Ask HN: Why hasn't Apple bought a cell carrier like AT&T or Verizon?
To close the loop on the last missing piece in the iPhone—making it a fully integrated end-to-end communication and media device—Apple buying Verizon would be a game-changer, especially since trust in federal oversight is largely eroded nowadays.
Apple as a company are hitting walls expanding their business, having a carrier would give them another point of innovation In addition to anti-trust problems, why would Apple want a capital intensive, low-margin, commodity business? Verizon has a net profit margin of about 13%, Apple is currently about twice that. Furthermore, Apple makes computers (the iPhone being a pocket computer using the cell network instead of wired or Wi-fi). Managing millions of cell towers would be diluting their focus into a low-margin, commodity business, away from their high-margin luxury hardware/software engineering business. In fact, Apple commodified the cell networks into dumb pipes for data. Apple benefits by being on any/all networks. (See: commodify your complement [1]) (The rumored Apple self-driving car, if true, was also a silly idea. Aside from self-driving cars being an order of magnitude or two more difficult than popularly expected, building cars is not something Apple has any experience with, and is a capital-intensive business with little barrier to entry [besides capital]. Buffett noted that totaled since their beginning until now, car companies and airlines have, on net, lost money for their investors.) [1] https://www.joelonsoftware.com/2002/06/12/strategy-letter-v/ >Managing millions of cell towers would be diluting their focus Somewhat disagree. If you stuck Apple and ATT into a single holding company, each company still has identical focus. Does Berkshire Hathaway buying another company dilute the focus of any other? I am always surprised when companies want to eliminate small divisions and projects that break even as if they cant just exist off to the side, pay for themselves, and be otherwise ignored. Not everything has to contribute to corporate profit. Resources that pay for themselves aren't consumed in a way that can be reallocated if they are eliminated. The puzzle of capitalism is that a company that won't spend to expand their network will happily spend $15 billion to buy a competitor. As a worker you're mainly concerned about how many dollars you get for an hour of work, a capitalist is concerned about the return they get on investment -- they want to invest as little as possible but get as large a return as possible. A consequence of that is that a huge valuation like what Apple has is a bit of a bluff. If they really started to invest that capital their valuation would collapse, their capital looks valuable because they can run a big business while using very little of it. Wireless carriers are a low-margin, increasingly commoditized business. Apple is only interested in expanding into high-margin businesses like services (iCloud, Apple Music, Apple TV, etc.) where they can offer unique value (e.g. privacy) compared to their competitors. Apple keeps so much cash on hand because they have more money than worthwhile ways to invest it. Uh no, they print money. They just have more costal spend and wouldn’t make Apple balance sheet attractive for wall st. The commoditization is a myth - it’s like beer, most of the competition are brands that are either reskinned white label services or partners. s/costal/capital/ > Wireless carriers are a low-margin AT&T's gross margin is 50-60% (for reference, Apple is usually 40-50%). Like many others have pointed out, Apple is obsessed with avoiding antitrust scrutiny. A fun (edit: incorrect) example: they are fine owning the device you use to connect to their own streaming service to watch their own produced TV shows, but appear to strictly avoid showing their products in those shows. EDIT: I stand corrected! Multiple "Apple Original Series" contain Apple products, such as in Ted Lasso and (I think implied) in For All Mankind, as people pointed out below. Shows what I know about TV. I wonder why some Apple Original Series have Apple products, and some don't. I would love to see if there's any correlation between the number of shows which feature a specific product and that product's market share in the show's region or demographic. > but appear to strictly avoid showing their products in those shows. Apple has 'villains can't use iPhones' rule. Directors are not allowed to use Apple product placement for villains. Apple pushes their products in Apple TV+ and pays for product placements, or provides their products for free for other productions as as long as you follow the rules. That is not true, just from first principles. You think anyone would watch Apple TV+ shows if there were no suspense or mystery because all the good guys use Apple stuff and all the bad guys use non Apple stuff? It is true. You can't use first principles to make argument about easily verifiable facts. There are movies that use loopholes and gray areas, of course. https://www.theguardian.com/technology/2020/feb/26/apple-doe... That Rian Johnson interview got milked to high heavens for clickbait. Genius marketing by him, especially since he makes mystery movies. Plenty of examples of bad guys using iPhones here: https://www.reddit.com/r/television/comments/13hrdak/comment... https://www.reddit.com/r/television/comments/13hrdak/rant_ap... Just