“Virtual” mobile carriers, which buy wholesale airtime in bulk and re-sell it under their own brands, have been dropping like flies. (And many of the ones that still exist aren’t doing so well.) But a recently published patent filing shows that at least Apple (AAPL) is looking for new ways to make the idea work.
Instead of buying airtime in bulk from one carrier, which most “virtual” carriers do, Apple’s model would let a phone connect to multiple networks, according to a summary posted by AppleInsider.
Those carriers could compete, auction-style, on the wholesale pricing they’d offer to Apple. Your phone would stay in touch with a central server somewhere, which would tell it which mobile network to connect to. Subscribers could also be able to pick which carrier they’d use, based on location and pricing.
This could potentially solve one business problem that most “virtual” carriers have — getting locked into long-term, wholesale contracts without knowing how many minutes its subscribers will actually use. And auction-style bidding could drive down rates, especially if a lot of companies are competing for Apple’s business.
But the nature of the U.S. wireless industry presents a big hurdle. Specifically, there are two types of mobile phone networks in the U.S., “CDMA” and “GSM,” which use different, incompatible technologies to connect calls. Apple would need to choose one for the basis of each phone. (Update: Commenters buckybanjo and bobthegreat bring up a good point: It’s possible to include both technologies in one phone, but it raises costs.)
If Apple chose GSM, like the current iPhone is, the only nationwide carriers it would work with are AT&T (T) and T-Mobile. If Apple made a CDMA iPhone, the nationwide carriers bidding for your business would be Verizon Wireless and Sprint Nextel (S). Some regional carriers (like Alltel or U.S. Cellular) could fill in the gaps, but only in certain areas. Either way, Apple wouldn’t have that many options for service.
More important: Who’s to say the carriers would want to participate in this kind of system, anyway? They’re much happier to have you as a “retail” subscriber, where they own the relationship with you — and bill you directly, and can upsell add-ons to you — than as a wholesale subscriber, where, under this model, they’re competing with each other just to be Apple’s dumb pipe.
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