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Apple's (AAPL) iPhone Sans Carrier Exclusivity

 August 21, 2009 09:41 AM

Apple's (NASDAQ: AAPL) iPhone is tied to the AT&T network. Sooner or later, the AT&T's (T) service plans could become a "serious hurdle" for would-be customers.

The message from social networks and surveys is clear – love iPhone but hate AT&T(T) network.

Apple is stuck with AT&T network until the exclusivity carrier agreement lapses. Will Apple renew its exclusivity agreement with AT&T or will it go the old mobile industry ways of selling the device to every mobile operator around.

[Related -Fusion-IO, Inc. (FIO): Can Fusion-IO Q2 Results Cheer Street?]

Apple may be becoming the mobile virtual network operator...

Apple may be planning to write its own application that enables iPhone to operate in a constant roaming mode, with no real home network, but with the ability to connect to any wireless network. Apple is planning to become the mobile virtual network operator (MVNO) where it would buy or reserve minutes on all the networks and offer them directly to the iPhone owners. The phone or the users could manually or automatically select the best service level and price at any given time and place.

A quick look at Apple's (NASDAQ: AAPL) patent application called "Dynamic Carrier selection" filed on Oct.10 2006, reveals that Apple had been thinking along these lines even before the introduction of iPhone.

[Related -Google Inc (GOOG): Why Nest Labs Deal Is A Wakeup Call For Apple Inc.?]

The device under the hood...

The device described in the application will have its own iTunes MVNO carrier ID to identify and register itself to any available network. Apple will negotiate with the network carriers for initial permission, registration, and data exchange between the iPhone and Apple MVNO server. When iPhone first connects to a wireless network, it will send MVNO server ID and location and receive information about available wireless networks, services offered, and rate of each service in that area. A user can manually select the best network or the system automatically selects the most appropriate network based on certain specified criteria. Once the permanent connection is established, the available network service and pricing data can be continuously updated and the device can be configured to change the network operator as and when better pricing becomes available.

As an Example, the AT&T may be offering better daytime rates and T-Mobile have better night time and weekend minutes, while three other networks have better data rates. The iPhone system will be  smart enough to switch the network operator according to the best pricing.

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