have everyone use non-apple stuff? What? The characters in Ted Lasso almost exclusively have iPhones and Macs To the extent that a character makes a joke about his relationship getting serious enough that they started sharing an iCloud account Yeah… there are also a number of Apple products in For All Mankind Right you both are! I had no idea. Guess they need even more product placement :) I'm really surprised they do it at all. I always thought they'd be crazy to. Why would Apple, the incredibly profitable, cash-happy company that could arguably be called the most successful business in the world, choose to take on billions of dollars in debt and the responsibilities of physical infrastructure maintenance? Apple is "hitting walls" expanding their business because they have captured nearly the entirety of their potential customer base. They don't need to keep expanding. The carriers are their biggest sales channels and eat all of the t&c and concessions that large customers demand. I oversaw a big org that had like 50k iPhones. We would never come to agreement with Apple’s terms, and they’d never give us the price concessions. Those 50k phones never cost more than $15,000 annually. I paid more for charging cables than iPhones. Apple can’t do that, as the feds have most favored nation status for procurement. Carrier also accept liability for the App Store, which Apple will flip the bird about. No device manufacturer would ever be permitted to own a national carrier like that, nor vice-versa. It gives too many opportunities for monopolizing the customer -- like there aren't enough of those already! What if Apple just operated a MVNO like Google Fi does? MVNOs are like second or third-tier citizens on mobile carriers, why would Apple hand a lever like that to, say, AT&T? That depends on their negotiations, no? Fi has been fantastic for me in the years I've had it, far better than first party AT&T or Verizon for my use cases. Presumably that's because Google was able to negotiate favorable terms from T-Mobile. I assume Apple would be even better at that. Google Fi isn't deprioritized. There are a few MVNOs that have the same priority as first party carriers. Apple could definitely strongarm the carrier to make them highest priority. ??? Why would they want to halve* their market cap? Lol. (*: ok 2T vs. 3T) What do you mean? Why would operating a MVNO lower their market cap? Apple has a 3 trillion market cap with a 1/100th of the products that Google makes. Why would they want to follow a strategy that is evidently worse? Lol. Are you saying if Apple does one thing Google does it becomes Google and then has identical financials? Huh? Just offering a cell phone plan doesn't mean that Apple becomes Google overnight? I would love to see a first party Apple cell plan. It'd be better if they owned the whole network, but a MVNO would be better than nothing. That doesn't mean Apple has to copy Google in any other ways. Antitrust; antitrust; antitrust; but also, debt, debt, and more debt. Verizon? $115 billion of it. T-mobile? $78 billion. AT&T? $126 billion. It gets even better when 6G networks start knocking! So let's make the case to shareholders: We buy Verizon, with a $180 billion market cap, for a substantial premium; assume $115 billion of their debt; there's an investment into 6G on the horizon; this hopefully won't anger any major players in the Android market (e.g. Samsung) from abandoning the network; and this will somehow magically reach the break-even point. Obviously, absurd. AT&T's debt is such a self-own. You'd think it's because building networks is expensive, but it's mostly debt-finance (IMO terrible) acquisitions like DirectTV and Time Warner This would be like cutting off their nose to spite their face. Apple profits from phone sales. The more distribution channels, the more phones they can sell, and more organizations spending the money to advertise iPhones. If Apple bought a cell carrier, they would be in direct competition with the other carriers. Worst-case, they would likely get dropped from the other's lineups. The less worse case, they wouldn't get advertising/promotion from their competition. They’re investing heavily in satellite communications. https://www.mobileworldlive.com/apple/globalstar-apple-super... Weirdly enough though. It's super expensive, only a real option for emergencies and not a mass market. Either they expect low orbit sat to be the next thing or it's a pure diversity topic because yeah what else should they do Isn't low orbit sat what Starlink is? Yes But for high speed the smallest antenna is still centimeters wide. Interesting. I wonder if you can space it out virtually by having several iPhone users stand near each other and form a virtual antenna? I don't need to be able to stream 4k from the woods, but it would be nice to be able to download topo maps and such while hiking. If it's only about the antenna you should be able to connect it with a cable and put it on a backpack Instead of worshipping company growth, perhaps you should think of your interests as a potential customer and remember competition is good when you're buying... All our carriers kinda suck, though. The best ones are all MVNOs. Apple entering the space WOULD be competition. The only reason I could see for Apple to do this, is the same reason I assume that the DoJ would break them