Will Apple bid to build US wireless network?

Analysts doubt Apple interest in wireless spectrum auction

Apple is debating whether to participate in the US Federal Communications Commission's Jan. 16 wireless spectrum auction, BusinessWeek reported Monday, but analysts who follow Apple said the company would be crazy to build a nationwide wireless network.

"That's way out in left field," said Gene Munster of Piper Jaffray & Co. "They're spending their money on other things, like the price cut on the iPhone."

Ezra Gottheil, an analyst with Technology Business Research Inc., came to the same conclusion, but wouldn't dismiss the report outright. "I wouldn't be surprised if Apple didn't do some head-scratching [on this idea]," Gottheil said, "but I don't see them taking their eye off the ball." Apple would face tremendous risk, something it doesn't need. "And they are a company that can only focus on one thing at a time."

Apple would have to come up with some serious cash to enter the FCC auction, which will sell rights to the 700MHz band that TV broadcasters are handing back to the US government when they go all-digital in 2009. The BusinessWeek story, however, noted that Apple has nearly US$14 billion in cash reserves, more than enough to make the minimum bid of $4.6 billion.

The story, which was posted on the magazine's Web site Monday, cited two unnamed sources who claimed that Apple CEO Steve Jobs has studied the implications of joining the auction, but is leaning against the idea.

Apple's iPhone, of course, is the genesis of any speculation that Apple might compete with other technology companies, most notably Google, in assembling a wireless network. One former Apple executive even told BusinessWeek that it would make sense for the company to give away access. "With the kind of cash position they have and the kind of push they just made into the handset space, it makes a lot of sense for them," the anonymous source said.

No way, said Munster. "Not only is that not where they know what they're doing, but that's also not where they want to go. It's pretty clear that Apple wants to be a device and a software company, not a network operator."

Van Baker, an analyst with Gartner, said somewhat the same thing, albeit with a caveat. "This would be very far afield for Apple, so I think the odds are very low that Apple would pursue this unless it is in conjunction with a partner," he said in an e-mail.

Exactly, chimed in Gottheil. "Apple is unlikely to place a bid itself, but it would very much like someone to build a network they would like, one with a low barrier to entry like low-hourly-fee basic voice and Web access, with fees for higher value services," he said.

Apple might consider a joint venture of some sort, allowed Gottheil, who tagged Cisco and Google as possible candidates. "Apple has a long-standing relationship with Google, of course," said Gottheil. Three of the seven current Apple board members have ties to Google, including Eric Schmidt, the search company's CEO, and former Vice President Al Gore, who serves as a senior advisor to Google.

"[But] they don't want to turn into a utility company. They don't want to risk their culture and too much of their reserves," Gottheil said. "On the other hand, they don't like the existing providers."

Apple's - and Jobs' - antipathy to wireless carriers, even to AT&T, Apple's exclusive partner in the U.S. for the iPhone, has been the subject of blog postings and pundit musing since the smart phone's debut in June. Last week, for example, when Jobs announced the iPhone's US$200 price cut, he made no mention of AT&T, nor did he mention T-Mobile, the wireless carrier that provides the hotspots for Starbucks, Apple's new iTunes partner.

"Apple should become more net-centric, but they don't have to own the network to provide cloud-based services," Gottheil said.

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Gregg Keizer

Computerworld
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