Updated — Quite a ruckus is stirring over the Google Voice (s goog) application getting rejected from the Apple iTunes Store. Some are pointing the finger — I won’t say which one — at Apple (s aapl), but it’s reasonable to believe that AT&T has some influence on the software rejection as well. It’s possible that other carriers are afraid of Google voice, too. There’s really only one way for Apple to truly control software apps that impact carriers: eventually become an MVNO, or mobile virtual network operator.
An MVNO essentially acts like a carrier by setting their own terms and pricing, but they have no network infrastructure, nor do they own any spectrum licenses. Instead, they purchase network services from carriers to rebrand and resell under their own name.
Now this idea is wildly speculative on my part, but let’s think about it out loud, using Apple’s current relationship with
Apple AT&T as an example. Recent monthly revenue figures for iPhone accounts on AT&T show that the carrier earns around $94.74 a month. With a massive user base for iPhones, an Apple MVNO could grab that monthly revenue stream, minus the costs charged by AT&T for the network service.
Of course, Apple could lose the handset subsidy offered by AT&T if this were to happen. Even if the handset subsidy is on the high end — say $400 — I suspect Apple could make that back in about eight months. I’m using $50 as my estimate for Apple’s monthly earnings per customer in an MVNO situation. For a 2-year contract then, Apple makes back the subsidy and an additional $800 per handset that it doesn’t make today. Obviously, much of my model is dependent on cost negotiations between Apple and various network providers. But Apple is no slouch in this department, so I think they could pull off a deal that’s advantageous with the carriers.
Speaking of carriers, Verizon (s vz) actually enters into my scenario too. But not in the way you’d think. CDMA is going away, so I don’t expect we’ll ever see a solely CDMA iPhone at this point. LTE is a different story, however. It is poised to become a more global than GSM and Verizon has plans to migrate over to LTE, just as AT&T does. Here in the U.S. then, we’ll have one less barrier in terms of common network standards, which could offer MVNOs even more flexibility with hardware. Put another way: an Apple MNVO using LTE networks in 2011 and beyond could open the floodgates to all of those Verizon customers pining for an iPhone. And with a good chunk of the monthly revenue retained by Apple, it just might reduce today’s carriers to the dump, fat pipes some think they should be.
In this situation, Apple earns more money without a net sacrifice to any current iPhone revenue streams. The same App Store will be ringing up sales with 30 percent going to Apple. The iTunes cash register still hums along. And the iPhone can be less dependent on the rules set forth by carriers. It might be a stretch and there are sure to be technical challenges, but Apple seems poised towards owning the entire phone experience more than any company I see today. The only exception that comes to mind is Google with their Android operating system and their Google Voice service. If Google explicitly enters the handset hardware market, which I doubt, you can bet on them to become a virtual carrier as well.
This whole “Apple as MVNO” isn’t exactly an original idea on my part. MacRumors unearthed an Apple patent application suggesting this very idea. The patent idea could be for a situation where Apple couldn’t negotiate favorable terms with a carrier. Then again, it might be something Apple tucked away for the not-too-distant future.
Update: Om thinks that AT&T has little or nothing to do with Apple’s rejection of the Google Voice software. His theory makes sense — AT&T allows Google Voice on BlackBerry devices within the AT&T network. Other voice over IP apps are also allowed, so perhaps it’s not a case of AT&T exerting force this time. It could very well be Apple. And if so, I’m thinking it lends even more credence to my MVNO theory, but in a different way — Apple has bigger plans in the cellular network market and they don’t include Google.