Cutting out carriers is tough, even for Apple

Carriers are a fact of using a cell phone. Can a special SIM card enable Apple to deploy complete control of the iPhone, as a recent report suggests?

The iPhone 4
CBS Interactive

Apple has made it plenty clear it would like to control everything about your experience using the iPhone.

But does that include somehow excluding the carrier from the process? GigaOm reported today Apple has been working with Gemalto to create a special SIM card that would allow iPhone buyers in Europe to get their phone from an Apple Store or online and then activate them via the App Store. The report says that this is Apple's attempt at "cutting out the carriers."

The SIM card, of course, is a central part of any GSM phone. It holds not only your phone number but also your identity as a subscriber. When you make a call, your SIM card identifies you as a subscriber to the carrier.

Even if GigaOm's sources are right--and we haven't confirmed that--it would be impossible for Apple to completely cut wireless carriers out of the equation of using a cell phone short of Steve Jobs opting to build out its own wireless network. And that's highly unlikely.

The big question here is whether the carriers would get on board with Gemalto's concept. To activate a phone, Gemalto would need to remotely access the carrier's network and activation software. Currently carriers have such relationships with third-party retailers like Radio Shack, so the concept isn't improbable.

On the other hand, if the carriers don't go along with it and Gemalto is somehow able to do it anyway, then that would be a big deal. Also, if Gemalto could make a single SIM transferable between carriers, we'd also be impressed. Currently, if you switch an unlocked phone from T-Mobile to AT&T, AT&T can't take your T-Mobile SIM and just overwrite it with new information.

So, yes, the prospect of a Gemalto-made SIM card certainly is interesting, but we don't see it as doing "an end-run" around the carriers. And we don't agree in the least with the notion that such a move would be "carrier-crippling." Here's why:

GigaOm makes the case that the new SIM would enable Apple to sell the iPhone without carrier involvement. We'll concede that, but it's not a new concept. Currently, you can buy and activate an iPhone in the Apple store without ever setting foot in an AT&T location. Google tried this same tack , admittedly unsuccessfully, with the Nexus One.

Sure, the Gemalto SIM would separate the carrier from the activation process even further, but you're still doing business with the carrier at the end of the day. You're still paying a carrier for the wireless service, you're still depending on the carrier to get service, and, for most people we guess, you're still signing a contract. In other words, you're not cutting out the carrier at all.

Carrier choice would be a nice thing, particularly in this AT&T-dominated market, but that wouldn't come as the result of a new kind of SIM card either. In many other countries, multiple carriers offer the iPhone in the same markets. And when consumers visit an Apple store on those places, they can activate the phone as they wish. So no, we don't see why that's significant either.

So how about the unlocked iPhone angle? Again, that would be interesting but not game changing. Though we don't have such freedom in the United States, unlocked iPhones are quite common abroad. Our friends in Canada, for example, have enjoyed them since last summer, and U.K. customers can buy them as well. Yes, they can pick carriers at will, but even unlocked iPhone users have to sign on with a carrier if they want to make a call.

And on the service side, though the new SIM would regulate the carrier to the role of a "dumb pipe," that's not a novel concept either. Remember that AT&T already plays that role for Apple in the United States. Its only role is to provide you with a network. What's more, AT&T doesn't cram the iPhone with AT&T-branded applications as it does on other handsets. Apple was given free rein with the iPhone from the start.

So we don't see how the Gemalto SIM would really make the iPhone purchasing process that different. If customers were able to activate their handsets through a downloaded iTunes app--as the GigaOm report predicts--that would be pretty convenient, but the carrier still will have its hands in your pocket.

 

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