Apple Eyes the Wireless Auction

(page 3 of 3)

When a new appointment is entered into an iPhone, the network could make sure to update the calendars on the customers' Mac or laptop, or even the iPod in their car. Says one longtime Net executive: "Apple's current architecture forces you to designate a Mac as your server where you stream to Apple TV or sync your iPhone. This is really klutzy. So what is the answer? Well, one is to have your media in the cloud. If the performance is there, it would be a superior model."

In a sense, Apple would have created a new kind of "walled garden." Normally, this term refers to Net offerings that limit where consumers can go on the Web. Think about the limited browsing available from most TV cable boxes. But Apple's walled garden would be defined not by what it limits you from doing, but by the fact it's tuned to work best with Apple's own hardware. For Apple fans, they'd only have to be familiar with one user interface. And since Apple's products all rely on the same set of software—Safari Web browser, the iTunes Music Store, the Quicktime Media player—they wouldn't have to deal with the many incompatibilities that plague Net users.

Also, Apple includes a wireless networking technology called Bonjour in every download of iTunes that lets any Apple product automatically spot other Apple products within range. Here's one possibility: An iPhone owner could be able to use the device like a handheld media server, to move movies or songs or files out in the cloud among those devices.

Grunt Work for a Partner

The hardware cost of building out the network would probably not be that huge, measured in hundreds of millions, possibly, rather than billions. And if Apple went to a voice-is-free approach or to a flat fee, many of the administrative tasks—bill tracking, or detailed call data, for example—would be largely unnecessary. And since no lawns would need to be dug up to make way for new fiber cables, Apple could connect homes for less than $300, compared with more than $800 for fiber, say experts.

Of course, there would be enormous complexity in running such a network, given rules set by the FCC. That's why most sources think Apple would sign up a partner to handle the grunt work—say, an equipment provider such as Ericsson (ERIC) or Alcatel (ALU), or a consulting firm such as EDS (EDS). Even then, skeptics such as Txtbl's Sarva doubt Apple could ever figure a way to make a return on its network investment.

The rules approved by the FCC on Aug. 31 make the job more difficult as well. Thanks in large part to pressure from Google and other Net companies, owners of the spectrum will be required to allow any device or application to run. Such "open access" rules are an attempt to break the ability of phone companies and cable providers to limit which cell phones or other devices consumers can use, or to prevent them from using competing services for downloading music or playing games. That means Apple would have to think not only about enhancing the use of Apple products, but also take on the gargantuan task of making sure the network also supports competing hardware and software, from Microsoft's Zune music player to Amazon's (AMZN) Unbox movie service.

And Jobs might have to beat out Google CEO Eric Schmidt, an Apple director, in a bidding war (BusinessWeek.com, 7/20/07).

Schmidt has said Google, come January, will likely bid.

Burrows is a senior writer for BusinessWeek, based in Silicon Valley.