Without doubt Apple has an amazing lineup of products. They control the iPhone app market and it's been the 'closed-garden' approach since the beginning. They have control over everything. There's one thing that they have no control over. It's the ability to sell directly to consumers in United States and Europe where the phones are normally bundled with talk-plans and sold by the operators. They want to by-pass the operators. So, Apple has been working on the idea of "Integrated SIM Cards" which would be embedded inside the device and cannot be changed. The future iPhones was being equipped with Integrated SIM Cards.
This plan has been shelved by Apple as the operators in Europe threatened to withdraw the subsidy that they are offering to the customers now. Today, operators in UK such as Vodafone and O2 are giving away the iPhone for free to any customer who sign up for a 24 month contract! The mobile operators are currently paying around 375£ or 700$ to Apple. A senior source at a mobile operator said: "Apple has long been trying to build closer and closer relationships and cut out the operators. But this time they have been sent back to the drawing board with their tails between their legs."
There has been some rumours reported by Gigaom regarding Apple's initiative to disintermediate the operators. "It’s rumored that Apple and Gemalto have created a SIM card, which is typically a chip that carries subscriber identification information for the carriers, that will be integrated into the iPhone itself. Then customers will then be able to choose their carrier at time of purchase at the Apple web site or retail store, or buy the phone and get their handset up and running through a download at the App Store as opposed to visiting a carrier store or calling the carrier. Either way, it reduces the role of the carrier in the iPhone purchase. Gemalto and Apple have not responded to requests for comment."
Gemalto is the proposed partner in this solution and they are one of the top players when it comes to digital security and mobile banking. So, this is what Gigaom has to say about Gemalto. "The Gemalto SIM, according to my sources, is embedded in a chip that has an upgradeable flash component and a ROM area. The ROM area contains data provided by Gemalto with everything related to IT and network security, except for the carrier-related information. The flash component will receive the carrier related data via a local connection which could be the PC or a dedicated device, so it can be activated on the network. Gemalto will provide the back-end infrastructure that allows service and number provisioning on the carrier network."
If the above approach is employed then Apple essentially controls everything in your iPhone. The Apps, The Carrier Information and The OS. Why is Apple exploring this route? There are multiple incentives.
First, the balance of power shifts from Operator to Handset manufacturer. Now the users no longer have to choose the operator first and then buy the handset. Instead, they would be buying the handset and then choosing the operator! If they are not happy with the operator, they can just swap it with some one else. In the current structure, users are locked with the operators for atleast 2 years.
Secondly, Apple can now venture into mobile payments easily. The battle for mobile payments is going on and there is lot in stake. It's a huge market. Apple has a database of 160 million credit cards through the iTunes payment system. With the integrated SIM Card, they can enforce the necessary security and hardware capabilities right in to your handset. They essentially would be disintermediating the credit card companies.
Third, Apple can become a mobile operator ala Mobile Virtual network operator (MVNO), which essentially opens up another revenue stream.
Though Apple has temporarily withdrawn this plan due to the operators threat, they are still going ahead with the integrated SIM on iPads. The reason being iPads are currently not subsidized by the operators. Apple would be releasing a new version of iPad for the christmas the device is expected to have the integrated SIM.
The above news might look weird to Indians because there is 'unlocked' market prevalent here. We dont have those restrictions of being locked with the operators currently :)