Patents Pondered: An AT&T-less iPhone World?
Your plane's landing in the middle of nowhere. Scratch that. WAY past the middle of nowhere -- that little state on the other coast you've never been to, where the people have funny accents and McDonald's has menu items you've never seen before.
The pilot flips off the seatbelt light, you whip out your iPhone to make a quick call, and before the bars come up you're greeted with a screen that lists off all the local service providers complete with up-to-the-minute rate information. You flick-scroll to the cheapest one, tap to select, the bars pop up, the network springs to life, and you start your call.
What? Your iPhone doesn't do that? You don't get to pick your service provider? You don't get to choose just-in-time data rates? You're stuck with AT&T 24/7?!
Yeah. That's because you're in the real world, not the world of what might-have-been. Not the world Apple could have created had they gone ahead with a little patent just recently brought to public attention...
Tale of Two Telcos
If you make a cell phone you have to have a telco behind it to provide voice, data, SMS, and other network services. In the United States, there are currently two types of telco providers.
- Mobile Network Operators (MNOs), which include the likes of AT&T, Verizon, Sprint, T-Mobile. These monoliths own their own bands of frequency and have pushed out their own hardware infrastructures to support them. They have the towers, the cables, and the oligopoly.
- Mobile Virtual Network Operators (MVNOs), which include (or have included) Virgin, Helio, AMP'd, and other discount, niche, localize, or otherwise boutique operations.
Dealing with the Devil
Apple, of course, ultimately chose option one: a locked-in, carrier-exclusive agreement with AT&T (then Cingular). For an estimated 5 years from initial launch, anyone who wants an iPhone in the United States has to sign a 2-year service contract with AT&T or be unable to activate their device, much less make calls or use EDGE data.
This agreement gave Apple carrier-cooperation in the form of Visual Voicemail and low-cost unlimited data plans. It also gave them revenue sharing with estimates as high as $15 per user per month ($360 over the course of the 2 year contract, on top of hardware and potential retail sales profits).
What Might Have Been
Even though Apple went with option one, a recent patent application shows they had a plan for option two ready as well -- and in typical Apple fashion, it's as slick as it is revolutionary.
Right now, when you pick up your iPhone, slide to unlock, and tap the Stocks widget, you get relatively up-to-date (within 20 min.) quotes. Right now, when you pick up your iPhone, slide to unlock, and tap the iTunes Wi-Fi Music Store, you get a list of songs you can flick-scroll through and tap to purchase through your iTunes account. Come June, you'll be able to do similar with the App Store.
In a different world, similar functionality would have existed via an "iCarrier" Store. Unlike traditional MVNOs, however, the patent filing indicates Apple may not have bought minutes in bulk from an MNO and simply resold them to iPhone users. Rather, they proposed a model combining the previously mentioned Stocks widget's near realtime price quoting with the iTunes Wi-Fi Store's (or App Store's) near instant transactional processing and purchasing system.
With this system a (presumably WebObjects-based) server would store up-to-date rate information for all regional, affiliated networks and then select whichever provided the best option at the moment, or -- in an even more utopian service -- allow the end-user to select for themselves as simply and easily as buying a Tune or downloading an App.
Apple Insider quotes Apple's iPod chief, Anthony Fadell:
"Bids can be received from multiple network operators for rates at which communication services using each network operator can be obtained. Preferences among the network operators can be determined using the received bids, and the preferences are used to select the network operator."
"Preferences may be further based on a location of the mobile device, the quality of service offered by the network operator, and/or type of communication. Bids from multiple network operators for rate information relating to rates at which communication services using each network operator can be obtained and the rate information can be sent to the mobile device for use in selecting the network operator."
And What Still Could Be
A system as described in the Apple patent could benefit consumers in many ways. Ars Technica sums them up as follows:
To borrow from AT&T's adage, it would mean more bars in more places at lower prices. Apple would also clearly benefit by the greatly expanded coverage of the iPhone, and the end to sale-stunting exclusivity agreements. Unfortunately, telecommunications companies like AT&T would be forced to actually compete for customers on price every minute of every day. One need look no further than what happened to the record companies when they relinquished control of pricing to the iTunes Store to see how that looks from the perspective of a faceless multinational corporation. Of course, the technical and business issues associated with becoming an MVNO would also be a hurdle for Apple, but getting the telcos to go along with this idea is a stone wall a hundred feet high.
Sound like a dream come true? Probably not for the oligopolistic telcos desperate not to become "dumb pipes" and gorged on over-priced service and subscription revenue ($0.20 to send 140 character text message?! Do the math for a megabyte at that rate and then shout "clear" and reach for the paddles!) For them it probably sounds like a nightmare.
Differences in technology in some countries, like the United States where MSOs are split between GSM and CDMA (which would require a broader spectrum radio), and lack of competition in others, such as Canada where there is but a single GSM provider, could limit these benefits in the short term. And as we said, Apple is currently locked-in to telco deals in the US, UK, France, Germany, and other countries. But Chief Operating Officer Tim Cook himself recently said:
"We're not married to any business model. What we're married to is shipping the best phones in the world."
Personally, I would love to see this system manifest for disruptive reasons alone. How does the idea grab you?