Report: Apple Is Kicking the MVNO Tires

Apple is in discussions to become a mobile virtual network operator in both Europe and the United States, where it’s already running a trial of its service, Business Insider reported Monday.

The MVNO idea may not advance beyond the test phase — and if it does, it won’t happen for some time — at least five years, according to the report.

Apple has been huddling with telecommunication companies for years on the MVNO play — it’s an “open secret” in the industry, BI said, citing telecom sources.

However, Apple on Tuesday issued a denial, telling several media outlets that it has not discussed, nor does it have any plans to launch an MVNO.

Toes in Water?

Mobile virtual network operators lease bandwidth from major carriers and use it to furnish wireless service to users, typically at discount prices. If Apple were an MVNO, you could pay Apple for your phone service instead Verizon, AT&T or some other carrier.

“It doesn’t take much money or expertise to become an MVNO, so Apple can try this industry segment and see if they become successful in it,” said telecom industry analyst Jeff Kagan. “If they do, then they can make the decision to either stay an MVNO and grow, or buy a wireless carrier.”

Google recently announced its MVNO status, but its service currently is available exclusively to users of its latest Nexus 6 phone. If Apple were to follow Google into the MVNO market, it likely would want to add value to its offering, which might be challenging.

“The question is, are they going to deliver anything different than AT&T or Verizon or Sprint or T-Mobile?” Kagan asked.

“Initially, I don’t think they’re going to be able to deliver anything different, because when you’re an MVNO, you have to take what they give you,” he told the E-Commerce Times. “When you own a network, that’s when you can innovate. That’s why I think this is just the first step.”

Dynamic Carrier Selection

In spite of its denial of discussing an MVNO, Apple clearly has some innovative ideas about that type of operation. It spelled some of them out in an application for a patent it filed with the U.S. Patent and Trademark Office in 2006, which was granted in 2011.

A cornerstone of that patent is the idea of “dynamic carrier selection.” It calls for a phone to poll multiple carriers in real time and arrive at the best price for a service through a bidding process.

At the time the patent was approved, the technology for rapidly switching among carriers didn’t exist — but with the introduction of the Apple SIM in 2014, that’s no longer the case.

Still, the question remains whether or not the MVNO route is suitable for Apple.

“Most MVNOs are built as a price differentiator. That’s completely uncharacteristic of Apple,” said Bob Egan, CEO and founder of the Sepharim Group.

“There has to be some other motivation,” he told the E-Commerce Times. “I suspect that other motivation is a gap they perceive going forward with their overall ecosystem.”

MVNO Challenges

That ecosystem could be unified by an MVNO agreement, noted Bob O’Donnell, founder and chief analyst of Technalysis Research.

“They could become a one-stop shop. They could control the entire experience — integrate all their services,” he told the E-Commerce Times.

“They could provide a single point of contact for the entire mobile experience — from the connection to the services to the applications,” O’Donnell added.

That benefit may be outweighed by the challenges of being an MVNO, however.

“Does Apple really want to be associated with a service when they can’t control it?” O’Donnell asked.

“If the service goes down, Apple gets blamed, even though it’s not Apple’s network,” he pointed out. “Apple won’t be able to meet the quality assurance that they would be expected to offer. They have extraordinarily high standards, so I think that would frustrate them, and that’s not a position they want to put themselves in.”

It’s uncertain how Apple’s existing carrier partners would react to its entry into the MVNO business, although Kagan believes it would have a minimal impact on those relationships.

“Apple and Google can do business with a carrier as a partner, and they can compete with that carrier with another service,” he said. “It’s just the way this industry has always worked.”