Mobile operators have conceded a lot to Apple in the last few years – most of it, not by choice – in the name of carrying its attractive, data-friendly products on their networks. But it appears that they may be finally drawing the line on Apple’s newest plans to introduce a so-called “soft Sim” into devices, threatening to remove subisidies on devices if Apple (NSDQ: AAPL) moves ahead with its plans.
The idea here is that users would then be able to switch operators via the phone’s software, rather than with a physical Sim card, as is usually provided by mobile operators in Europe. The Sim card contains subscriber information, and lets the phone link up to whichever network the Sim belongs to. It’s generally thought that keeping it in a physical device makes it that much less likely that a user would swap one operator out for another – a major issue in today’s hugely competitive, over-saturated mobile market.
According to a report in the FT, operators are crying foul, saying that they would be cut out of their customer relationship altogether if these plans go ahead. And if Apple follows through, they might have to remove their subsidies on devices in an all-out “war” with Apple.
Currently, a 32-GB iPhone 4 sold directly by Apple in the UK, without any operator plan, costs £599 ($924), whereas buying it on a contract with an operator can bring down the cost to as low as £59 ($94). iPhone 3GS models sometimes even come virtually free with certain contracts.
Apple’s iPhone has certainly driven up data usage, but its business model for apps – one large part of how data is getting used – virtually cuts operators out of the buying and selling process, giving them one less revenue stream in the quickly evolving mobile market, and relegating them into “bit pipes.”
Robin Bienenstock, an analyst at Bernstein who is quoted in the report, says that Apple’s handset sales could fall by up to 12 percent if it ends up introducing soft Sims, because of the backlash from operators cancelling their subsidies.
Operators named in the FT report who are concerned about this development are Vodafone (NYSE: VOD), France Telecom (NYSE: FTE) and Telefonica (NYSE: TEF). France Telecom and Telefonica had both cut deals with Apple in the early days of the iPhone to be its exclusive providers in different countries for an initial period. (Telefonica’s O2 carried the iPhone in the UK, while Telefonica carried it in Spain, with France Telecom’s Orange in France. Vodafone was the lone standout among the big operators.)