months before Apple announced the first iPhone. The diagram portrayed Apple as the wireless service provider connecting to multiple carriers. "This would allow Apple to have wholesale cellular agreements and be connected to multiple carriers so it could offer its customers choices in carriers, plans and services," according to Bluestein. Last year, Apple extended the filing in what many considered confirmation of its plans. 

Adding further fuel to the fire, Apple has fought with other handset vendors, including Nokia, over a new, smaller-sized SIM, used in GSM handsets around the world to include the telephone number and service profile of customers. According to some, such a SIM would allow Apple to bypass carriers entirely, and turn a new customer up right through the iTunes Store.

Bluestein told the wireless industry gathering that, "Apple has all of the pieces necessary to offer wireless service directly to customers," he said. "They have the brand, a loyal following, nearly 400 retail stores around the world, and with iTunes, the content and billing platform to offer service with one-click simplicity," Bluestein told the industry gathering in Barcelona.

iPhone customers typically spend as much as twice or more the US national average monthly usage, or ARPU (average revenue per user), which averages about $50 in the US. So these are high value customers. And they buy apps and content – music, videos, TV shows and movies – through Apple today, By offering mobile service with iPhones and iPads, the company could provide the full Apple experience to its users.

How likely is this to happen? Given the patent filing more than five years ago, clearly for some time, Bluestein said. “I wouldn’t be surprised if Apple is already talking to mobile operators about this, nor would I be surprised if the mobile operators initiated the conversation,” Bluestein added.

Bluestein also addressed whether Google might offer mobile service directly to its customers, for the rumored Google Android tablet or any of the Android smartphones. With Google acquiring Motorola Mobility, they too will be able to manufacture handsets to their specifications.

Bluestein said that it would not be as easy for Google to follow Apple’s likely path. While Google has a great brand, number two in the world second only to Apple, they don’t have the retail stores, the experience with subscription services, the customer care that Apple offers, or the ecosystem that enables single-click app and content purchasing that Apple has through its iTunes Store.

Bluestein is a wireless industry veteran, present at the first round of US cellular filings in 1982, strategist, corporate development expert and thought leader in the wireless industry. After playing a leading role in the first cellular industry consolidation, he later developed what many consider the first Mobile Virtual Network Operator while at MCI.