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Anyone who uses an iPhone or an iPad with 3G and GPS capabilities will tell you that much of the functionality that you get from some of the best apps for these devices come from geolocation and mapping services. However, at the moment Apple currently depends on Google Maps, Google Earth, and Google’s GeoEye-1 satellite to provide this data.
With the strained and cantankerous relationship that Apple and Steve Jobs has now put itself in with Google, it would behoove them to become as independent as possible when it comes to the key services that it needs to offer the core functionality that makes “The Apps for That” actually work.
That includes not only Search capabilities — which it should probably consider building its own engine or perhaps partnering with — GASP! — Microsoft and its Bing! service, but Apple should also consider launching its very own mapping satellite in partnership with one of the major geospatial companies, such as GeoEye, DigitalGlobe and Spot Image, and a major Aerospace company such as Orbital Sciences, Boeing Space and Intelligence or Lockheed-Martin Space Systems.
What does it cost to launch and operate one of these things?
Well, a lot of money. In fact it costs so much that the US government actually financed about half the cost of GeoEye-1, which was over $500 Million in 2008, so Google only gets to use it partially. Apple actually has enough cash that it could easily launch its very own bird and form its own geospatial services firm if it wanted.
It should also be noted that the GeoEye company (GEOY) that provides the mapping services in partnership with Google and the United States government currently has a market capitalization of about $486M right now (about half of what the company was worth two years ago) so the company might not be a bad acquisition target for Apple either.
The iSat-1. Has a nice ring to it, doesn't it?
If Apple’s soaring profits on the iPods and iPad and the recent sell-outs of the new Apple TV are of any indication, much of the company’s future with these devices is going to rely on the sales and distribution of content and applications on the App Store and on iTunes.
As the company grows, it’s going to need to expand its content distribution infrastructure. That means in order to get things like huge, bandwidth-hungry HD movies downloaded to iTunes or even streamed directly to Apple TVs and iPads, it is going to have to get that content in close proximity to the ISPs that provide broadband service to consumers as well to the Tier 1 providers that provide backhaul services to wireless carriers that sell the iPhone and iPad 3G worldwide.
Apple has invested lots of money in new datacenters to house servers and storage that power its back-end infrastructure — its most recent infrastructure expansion project was building a huge, One-Billion dollar 500,000 square foot facility located in North Carolina in order to house the iCloud infrastructure.
Rumor has it that Apple is looking into possibly doubling its size.
However, having huge centralized datacenters isn’t enough. It won’t solve latency issues globally, Apple will need to spend a considerable amount of money connecting these datacenters to the ISPs with high-speed links and possibly even replicate some of that data globally so that the most popular or in-demand content doesn’t overload the centralized infrastructure.
Content Distribution Networks, or CDNs, can solve these problems. Apple could build its own global CDN, or it could purchase an existing CDN, such as Limelight Networks (LLNW) or even Akamai (AKAM). Limelight is currently capitalized at about $347M and Akamai, which is considered the leader in the space, is hovering around a whopping $5.64B.
Both of which should be considered a bargain since that's about half of what they were capitalized at two years ago.
A lot has changed in the wireless landscape in the last two years for the iPhone and and the iPad. In the United States, AT&T lost its exclusive on the iPhone, and Verizon and Sprint joined in on the fun. But each carrier has had their own set of problems accommodating the devices and huge amounts of data demand from iPhone and iPad users.
Despite the phenomenal device growth on all the US carriers combined, It hasn't been as smooth a ride as everyone has wanted. Apple is an extremely customer service oriented company and having to leave the network support to the carriers is probably not something the company will ever admit to be happy about.
In order for Apple to not have to deal with carrier mishegas in the US anymore, it probably makes sense for it to become a carrier itself. Obviously, there would be significant regulatory issues that the company would have to overcome, but it wouldn’t be impossible for Apple to do.
In terms of actual infrastructure costs of what would be needed to build a 4G network, the company would be looking at anywhere between 5 and 10 billion dollars to pull it off, depending on whether or not they needed to build new towers, could piggyback their transceivers on existing ones, what backhaul services they would need to buy, network operations centers needed, et cetera.
Of course, Apple could just go and buy a carrier that already does business in the US. The logical choice would be Sprint/Nextel (S), which is currently capitalized at approximately $6.4B and already has a significant customer base.
The other carriers are way too big for the company to swallow. The next smallest would be T-Mobile USA, which is actually a subsidiary of Deutsche Telekom AG (DTEGY.PK) a German-owned company.
Apple could certainly offer to take the US subsidiary off the company’s hands, and it may still even be attractive for Deutsche Telekom to dump the asset, as it tried and failed to do in its aborted $39B acquisition with AT&T, but given how painful it is to buy a telecom company of any substantial size without going through a huge regulatory approval ordeal, it’s unlikely Apple could complete the transaction, even though it could easily finance it all by itself.
But you never know.