Apple May Face Lawsuit From European Phone Carriers Over Built-in SIM Card iPhone

What would be the consequences of Apple cutting out mobile carriers if it does incorporate the SIM card into its iPhone?

Apple is risking all-out war with European cellphone carriers, claims the Financial Times today. The burgeoning row—it's one of those "If A does X, then B will do Y" stories—reveals a lot about Apple's plans, and how exposed it may leave the mobile networks that are already struggling against the worry of being nothing but glorified data pipes of the future.

Reports surfaced last month that Apple had created a SIM card in partnership with German firm Gemalto that was integrated in the device itself. This would mean that customers could buy the phone directly from the Apple store and then choose which carrier to go with. Result: Apple controls all the sales, and makes more money, the consumer has more choice over which carrier to go with, and the carrier would be stuck with offering shorter, more customer-friendly contracts to iPhone users. The current situation of subsidized iPhones in return for a two-year, molto 'spensivo contratto, would be kaput. Pronto.

These subsidies—compare shelling out $600 for an iPhone directly from Apple, with signing up for a free iPhone in return for paying a higher monthly amount ($80, say) for two years—have helped Apple shift units in Europe, units the like of which haven't been shifted before. Unlike in the U.S., where AT&T still has a monopoly three and a half years after the original iPhone launched, Europe has multiple carriers.

But we Europeans can be a revolting lot, always wanting more. There has been a huge demand in the U.K. for unlocked iPhones, with people sending them back to friends and family living either in iPhone-free territories, or ones with a carrier monopoly. And it may be this issue that Apple is taking an educated punt on.

The carriers must be worried. Although some are gambling on the Apps market to make more money—Vodafone has its own App Store—there is a vacuum at the heart of many of the network service providers. As they are forced to spend more money on upgrading their systems in order to transport the vast amounts of data that the rise of mobile video will bring, if Apple does force them to rejig their customers' contracts to less manacled versions, they will make less money.

And so it is time to start thinking beyond the data pipe—the perfect example of this is Orange's ON project, run by Orange Vallee's Giles Corbett. It's a pre-emptive strike aimed at an age where cellphone users will be paying for their cellphone's UI, and they will choose an interface from either Google, HP, Apple, or Microsoft. Or, if it works out, Orange.

The carriers do, however, have one ace in their pack: the subsidy card. Scrapping subsidized iPhones will cost them dear, but it could cut Apple's global iPhone sales by up to 12%, says telecoms analyst Robin Bienenstock. To counter this, Apple could cut the price of its smartphone. With a 61% profit margin, it could certainly afford it.

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  • rollo47

    There's an interesting parallel between mobile networks and the national electricity grid of 1950s Britain. Back in the 1950s there was a need to recoup the big investments made in the grid by encouraging greater use of it. Electricity companies took it upon themselves to open their own shops and "electricity showrooms" across the country to promote and sell fridges, washing machines, ovens etc.

    In a few years time perhaps buying a mobile phone from a carrier will be as anachronistic as buying a toaster from an energy company?