Here comes the iPod phone
This past May, I suggested that Apple might try to fend off competition from music-playing cellphones by creating an "iPod phone" whose popularity is driven by the strong brand created by their successful iPod product. I figured that dominant players in one market segment have a leg up when that segment converges with others in the future.
Well, according to this article in Forbes, Apple is thinking the same thing. They're working with Motorola to develop iTunes software for cell phones. That, combined with the push by companies with strong brands, such as Disney, ESPN, Wal-Mart and Nike, to create their own branded cell phone network, may indicate that an iPod phone, if not an iPod mobile network, is just around the corner.
These days, the barrier to entry for branded networks is low. Sprint was first to lease its network to other companies wishing to become their own Mobile Virtual Network Operator (MVNO). Virgin Mobile didn't have to set up radio towers in America to roll out its prepay phone network. They just leased the network from Sprint.
An Apple-branded MVNO would make an end-run around mobile networks that would prefer to force iTunes users to download music over their mobile networks. As Rob Enderle of The Enderle group stated (quoted in the Forbes article):
"The carriers don't like it...They want Apple to change the design so the phone has to sync through their networks, not with a PC."
Some have suggested on other sites that Apple might be in the market to buy T-Mobile (recently put up for sale by its owner, Deutsche Telekom), which would be another way for Apple to create its own network. I think that would be a bad idea. First, Apple knows next to nothing about the mobile phone market. It would be like US Steel buying Dell Computers, and that isn't an indictment of Apple's corporate skills. Second, the reason Deutsche Telekom is selling T-Mobile, according to a recent article in the Wall Street Journal, is the difficulty they are having in keeping up with bigger, newly-merged wireless providers. Apple would not only take on a huge amount of debt, but be faced with massive upgrade costs.
It would be far better for Apple to lease its lines, leaving the mobile network business to those who specialize in it. That would leave them free to add value through innovative hardware designs and media capabilities.