Apple might build its own wireless network for the iPhone, cutting AT&T out of the picture…
“Google may have dominated much of the speculation so far regarding the FCC’s upcoming auction of 700 MHz wireless spectrum — but on Monday the possibility emerged that Apple may be making its own bidding plans.”
With the Federal Communications Commission (FCC) set to auction off the so-called 700-MHz band this coming January, two unnamed sources told BusinessWeek that Jobs and company have “studied the implications” of a bid, to let iPhone owners download videos and music at faster speeds.
Hard on the heels of Apple’s widely hyped expansion of its iPod line and slashing of iPhone prices last week, word has now leaked out that the company has evaluated the possibility of placing a bid for a portion of the wireless spectrum, according to a BusinessWeek report.
“Wresting control away from AT&T for the iPhone’s cellular service, to name just one, could bring powerful advantages to the Cupertino, Calif.-based firm.”
Indeed, “Building a wireless network is pretty far from Apple’s core competency,” said Paul Gallant, a telecom policy analyst with Stanford Group. “You would have to think they would have a plan to do something with this spectrum that is very different before they would decide to dramatically expand their business model this way.”
The 700 MHz spectrum, which has been used for television broadcasting, is considered particularly valuable for wireless service providers because signals operating at that frequency can easily penetrate walls and buildings and because it would be relatively easy to build out services for mobile phone users.
“Unnamed sources say the technology giant is currently inclined not to bid, BusinessWeek reports, but a raft of potential motivations has brought the possibility to the table in Apple’s boardroom.”
If true, a move by Apple to bid in the auction would place Google’s chairman Eric Schmidt in an awkward position. Schmidt is on Apple’s board of directors. To complicate the situation further, Google is reported to be considering marketing its own mobile phone, a device that would likely compete with Apple’s iPhone.
“Google will likely bid anyway, CEO Eric Schmidt said last month.”
As BusinessWeek points out, Apple has more than enough cash for a bid, but maintaining a nationwide wireless network does not exactly play to its strengths – hardware and software innovation – and this sort of a low-margin, hassle-heavy operation could put a strain on the rest of the company.
Plus, under the FCC’s new rules for the 700-MHz band, Apple would have to open up the spectrum to competing applications and devices – something that flies in the face of the company’s overarching philosophy. Apple likes to keep things closed.
Google tried hard to affect the rules by which the auction would be run, but the FCC voted in July to adopt a scheme that represents more of a middle ground, including only two of Google’s four requests. It did, however, adopt a measure that would open up a large portion of the spectrum to serving devices from many providers.
The article also mentions that Apple could use a network for “cloud computing,” which would involve all of your Apple devices being connected to a larger wireless network.
Essentially, Apple would be creating an even larger network of products than already exists in order to distribute lots of content, a direction that it is certainly plausible Jobs wants to go in. You could then order a movie on your Mac and have it sent to your Apple TV, as well as buying all sorts of other content whenever you wanted it and wherever you happened to be.
Google sees it as a vehicle for internet broadband that is outside the control of big Telco’s like AT&T and Verizon. The Mountain View-based outfit spent the summer urging the FCC to require “open access” to the spectrum, which would give consumers the freedom to attach any device and any application.
According to the timetable proposed by the Congress, February 2009 should be the month when the last analog TV signals (which operate between the 54MHz and 698MHz television frequencies) will be broadcast.
The FCC may have opted for open access, but it denied Google’s request for a “wholesale condition,” which would force the winning bidder to slice up the band and sell it off to various ISPs.
“The FCC eventually agreed to open access for a 22MHz portion of the band, and you would have to think this is a deal breaker for Apple.”
The stakes are high, considering that a 2005 estimate indicated a value of up to $20 billion for the entire US analog TV spectrum.
FCC has slapped a $4.6bn reserve price on the 700-MHz spectrum, and both Google and Apple seem to have more than enough cash to meet that price.
According to BusinessWeek, it is not a problem for Apple to come up with the money for the minimum bid of $4.6 billion, since Apple’s pockets are filled with more than $14 billion in cash.
But, before the FCC decided against a wholesale condition, Google publicly announced it was prepared to pony up the commission’s minimum price. And according to BusinessWeek, Apple could bid as much as $9bn.
The Cupertino hardware and software behemoth has recently announced that it has sold more than 1 million iPhones, in just 74 days.
If Apple does get involved, it will likely be with an eye toward future capabilities rather than trying its hand as a wireless operator, Ricky Spero, contributing editor with The Mac Observer, suggested.
Apple could not be reached for comment.