The tech world was abuzz with rumors on Monday that Apple would become a mobile operator, competing against its wireless network partners in the U.S. and Europe to sell mobile data and voice plans. But today Apple (AAPL) denied those rumors, refuting a report from Business Insider that it would launch what’s known as a mobile virtual network operator (MVNO), which is essentially a carrier that owns no wireless infrastructure.
“We have not discussed nor do we have any plans to launch an MVNO,” and Apple spokeswoman said in a statement to Reuters.
After the statement, operators like AT&T (ATT-INC), Verizon (VZA), and Vodafone (VOD) likely let out of collective sigh of relief. The last thing they want is Apple vying against them for their own customers, but it’s also the last thing Apple wants too. The tech firm would gain very little by becoming a mobile operator, and it would stand to lose much, much more.
The main reason Apple would even consider becoming an MVNO would be to capture the entire mobile value chain. Instead of passing customers along to an operator after they purchase their iPhones and 4G iPads, Apple would control the whole mobile experience by selling voice and data plans that could be billed directly to customers’ iTunes accounts. That might seem like an attractive proposition to a company like Apple, which likes to be in control of every detail, but it carries a lot of baggage.
First off, Apple would alienate its carrier partners, and it has no reason to do so. Apple currently has no distribution problem with its operators. In fact, mobile operators around the world are falling all over themselves to carry the iPhone, and in many cases they market Apple products just as much as Apple does. Operators accept Apple’s products almost unconditionally even though they contain software, like Facetime and Apple Pay, that cannibalize their own services. Apple has carriers’ right where it wants them. Why mess up a good thing?
Second, there’s this notion that if Apple were to become a mobile operator it could somehow offer a better, faster and cheaper mobile service than the incumbents, but there’s absolutely no evidence to suggest that would be the case. As an MVNO Apple would need to buy voice and data capacity from one of the big operators like Sprint (S) or T-Mobile (TMUS), so Apple’s network would only be as good as its partners’. When its partners suffer a network outage so does Apple; when its partners’ customers get bad signals and slow speeds so do Apple’s customers.
Apple could feasibly offer a more inexpensive service than the carriers, but I doubt it could meet its customers’ expectations on price. When Google
launched it’s own MVNO Project Fi this summer, it unveiled an innovative mobile data pricing model that charges customers only for the data they used each month. The plans, however, still priced data at $10 a gigabyte, which led to a lot of grousing in the media and on Twitter.
Short of offering an unlimited data plan with no restrictions, Apple wouldn’t be able to satisfy every customer’s expectation on price, and simply couldn’t offer those kind of plans even if the company wanted to. The economics of being an MVNO wouldn’t support it, and presumably Apple would want to make money, not lose it, by becoming a carrier.
Lastly, if Apple were to become a operator it would inherit all of an operator’s problems. Apple is a company that’s accustomed to being loved by its customers. Carriers, on the other hand, are companies consumers love to hate. Apple has done an excellent job throughout its eight-year history in mobile of keeping the iPhone separate from the service providers that connect it—if your data speeds are slow that’s your carrier’s fault, not Apple’s.
If Apple sells you your service along with your phone, then there’s no one else left to blame if you can’t find coverage, max out your data plan, or incur some massive roaming fee. If Apple wants to earn the resentment of its customers, then I can think of few better ways to do so than becoming their service provider.