up. why would they? It's already a fully integrated end-to-end communication device. They don't know how to operate it, they don't care about millions of people complaining about shitty network, they don't have to handle internationalization and they would position themselves against whoever carrier is before/after at&t, Verizon and T-Mobile. They make huge margins by making hardware. This type of margin is not happening at carriers. And no just because companies like Verizon do have daughters in other countries they are not global. So apple would also need to expand to all countries. I only see a lot of downsides and not a single upside. PS it looks to me like all of your comments are being auto-marked as "dead" and won't show up to most readers. Not sure why; they seem totally reasonable to me. Might wanna reach out to hn@ycombinator.com and ask. (Welcome to HN btw) Uh, doesn't it need a network to be an end-to-end communications device? Except for physical proximity of course. If you wanna define it like this then apple would need to be your home ISP too. And owning all the fiber connections between the base stations and their network. And all connections from home to their network. And even if they have that, you are not browsing Verizon services but from others like Google etc. They don't do that. Closest operator I know could be German Telekom because they came out from the state owned Telekom company and they got all the copper which was laying around. I am not sure how else to define "fully integrated end-to-end". Http, https, etc. the protocols responsible for the end to end communication Protocols and nodes are not the same. You’re a bit late to that, in the sense that they actually considered it but ultimately gave up given the US carrier landscape and AT&T’s dominance. At the time there were no MVNOs to speak of… Why hasn’t Apple entered the medical devices business (glucose monitors etc)? Isn’t that a lot easier than spending hundreds of billions into buying a carrier? Apple is adding features that compete with medical devices, but my guess is that they haven't developed any devices that require FDA approval because the approval process would eat up too much mental bandwidth among their executives. Apple seems to have a healthy instinct for conserving executive bandwidth. AirPods Pro are FDA approved as hearing aids Apple Watch has FDA marketing authorization for afib detection (and looks like sleep apnea detection as well) Because privatized carriers are low-margin, high-cost, and with an uncertain future. Let’s take two different paths as an example of why it’s a bad idea. PATH 1: Privatized Carriers are the Forever Norm In this scenario, private carriers (cellular, wireline, satellite, fiber, etc) don’t get nationalized or regulated (so now, but forever). The market forces there are all about consolidation since these are low-margin businesses, and fewer competitors means higher prices, more revenues, and more customers. If Apple entered this arena, they’d be exposing themselves to the predatory maneuvers of companies like BT or AT&T, who generally enjoy screwing their competitors over and locking customers in. Now these telecoms would have justification for blocking Apple devices or functionality (like some did to FaceTime), and deliberately choosing radios the iPhone doesn’t support so as to force Apple to spend more money on expansion of their network or adopting new radios for said networks. It generally exposes Apple to a world of pain and misery for nothing in terms of growth, and hinders their technological progress by forcing them to invest exponentially more money to support new standards or products across their network. PATH 2: Carriers are Nationalized, with Telecom treated as a Utility This is a more likely outcome given the importance of the internet to the functioning of a society. As a general rule, if your country NEEDS something in order to succeed, that thing is cheaper and more scalable if you own it yourself - provided you have a functioning government apparatus that invests in its modernization and maintenance (so, not America). In this case, Apple would’ve started their own carrier only to see control taken from them for the public good, wasting money they could’ve invested in other R&D or product lines. That’s likely the long game they foresaw back in the 2000s, and is likely why they never started their own MVNO or carrier. Ultimately, Apple benefits more from building products on internationally standardized communications systems than building said systems themselves. It keeps their costs low, lets others absorb R&D and upkeep costs, while also driving the market and infrastructure adoption through new products themselves. Infrastructure is rarely directly profitable to private enterprise, and when it is, it’s often taken away once it becomes necessary for the survival of a country. Apple's grift is convincing consumers they are buying into superior technology. Iphones are the best phones, Macs are the best PCs, iGoggles are the best headset. Despite substantial limitations on all these products, they create the mystique of superiority. If Apple bought a carrier, they'd need to sink insane capital into making it noticeably better (than others and itself before acquisition). And if they did, how noticeable is a little extra bandwidth? Not very considering everyone is offloading to wifi anyway.