The upcoming wireless spectrum auction, slated for Jan. 16, has generated lots of speculation about how it will affect the telecommunications market. Google’s (News - Alert) announcement in July that it plans to bid in the auction created something of a stir. Now even more excitement is being generated by Apple’s apparent interest in the spectrum as well.

 

BusinessWeek reported Monday that two sources from Apple (News - Alert) confirmed the company’s potential interest in bidding on the spectrum. The spectrum in question, sometimes referred to as 700Mhz, is what television broadcasters are freeing up as part of the mandated shift to digital TV. It will be available for use no later than 2009.

 

Many companies are interested in this spectrum because it offers a way to provide a variety of broadband wireless services. For Apple, the most obvious application is a way to boost the performance of service for iPhone. It should be noted, however, that since Apple has an exclusive agreement with AT&T (News - Alert) for cellphone service, use of the spectrum would be a couple years off at least.

 

But still, there is something compelling about the idea that Apple might even consider bidding, implying that it intends to possibly create its own cellphone service.

 

The sources that spoke with BusinessWeek said Apple is weighing the pros and cons of participating in the auction. At present, the scales seem to be tipping in the direction of “no.” This is not, BusinessWeek stressed, because Apple can’t afford to buy spectrum, but rather because jumping into the low-margin world of running a wireless network probably wouldn’t end up being a winning proposition for the company.

 

In-Stat analyst Bill Hughes told TMCnet he has several concerns with a wireless spectrum bid by Apple, although he definitely understands why the company might consider such a move.

 

“Many wireless handset manufacturers decry the difficulty of having a wireless operator carry their device,” Hughes said. “One solution to that, if you have multiple billions at your disposal, is to buy your own spectrum.”

 

The problem with that strategy, Hughes said, is that while it would assure Apple its own channel, that benefit would come at a very steep cost.

 

“The reason that wireless carriers are hesitant to take on new devices is not that they are just stubborn,” he said. “There is real cost from accepting devices that do not ‘behave nicely.’”

 

Of course, Apple could always create its own wireless network and use it solely for Apple devices. That would mean a pretty lightly loaded network, though, and probably wouldn’t be a sustainable strategy over the long run. And, as Hughes pointed out, accepting other devices brings a whole new set of problems.

 

“If they accepted other phones, they would quickly find a lot of badly behaved devices,” Hughes said.  “The FCC (News - Alert) certification for devices does not protect against all the bad things that can happen.”

 

Gizmodo blogger Mark Wilson echoed that sentiment in a Monday post: “the purchase would mandate a lot of infrastructure and busy work. Presumably Apple would farm out logistics to another firm, but still...it's a commitment that brings you directly into the wireless service world, which is full of headaches and federal regulation.”

 

Apple seems to be reaching the conclusion that it’s best to leave network operation to the network operators, and instead focus on what it is good at: creating new, cutting-edge computing gadgets.

 

“Apple’s bid is a long shot,” said ZDnet blogger Larry Dignan in a Monday post. “But on paper an Apple bid makes some sense and could change the game.”

 

Only time will tell. Apple is known for doing things differently and a cellphone manufacturer running its own wireless network would be pretty different.

 

BusinessWeek sees Apple’s interest in the spectrum auction, even if it ends up declining to participate, as being a potential change in strategy from devices to services. That definitely would be a change, and not one that seems likely—at least on a wholesale level—anytime soon. Eventually, though, it’s not unconceivable for Apple to jump on the software-as-a-service and on-demand bandwagon since that’s where things seem to be moving.

 

---

---