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Summary:

Apple’s plans for a universal SIM card and allowing consumers to pay for mobile access from multiple carriers via iTunes would turn Apple into a mobile virtual network operator and puts Apple, not the carrier, in control of the customer. It changes everything. Here’s how.

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Apple’s plans to once again change the dynamics of the mobile world are becoming clearer. Bloomberg reported today that the device maker has plans for a universal SIM card that I first reported on in October, and Apple is seeking a way to make it possible for consumers to pay for mobile access from multiple carriers via iTunes. 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.

The Bloomberg article says:

Apple is working on a technology called a Universal SIM, which would let iPhone users toggle between GSM networks without having to switch the so-called SIM cards that associate a phone with a network, according to one person. This would help cut the cost of distributing and managing millions of SIM cards. The new features could also give Apple an advantage over mobile carriers in influencing customers. The device would be affordable without a carrier subsidy, so buyers would not need to agree to terms, such as termination fees, that carriers demand in exchange for subsidizing the cost of the phone. Apple has also worked on redesigned iPhone software that would let customers choose a network and configure their device on their own, without relying on a store clerk or representative of a carrier, according to the person.

Wow, it sounds exactly like what I described back in October after hearing from some panicked European wireless carriers about the hardware. At the time, sources described the Universal SIM as being a project Apple was working on with Gemalto, a SIM card maker as follows:

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.

Wednesday, Apple Insider reported that Apple was granted a patent on software that would allow a phone to “collect rate information from participating wireless networks within a region and automatically select or allow users to select the best option.” That patent, plus a Universal SIM, or even the dual-mode CDMA and GSM iPhone Apple is currently selling to Verizon users today, makes the idea of an Apple network plausible.

Would carriers go for it? So far, the reaction to the thought among major operators has been fear and loathing, but Apple has managed to push the envelope in the past, such as cutting the carrier out of its revenue-sharing model on its app store and keeping the carrier software off its phone. It’s possible there are carriers who would welcome the opportunity to have iPhone users hop on and off its network in exchange for a chunk of the revenue those high-data users provide. Sprint, for example, has talked about embracing such a wholesale model in the past. LightSquared, which hopes to build a wholesale LTE network in the U.S., is another potential network that might want to play this game.

The Bloomberg article also discussed a smaller and cheaper iPhone as another project at Cupertino. Bloomberg says it could cost about $200, as compared to the current iPhone price of $649.99 for the low-end, 16 GB model. That smaller handset could work well with this MVNO model, because it would be cheaper for the end user and less reliant on carrier subsidies. In the U.S., carriers tend to offer phones at less than their cost in exchange for the subscriber signing a contract. Of course, if the subscriber is hopping from network to network in search of the lowest rate or best quality of service, a carrier subsidy no longer works, which means Apple has to offer a cheaper phone.

In a world where carriers lose their exclusivity and have to compete not just every time a customer buys a new handset or renews a device, but every minute solely on their network and price, a true competitive market for mobile broadband could emerge. As an MVNO, if it can lower the price for service with a compelling and cheap handset, Apple wins and wins big. Who would want an Android phone if it doesn’t come with competitive data access? As for carriers, their dumb-pipe nightmares are just beginning.

For more on this topic, check out An Apple Integrated SIM: What It Could Mean.

Related content from GigaOM Pro (subscription req’d):

  1. SIM and software radio stack are only 50% of the equation – must have radio chip that runs all the frequencies ( which Qualcomm happens to make ).

    But may be a moot point ultimately, carriers will just quadruple down on the ETF, making it cost prohibitively expensive. Case in point…

    AT&T has killed off today’s predicted “rush” of Verizon iPhone churn with their nasty $400.00+ ETF

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    1. I don’t see how AT&T has killed off anything – since that ETF only applies to new contracts/renewals after June 1. And AT&T’s party line of needing to recover heavy iPhone subsidies is ludicrous. They are enjoying giant margins and/or pushing that subsidy back to Apple.

      This is where I would have liked to have seen Google go with the Nexus One – but they didn’t have the will nor the leverage to do it.

