There is talk that Apple Inc. (NASDAQ:AAPL) is looking to expand into directly offering mobile services to customers, competing directly with firms that currently carry their products such as Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T). Wireless industry analyst Whitney Bluestein hinted as much at a presentation given at the Informa MVNO Industry Summit in Barcelona. It was no secret that Steve Jobs wanted to step in and replace current carries for iPhone services, but it seems that Apple is increasing their efforts recently to see this become reality.
Vertical integration for Apple makes some sense with current firms criticized for their costly data plans that may inhibit the full utilization of Apple’s iTunes and iCloud services. With lower cost data in the hands of consumers, individuals would feel more comfortable using more of these services.
One of the current situations inhibiting the move for Apple is the current wireless carrier subsidies that firms apply to the iPhone to reduce the cost of the product to end consumers. Without these subsidies, the iPhone would be substantially more expensive than it is today in the retail environment, and this may impact demand for the product. If Apple intends to reduce its margins on the iPhone in order to match these subsidies, it would have to recover these margins in other places, either through the wireless data service or through increased revenue related to iTunes or iCloud.
Apple would not likely be alone in making such a move, as Google Inc (NASDAQ:GOOG) would need to quickly counter with their own wireless data services in order to keep their Android OS phones competitive. And of course the incumbent carriers are not likely to allow their market share to be eroded by new entrants easily, and will leverage their experience in order to battle both Apple and Google. After the introduction of such competition, it’s not clear much margin will remain to make these services highly profitable to any of the participants.