Stacey Higginbotham - Gigaom
Gigaom’s Stacy Higginbotham had a great post last week based on a Bloomberg article about Apple’s new plans for a universal sim card and back end “pairing” service provided by Gemalto.
In October Stacy described the service as something being planned for the European market, under the auspices of providing a dual band capability. “It’s rumored that Apple and Gemalto have created a SIM card, which is typically a chip that carries subscriber identification information for the carriers, that will be integrated into the iPhone itself. Then customers will then be able to choose their carrier at time of purchase at the Apple web site or retail store, or buy the phone and get their handset up and running through a download at the App Store as opposed to visiting a carrier store or calling the carrier. Either way, it reduces the role of the carrier in the iPhone purchase.”
Further, she was able to dig up what Gemalto will be doing: “The Gemalto SIM, according to my sources, is embedded in a chip that has an upgradeable flash component and a ROM area. The ROM area contains data provided by Gemalto with everything related to IT and network security, except for the carrier-related information. The flash component will receive the carrier related data via a local connection which could be the PC or a dedicated device, so it can be activated on the network. Gemalto will provide the back-end infrastructure that allows service and number provisioning on the carrier network.”
That should all seem pretty dramatic but it gets better. The original Bloombery article was about making cheaper iPhones, as the title suggests,”Apple Is Said to Work on Cheaper, Smaller IPhones.” Quoting unnamed sources, the article states, “One version would be cheaper and smaller than the most recent iPhone, said a person who has seen a prototype and asked not to be identified because the plans haven’t been made public. Apple also is developing technology that makes it easier to use the iPhone on multiple wireless networks, two people said.”
Smaller cheaper phones for a mass market push and “easier use” on multiple wireless networks. So its a full on assault of the wireless carriers relationship with the consumer. That’s a big deal.
I have been watching companies (10/26/05) try (11/9/05) and lease cellular networks (12/18/05) and very few were ever able to pull it off, with most spending around $500M (11/25/05) to flame out in months,(11/15/05) not years. (4/4/06)
The Apple MVNO
Its was with great interest that I read the term MVNO in Stacy’s post: “The result of that hardware shift and business model change turns Apple into its own mobile virtual network operator (MVNO) and puts Apple, instead of the carrier, in control of the customer relationship.”
Yes, yes it does. And Apple has something that no MVNO in 2005 could have possibly dreamed of: a direct billing relationship with 100 million consumers and the hottest portfolio of mobile devices in the market.
Apple’s NFC play against the credit card companies
Last month we looked at Apple’s NFC play in a bid to relieve credit card companies of their relevance, a move which M G Stigler described with this prediction: “If Apple can nail Near-Field Communication (NFC) and tie it directly into their already-established iTunes payment system. It could change everything. It could transform Apple from the biggest technology company in the world, to the biggest company in the world, period. By far.”
Also, with Gemalto managing the carrier back end relationship of service and number provisioning, it sure would be nice if they also could handle the NFC payment systems. Well, what do you know, they can! Gemalto positions itself as a TSM (Trusted Service Manage) who’s role “is to help service providers securely distribute and manage contactless services for their customers using the networks of mobile operators.” When the article was written in 2008, they further envisioned a role managing the actual NFC transactions, “Another possible role of the TSM that can accelerate the successful deployment and ramp-up of mobile NFC applications is to act as a commercial intermediary that facilitates contractual arrangements and other aspects of ongoing business relationships between service providers and mobile operators.”
More recently, Gemalto signed a deal with NXP Semiconductors, our friends who make the NFC chips for Android phones.
See this Wired post for background on why iTunes and Paypal offer a more efficient payment model than traditional credit card companies.
WIRED: The future of Money
Combine the “dual band” capability with direct payment via device and you have Apple absolutely clobbering cellular and credit card companies. It seems too far fetched to be possible. The credit card companies are already screwed but why would the cellular companies let themselves become a wholesale commodity?
Enter the White Space
Everyone hears about the pending demand for spectrum to deliver mobile data that the increase in smartphone usage is going to bring. However, most of the available spectrum is not being used. AT&T and Verizon talk about utilizing their 700Mhz but have yet to fully turn it on. Clearwire has 100% of the 2.5 Ghz spectrum giving it around 120 megahertz of coverage in most of the US. There have been talks about Clearwire selling or leasing their spectrum but so far that has not happened. And now recent reports have stated that Clearwire is abandoning its retail strategy and will focus on “being a wholesale network provider of fast wireless service.” That would seem to provide a potential partner, with a ton of spectrum covering the US, for Apple to roll out a MVNO operation.
What happens when the White Spaces open up? When the White Space database comes online why would Apple not make its new “dual band” phones able to use the free White Space spectrum and cut out the carriers altogether? How’s that for disruption?
