Earlier this week, I reported on rumors that Apple (s aapl) and Gemalto were developing a SIM that Apple could integrate into its iPhone motherboard. In the emails, comments and phone calls that have poured in since then, I’ve received confirmation of the rumors, (although still no word from Apple or Gemalto) and gotten a lot more context about what this move might mean.
While the idea of Apple cutting out mobile operators by selling the device with a SIM already inside — and the ability to choose your carrier via an App Store download — is the most obvious option being discussed, there are plenty of other options that might also be on the table, from a mobile payment scheme to Apple launching its own bid to become a cell-phone company that uses other carrier networks. Let’s break it down.
The Payment Game
The idea here is that Apple would use the integrated SIM not only as the keys to the carrier kingdom, but also as the keys to the banking kingdom. After all, Gemalto has a big business in secure payments, and Apple has already filed some interesting patents when it comes to hardware that could offer payments on a cell phone. The mobile payments market is potentially huge, and Apple has the experience to get it right, and a significant interest in doing so. With iTunes, it already has the credit card information from 160 million consumers, which has enabled a frictionless app-buying experience from its handsets.
Apple clearly has an interest in expanding its payments efforts beyond digital goods and into the real world, where it could not only capture additional revenue from processing fees, but also change the device game by turning the iPhone into a mobile wallet. Integrating such a feature into the handset as opposed to the clunky dongles in use today would appeal to the Apple design aesthetic. I’m pretty sure Steve Jobs doesn’t have a few dongles dangling from his key chain so he can swipe and go at his local gas station.
Apple Becomes a Carrier (sort of)
For those who are focused on the carrier side of the equation, it seems I didn’t go far enough in my initial analysis. Several folks pointed out that the SIM card move could allow Apple to create a network of operators that provide service, and thus turn itself into a mobile virtual network operator or MVNO. MVNOs are popular in other parts of the world, where companies resell access on mobile broadband networks to certain populations. Several companies attempted that in the U.S. around demographics like sports or teens, but generally failed. Prepaid is one area where it has been successful, which could be an interesting option as a way of getting Apple’s iPads onto a network, for example.
There’s Room for Debate
The biggest debate in the comments of the original story centered around whether people would pay full price for a handset, since under such a model, consumers wouldn’t sign a data contract with a carrier. I think some people would, and some wouldn’t, but I do think there are still ways to offer a subsidy, even if Apple could offer folks access to a network directly. Carriers could still offer subsidies if users sign a contract, and even Apple could offer some kind of discount.
[inline-pro-content] I don’t think those are very likely scenarios, but if Apple succeeds in changing the relationship between device sales and the mobile network, rest assured handset vendors and companies like Dell (s dell) or Samsung that see huge opportunities in the mobile device space would hop on the bandwagon faster than you could swap out a SIM card. Those companies aren’t known for producing high-margin hardware as Apple is, so their devices may be less of a squeeze on consumers’ wallets, and those companies might also work out some kind of subsidy of their own.
The other big topic of discussion was around the loss of freedom that comes from having a SIM now embedded into the device as opposed to swappable by the consumer. What if only certain carriers were compatible with the iPhone (which is almost certain to be the case, given the different cellular network technologies deployed around the world and the spectrum bands used in various countries) and Apple somehow kept consumer-friendly options out of the loop? It is a company known for exerting high levels of control.
I’m not as concerned about this, possibly because there are products from other device manufacturers, and I don’t really have a problem with a gadget-maker like Apple controlling access to a network, mostly because if it wants to sell the most gadgets, it has an incentive to ensure the devices work on as many networks as possible. Meanwhile, the operators have a huge incentive to offer solid devices and contracts as a means to lure consumers onto their network for as long as possible, regardless of the network quality or customer service.
I also heard about some really interesting options for this type of SIM for the machine-to-machine market, and about services that provide virtual SIMs already such as Truphone and MaxRoam. So keep the ideas and information coming, and let’s hope that Apple can push its vision forward.
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