For Apple, Sticking it to U.S. Carriers Isn’t That Important

By  |  Thursday, October 28, 2010 at 9:48 am

Rumor has it that Apple is secretly building a SIM card as a way to handle all European iPhone sales and activations on its own.

According to GigaOM, this would allow Apple to sell smartphones directly in Europe. Customers would be able to activate their phones through the Web or at an Apple Store, with no need to ever visit a wireless carrier.

Naturally, the discussion has shifted to whether Apple will try to use its own SIM cards to weaken wireless carriers in the United States. As MG Siegler at TechCrunch notes, crazy demand for the iPhone gives Apple a lot of leeway to push carriers around. Once LTE networks are up and running, Apple could sell its own SIM cards instead of locking customers into specific carriers.

It’s a nice concept, but in the United States, I don’t think cutting out the wireless carriers is in Apple’s best interests.

Like all smartphones sold in the United States, the iPhone relies heavily on a carrier subsidy for its $200 price tag. Without it, Apple wouldn’t make as much money unless the phone cost hundreds of dollars more, at which point many consumers would not be interested.

Subsidies have nothing to do with the technology inside the phone, and everything to do with business. I’m sure Apple would love for its iPhone users to upgrade every year, instead of every two years, but there’s no point without the generous subsidy payout from AT&T. I don’t think any carrier is stupid enough to sell an unlocked iPhone at a subsidized price, so it behooves Apple to stick with the status quo.

To me, the rumored Apple SIM card is as simple as it sounds. Europe is a chaotic market, with many carriers across many countries, and the SIM card would present a way for Apple to control the entire sale, from purchase to activation. In the United States, you can already get that experience at an Apple Store.

 
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3 Comments For This Post

  1. kailsabin99 Says:

    Does Apple benefit in any way by being the direct seller of locked phones at the Apple store instead of a consumer buying from a carrier's store?
    In Canada, Apple stores were nearly the only place you could reliably find a large iPhone 4 supply daily. Carrier stores received very few units (1-5) once a week, including launch day.

    Unlocked phones sold relatively well in Canada because we had access to the them before China and many people were reselling. Unlocked phones sell better where there are competitive wireless providers. In Canada, companies that support the iPhone are price matched in an intense oligopoly with three year contracts required, HUP once every 30 months. New carriers exist but only on the unsupported AWS signal.

  2. JaredNewman Says:

    I think the benefit is in the control. When you go to an Apple Store, you become an Apple customer. The company gets to expose you to iPads, MacBooks and all kinds of accessories. Even if you don't buy anything else, you walk away feeling like you purchased an Apple product, not an AT&T phone. I imagine this is what Apple is shooting for in Europe, if the rumor is true.

  3. Mike Watts Says:

    I’m not sure that you understand how mobile networks work…

    SIM cards can be bought in bulk and programmed with whatever information is required by whoever wants them – it’s the MASSIVE CELL NETWORK INFRASTRUCTURE that Apple needs from the wireless carriers.

    In order for Apple to have the kind of control you are talking about, they would need to become a virtual carrier (like Tesco or Virgin) and sign deals with various carriers across Europe.

    The euro cellphone market is probably not as chaotic as you think either – many of the carriers are owned by large parent companies – O2 for example operates a network in many European countries…

    You can walk into an Apple store in the UK and leave with an activated iPhone on the O2 network.

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