Apple’s huge successes with the iPhone and iPad have allowed the company to amass $76 billion in cash. While no one outside Apple knows what the company will do with this Scrooge McDuck-like money pile, Jean-Louis Gassée has an interesting theory: Apple should buy a wireless carrier, such as T-Mobile.
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Gassée makes a compelling case (Apple could finally control its entire smartphone business and optimize service for iPhones) while acknowledging the reasons why it may never happen (regulatory hurdles, relatively low return on equity and friction with other wireless carriers). The whole piece makes for great reading.
But in the end, Gassée dismisses his theory as a fantasy for one big reason: Apple is primarily in the business of selling hardware, and owning a wireless carrier doesn’t necessarily mean more hardware sales. “A wireless carrier owned, operated and integrated by Apple would only take two or three years to generate (much) more revenue than iTunes,” he writes. “But would it sell twice as many iPhones? Probably not.”
He’s right—assuming that an Apple-controlled wireless carrier would model itself after its competitors. But because Apple is in the business of selling hardware, rather than selling service, an “Apple Wireless” could operate in a completely different way. Instead of selling coverage for individual devices, Apple could offer coverage on a per-user basis, with the goal of selling as many connected iPhones, iPads and MacBooks as possible.
I’ve dreamed of this scenario for years. Instead of paying $30 per month for a smartphone data plan, plus $30 for a tablet data plan, plus $30 for a connected laptop, you’d connect all of your devices for one flat monthly rate. In other words, you’d buy a single bucket of data that all your devices may use at no extra charge.
Under the status quo, wireless carriers have no incentive to do this, because they don’t make money when you buy a phone, a tablet or a computer. They only stand to gain by selling more service, so every new device costs extra to connect to a wireless network.
Apple’s incentive would be different. Nearly all of the company’s profits come from hardware sales, so its primary goal is to sell more devices. If you’re an iPhone owner on Apple’s hypothetical wireless network, you’ll also want an iPad and a MacBook, because all of those devices will be connected to the Internet at no extra charge. You’ll never want to leave the network and lose the monthly savings over other wireless carriers, so you’ll never stop buying Apple devices. Like iTunes and the App Store, a user-based approach to wireless coverage would help Apple sell more hardware to more people.
There’s plenty of room to debate whether the hurdles Gassée mentions are too difficult to surmount—and chances are, he’s right—but I can certainly see how an Apple-controlled wireless network would significantly boost hardware sales—and maybe even contribute to a bigger cash hoard in the future.