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Apple Hedging Cellular Bets with a Tablet Through Verizon?

apple-logoAnother Apple tablet rumor hit today, but this one offers an interesting twist. Scott Moritz believes that such a device will be subsidized by Verizon Wireless (s VZ). AT&T’s (s T) network is struggling to keep up with the many Apple iPhone devices using it — Apple (s aapl) just reported another 5.2 million iPhones sold in the last fiscal quarter. If I were a decision-maker at Apple, I’d be keenly aware of how AT&T’s capacity woes reflect on my product. Luckily, I don’t need to be telling Apple what they already know. Why else might they be looking at another carrier for a web-capable product?

Selling the device at a subsidized price makes sense on several levels. It locks customers into data plans for the carrier, but allows the device to shine with always-on, high-speed connectivity. This is the reason I never strongly considered an iPod Touch over an iPhone — I don’t want to have to search for a Wi-Fi hotspot every time I want to use the web. A carrier subsidy would also allow Apple to create a device that is expensive, but more affordable. I expect a 9 or 10-inch Apple tablet to be priced in the $700 to $800 range because Apple has no product line there. Rumors from last week indicate a 9.7-inch device is already in production. But in today’s world of $300 netbooks, that kind of price point for a new Apple product might perceived as too high on a relative basis. If a subsidy can bring the price down to $400 to $600, it’s far more compelling to any folks that compare the tablet to a netbook. It may be an unfair comparison since the devices aren’t quite the same, but people will make the comparison anyway.

My gut says that this device will be geared heavily for web use, so it’s really going to need a dedicated connection for the most benefit. I’m wondering if Apple will use a modified version of the iPhone OS or if they’ll create another offshoot of Mac OS X. I have to believe that whichever road they take, Apple will make it as easy as possible for iPhone app developers to easily port their wares to a larger device. Regardless of the OS, I can see why Apple might partner with a different carrier. With 280 million people blanketed by EVDO in 264 markets, Verizon’s network is quite extensive. It’s also not buckling under the weight of too many users.

The only question nagging at me is: why go with a CDMA carrier for an Apple tablet? It could be due to a lack of good choices. T-Mobile offers a GSM choice, but their 3G coverage areas are far fewer than Verizon’s CDMA network. Sprint (s s) offers reasonable EVDO coverage and has roaming agreements with Verizon, but they’re looking to get devices on 4G WiMAX to recoup their Clearwire investments. There simply isn’t another good  U.S. choice for Apple if they don’t want to use AT&T for a new device. Of course, the challenge of going with Verizon is that the original device can’t be used worldwide. Most other markets use the more global GSM standards like AT&T and T-Mobile. An Apple tablet on Verizon can’t be sold in those markets, so they’d eventually have to produce a GSM version as well.

At this point, everything we know is based on “industry sources.” It could easily turn out that Apple sticks with AT&T for a new device platform. After all, the carrier is working on network upgrades, so Apple could hold off until some major infrastructure changes take place at AT&T. That’s a more likely scenario in the end since a CDMA device has limited marketability on a global basis. Actually, I can’t think of a better way to kick AT&T’s network upgrades into the next gear — Apple merely suggesting the idea of partnering with Verizon on another data-hungry money maker just might do it.

18 Responses to “Apple Hedging Cellular Bets with a Tablet Through Verizon?”

  1. Apple Tablet may be launched this Christmas or possibly as early as September and might cost $800.00 with Verizon as the carrier. I hope this will be another great rally for apple earnings. I will buy one of this for sure. The iphone started to be too little to stay all the day looking things. I am a great fan of apple product so started collecting all the information (more than 200 sites) about Apple Tablet(News, Videos, Pics, Pre reviews, Rumors etc.,). If you are interested take a look at the below link
    http://markthispage.blogspot.com/2009/07/apple-tablet-large-iphone-or-ipod-touch.html

  2. What would prohibit Apple from simply installing wireless broadband chips to support both EV-DO (for the American market) and HSPA 2100MHz(for the European and Asian ones)? A total solution for global travelers and better performance for American users versus AT&T.

    I mean, if RIM can do this on the new Blackberry Tour (a small handheld device) surely Apple could find the real estate for installing dual WWAN chips inside a much larger iTablet.

    • To paraphrase Topolsky, Apple is is a company not necessarily know for building a product based on consumer requests. “What do the People want? Let’s give it to them!” I’m sure Jobs is uttering those words at this very moment.

  3. Think I’ll just get a CrunchPad. Probably 12″, about $300 and no carrier/manufacturer extortion. Besides, most places people would use a 9″ to 12″ pad have wi-fi.