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    2. Todd, you’re right frequency bands will limit the universality of this for a while, but I didn’t get into that here. I did in this story though if it helps: http://gigaom.com/2009/06/19/ending-handset-exclusivity-wont-mean-a-phone-that-can-roam/

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    3. “AT&T has killed off today’s predicted “rush” of Verizon iPhone churn with their nasty $400.00+ ETF”

      Having worked for a company with a high ETF, sometimes that doesn’t deter customers at all. If they’re sufficiently dissatisfied, they’ll pay it — happily. And curse you out for the length of the call.

      There’s also the problem, in the long run, that a high ETF will deter future customers from enrolling in the first place.

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  2. Would this technology allow international travelers to do a short term switch to a local carrier while abroad?

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    1. Theoretically. It depends on if the radio in the phone, but the assumption is that if you put a universal SIM into a phone you also have a radio that works on most common frequencies and with common network technologies. The local carrier would also have to participate and let you on their network.

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  3. This whole thought out scenario works well only in US since this the only place carriers have most hold on customers, but rest of the world already has free pass for carrier hopping!

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    1. In this scenario you wouldn’t have to manually swap out a SIM card to carrier hop.

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      1. There are phones currently being built with dual SIM slots.

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  4. The hard part of being a carrier isn’t the SIM, it’s having enough cell sites so you have adequate coverage.

    Unless you mean Apple is going to become an MVNO.

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    1. Ummm, I think that’s why “MVNO” was stated in the first paragraph, and then subsequently a couple of times later in the article ;)

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  5. It’s only a matter of time before this happens. It’s not good news for the travel SIM operators either. The days of roaming arbitrage are numbered. A great thing for the consumer. Let’s hope that other smartphone makers follow suit.

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  6. my major concern with is that consumers will lose the ability to use ultra-cheap prepaid SIMs from small carriers and MVNO’s. if apple only cuts roaming deals with the major carriers who sell iphones now for example than the smart consumers who know how to shop for the best GSM deal(and swap SIM constantly) will be the losers.

    being able to physically remove and install SIMs(including ones not necessarily intended for iphone usage) gives consumers an extra level of control instead of having it in the combined hands of the carriers and apple.

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    1. Tom, that’s a fair point and a definite consideration if/when this happens. Do they want to succumb to the Apple universe and have it handle everything possibly at a higher cost, or retain some of their own control? Given what people pay for Apple products now, I imagine that some people will accept the trade off and others won’t.

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  7. So, who do I call for support when my magic Apple device is hopping between different carriers? And why would a carrier spend $20 to answer my call for support when, for all they know, I plan to spend $8 with them in my quest to save an additional $3.50?

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  8. The first question that comes to my mind is how does my number get ported? Big deal if I can save $10/month if I lose my number. I get how it works in the US. But what happens when I got to Spain for Mobile World Congress next week and I hop on the Yoigo network let’s say, does my T-Mobile service get put on hold or do I lose it all together? And more importantly what happens to my phone number in the US? And when I leave Spain to come home for the next 51 weeks what happens to my Spanish number? Can I fly back to Barcelona for MWC ’12 and expect to have my same mobile number I did the year before?

    Sorry to get so into this but I’m curious how all this will be handled. Having multiple sims I just top up my Yoigo sim in Spain when I land and I have my same number I did the year before and am ready to go, but I also know that when I come home a week later I will just pop my T-Mobile sim in my phone and my US number will be active again.

    I guess I’m asking who owns my numbers?

    Thanks and I’m really enthralled with this entire concept and have been following an MNO/MVNO (same company just different countries) for a few years now. Let’s see how they react.

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    1. I think you are worrying too much about the phone numbers. I travel frequently to the UK and Europe from the US and swap SIM cards from various carriers in various countries. Yes, my number changes when I do this and from year to year I even change numbers/carriers for a given country. I haven’t had a problem with this at all. I always keep the US number and account active. When abroad, I email or text my current number to those who need it and move on. In any given business week while travelling, the total number of people who actually need my phone number to reach me (as opposed to email) is relatively small and manageable. Remember, the benefit is not just avoiding usury voice charges for international roaming, but also the ability to have affordable data coverage (for which the phone number is irrelevant).

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  9. Rather than focusing on cheap phones, Apple should partner with different companies in developing countries and leverage their local presence to counter android

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  10. Any move in this direction is great for consumers and will eventually result in a far more competitive market.

    Apple won’t be my next phone company, but I’ll be eternally thankful to whomever nails a thesis to the carrier’s door that brings down the system.

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