Patent Reveals Apple's Plan to Cut Networks Even More Out of the Smartphone Loop

Apple MVNO patentApple has plans to one day insert itself in between cell phone network providers and smartphone owners, dynamically offering an end user the best deal. And it could change the entire phone business.

Apple applied for the patent in 2006, and it's just been granted--but don't dismiss this as just one in a string of interesting Apple patents, some for real products, some defensive. Because if Apple ever chooses to act on this patent in a future iPhone iteration, it could entirely shake up the way cell phone networks control the smartphone business.

What Apple is planning to do looks at first like a typical Mobile Virtual Network Operator (MVNO)--a business that does not own any cell tower infrastructure of its own, but that buys airtime from "real" networks, then sells it on to end-user phone customers under its own brand.

But what Apple plans to do, as set out in its "dynamic carrier selection" patent, is to monitor the offerings of several different real network companies at once, soliciting bids from them for service offerings to clients...and then it will offer the best deal to the user. Apple's system may even select the best deal on behalf of the iPhone customers, and keep soliciting the networks for better deals. It could even select more than one operator, depending on which service they offer best. Or, it could chose services from a PSTN, a physical wired phone network, perhaps accessed over a local wireless grid.

This would represent a radical change to the strong one-to-one personal relationship that cell phone networks like to have between their business and their clients. It maintains their revenue streams, by tying users into a subscriber contract that locks down payments (sometimes unfairly, as several court cases--and legal action by the EU--have proven), and simultaneously lets networks control how much of a burden users can place on their hardware...that's what minute limits and data ceilings are for. The Pay-As-You-Go system, popular in Europe, is a slightly different proposition, but still lets networks manage their client relationships.

Apple wants to break this system and position itself as the arbiter of which deal suits users best--possibly in real time. The dynamic nature of the system could even result in a real-time bidding war for the best service offerings. The cell networks are reduced to no more than vanilla data-voice-SMS pipelines, selected and dismissed at will, or at the whim of an algorithm not of their choosing. All those luscious client subscriptions are flushed. And all those woes about poor service from AT&T, and worries that Verizon's network will struggle with the burden of millions of iPhone users, instantly go away.

It gets worse from a network point of view: The patent has a provision for Apple to collect payments for real-time network use via iTunes. That would insert Apple directly into the client-network relationship, giving it access to deep levels of personal usage data, and potentially a share of the cash.

If you add in Apple's recent patent to allow a "virtual SIM" card instead of a physical one, this begins to look like something Apple really might try in a future iPhone iteration. And remembering that Apple's even managed to strong-arm Verizon into leaving the iPhone untainted with brand decals or bloatware--it's a company that loves to do that to other phones--this is also something that Apple may be able to pull off.

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1 Comments

  • Chris Taylor

    It is brilliant, really. Apple sees the opportunities to move upstream and cut out the middle men that aggregate the phone users on networks. The rumor in January that they might bid on European Premiere League streaming rights is the same idea...to get close to the content where all sorts of technology can make better customer experiences. 

    Phone and television networks currently control end user interaction but this is a paradigm that will drop just like newspapers controlling the news once did. Fascinating moves!