    • CTSLICK

      “Besides, most places people would use a 9″ to 12″ pad have wi-fi”…Sorry we’ll have to agree to disagree on that one. All can I think of is all of the places I couldn’t use this because there’s no WiFi.

  4. drzeller

    Apple could go the way of the Kindle DX and make the cellular radio modular. Swap out which module is used for each market. That even allows the current iPhone users the option of having both devices on the same carrier – a no-brainer there.

    D.

    • Now *that* is something that I completely overlooked! In my defense, it took me 28 hours on the clock to get from one coast to the other during a series of mishaps. I was writing this post on little sleep, no food and from somewhere I didn’t want to be at the time. ;) Regardless: a Gobi chipset would offer the flexibility of CDMA or GSM. Great point!

  5. Kevin,

    I wouldn’t give much credence to this report. First, it’s penned by the infamous Scott Moritz. Scott was the guy who put out a report that Apple was internally expecting to sell 1 million of the original iPhones during its debut weekend in 2007 (never mind how a company can expect to sell 1 million units when it knows only 300,000 had been manufactured at that point). Scott then conveniently referred to his own made up report as “analysts were largely expecting” bit in a post-launch report talking about how disappointing sales of 275,000 were. Scott is a rumor manipulator preying on the desperations of Verizon customers who want an iPhone of their own.

    The rumor simply doesn’t make sense because it puts up a huge barrier for iPhone owners to get the device. You can own one, but not the other with this business model simply because only a few percentage of people find value in paying for two or more 3G service plans simultaneously.

    Here’s something that makes more sense. A device with nothing but Wifi that allows anyone to buy it and use it on existing WiFi networks. And if you have any iPhone, then you can add tethering via AT&T to get always-on Internet for the device, making it synergistic for consumers to have both iPhone and this new device.

    The Verizon rumor makes absolutely no sense, unless you think it’s a good deal to pay another $60/month on top of your $80 cell phone bill so you can get always-on capability for a cheap $99 netbook that will be obsolete in 6 months, when anyone with half a brain will get a good notebook and tether it to any existing 3G device for much better capability (and more money saved).

    This, of course, all assumes AT&T will finally have a tethering option for iPhone by the time the new Apple device launches.

  6. I’ve heard these rumors as well.

    My bigger concern is that it kind of puts people in an either/or position with respect to this tablet and the iPhone. I would think iPhone users would be an obvious target of such a device, but not if it’s on Verizon. Not because they have anything against Verizon, but because most people have enough problems with one cellular data bill a month; they won’t be crazy about needing another.

    If Apple/AT&T pulled off free tethering with the device for iPhone customers, that would be a major coup.

  7. Larry Thomas

    Nope, I think it will have wi fi and tether to an iphone! that’s all it needs, now if they can swing a no-tethering charge under AT&T they’d have a winner in my book!

  8. EVDO on Verizon? Nope.

    Try 4G GSM on Verizon’s brand spanking new LTE network.

    May 15, 2009

    “Verizon CEO Lowell McAdam told those attending or listening in to a conference call that Big Red would have started to roll out its 4G LTE services in 20-30 markets by the second half of next year. Nationwide build-out would be targeted for completion by late 2013 to early 2014. The Long Term Evolution service will be the 4G network that will supplement and eventually replace the current CDMA system and is expected to be compatible with similar LTE services being developed at AT&T and MetroPCS. Average data speed will be between 8-12 Mbps. At the conference call, Verizon disclosed that all of their LTE devices will have swappable SIM cards. The carrier will have certification requirements above the minimum, which basically means that the swappable SIM cards will not be usable in devices not certified by Big Red.”

    http://www.phonearena.com/htmls/Verizon-to-roll-out-4G-LTE-in-20-30-markets-during-the-second-half-of-2010-article-a_5070.html

    • CTSLICK

      Ding-ding-ding…winner. I think Verizon jumping on the LTE train puts an interesting spin on this rumor that moves it from wildly speculative to somewhat plausible.

    • Could be an LTE device, but I don’t think Apple (or most companies for that matter) would launch a key new device class this year when the wireless service for it could only be used in a handful of places over a year from now.

  9. Makes total sense to me. Verizon is huge here in USA. For the “world” version, apple will build it with a GSM radio. HTC does that now with their phones. EVDO for Verizon, GSM for at&t.

  10. What would be nice if Apple does come out with a Tablet. This should have Wi-Fi, which then you could use your Mi-Fi to connect to the internet. Second Apple hopefully would make the BT be able to setup as BT DUN for you to connect. This would also be nice if the up coming iPod Touch could let you configure BT DUN.