Greg's bite: Apple, the new cell phone company?
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Greg's bite: Apple, the new cell phone company?

Apple's Tony Fadell is named as the inventor of a novel method of using various existing cell phone company's excess capacity cobbled together to create a new Apple branded virtual cell phone network.  

The concept is that as Apple's newest iPhones and coming iPads are now able to operate on all cell phone networks around the world, buying excess network capacity in large blocks makes sense. Then Apple could resell that network access to consumers at retail prices per minute and pocket the difference. Some predicted Apple would buy an existing cellular network to get into the cellular business. That won't happen, but this new concept just might work.

Think of this as an extension of the digital download concept Apple is working on cornering with it's new data centers. This can all be done using the newly patented Apple technology without building even one cell phone tower, anywhere.  The patent was issued yesterday and is US patent #7,885,654. I have provide a link near the end of this article that will open a browser page displaying the patent.

This neat trick (which the new Verizon iPhone can now do) creates the technical possibility that Apple could do an end run around the existing carriers and open a new Apple Branded Cell Phone Network. This business model is called a MVNO or a Mobile Virtual Network Operator system. This virtual cellphone network concept is already used by Cricket, for example.  

What makes the new Apple patent different is that Cricket contracts just with Sprint and a few other smaller CDMA networks to support their brand of phones, while the Apple concept is to buy minutes on any flavor of cell phone technology with multiple carriers and use a network controller system to mix and match service from any local participating network, as needed when you make a call, text or use data.  

The retail cell phone account would be held at Apple and cellular services charged to your iTunes account. The carriers would be made into dumb wireless data pipes, that just sell bulk network time to Apple for resale to consumers.  They wouldn't even know who is using their networks.  The system might even use Wi-Fi and Apple's Internet network, when available, instead of wireless cellular networks. Who cares what "pipe" you use, as long as the call goes through and sounds good?

While most people imagine cell phone towers and the backbone networks that control them as always being overcrowded, resulting in the famous AT&T dropped cell phone call experience, the truth is that there is a normally a tremendous untapped capacity there. Most cell towers are running with only a nominal amount of activity most of the time, only reaching peek usage part of the time. This is why most carriers offer nighttime discounts for calls between certain hours or on weekends. That capacity is going to waste otherwise, so selling it cheaper is better than completely wasting it. 

The notion is that Apple could announce that they are willing to purchase, say 1,000,000 minute blocks of excess network time on any and all cellular networks. They would take the lowest bid per minute in every market. This is despite the natural reluctance of AT&T, Verizon, T-Moble and Sprint to not like the idea of Apple competing with them on their own networks.  

The notion of selling excess capacity in bulk for a giant amount of money would "talk to them" in the Steve Jobs sort of tone.  This is similar to the situation where cable TV companies allow other companies to use their networks, for a negotiated price. The FCC pushes this concept by its rules.

This basic concept has already gotten a crisp "over our dead body" response from European cell carriers who got wind of the concept, a while back.  While the knee jerk reaction is "drop dead Apple," the reality is that if competitors underbid the asking price for selling excess network capacity, that would put the holdout networks at a serious disadvantage economically.  

Something for excess network capacity beats nothing at all. The subject patent is found at this link: http://macte.ch/BOBRB61 .

Apple has both the guts and power to bring the networks to "heel! bad dog." If this were to be brought to practice, Apple could sell you the iPhone and also provide network service at competitive rates. Excess network capacity can be purchased for very low rates per minute, if done in a competitive bidding process.  

With a big gun like Apple doling out the giant chunks of money, any cell phone network that refuses to sell excess minutes to Apple will be the loser.  All the carriers know that network minutes unsold amount to a major waste of their potential income. Business is about income, in any language and culture

That's another Greg's bite for today.

(Greg Mills is currently a graphic and Faux Wall Artist in Kansas City.  Formerly a new product R&D man for the paint sundry market, he holds 11 US patents. Greg is an Extra Class Ham Radio Operator, AB6SF,  iOS developer and web site designer.  He's also working on a solar energy startup using a patent pending process for turning waste dual pane glass window units into thermal solar panels used to heat water see: www.CottageIndustySolar.com . Married, with one daughter, Greg writes for intellectual property web sites and on Mac/Tech related issues.  See Greg's art web site at http://www.gregmills.com . He can be emailed at gregmills@mac.com )

 

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