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Apple warned over built-in Sim cards

By Andrew Parker in Barcelona

Published: November 18 2010 22:31 | Last updated: November 18 2010 22:31

Some of Europe s leading mobile operators are warning that they could take

punitive action against Apple if it introduces a technological innovation on

its iPhone.

The operators are privately saying they could refuse to subsidise the iPhone if

Apple inserts an embedded subscriber identity module, or Sim card.

The operators are accusing Apple of trying to gain control of their

relationship with their mobile customers with the new Sim. The technology could

allow customers to buy the iPhone and sign up for service on Apple s website

and start using it immediately.

Closer to the operators hearts, it could allow customers to switch more easily

from one to another or insist on shorter-term contracts. It could even set the

stage for Apple to resell connection service on its own, although the company

has not indicated such plans.

European operators known to have concerns about Apple s interest in the Sim

include Vodafone of the UK, France Telecom and Spain s Telef nica. They all

declined to comment, as did Apple.

But one senior executive at a European telecoms group said Apple risked a war

over the new Sim with operators, which could refuse to subsidise the iPhone.

The iPhone s wholesale price is about $600, but the operators charge customers

much less and sometimes nothing if they sign up to network contracts that can

last two years. These operators subsidies have enabled Apple to maximise

sales.

European operators say Apple is considering having a Sim embedded in the

iPhone, which could then be

activated and updated at its online store.

Such a Sim would be a sweeping departure, although an operators trade body is

looking at setting standards for universal cards.

The Sim is a memory chip that enables a phone to connect to an operator s

network. It contains a customer s personal data. Currently, the operator

usually provides the Sim to the customer at its shop. The Sim is then activated

by the operator so the customer s phone can connect to the network.

Robin Bienenstock, analyst at Bernstein, said any decision by Apple to

introduce an iPhone with a Sim embedded would undermine the operators

relationship with their customers.

Such a move could ultimately prove to be the first step in a process in which

[the mobile operators] cede customer control to handset vendors like Apple,

[and are] relegated to commodity capacity providers , she said.

However, Ms Bienenstock estimated that Apple s global iPhone sales could be cut

by up to 12 per cent if the operators refused to provide subsidies for the

smartphone.

Additional reporting by Joseph Menn in San Francisco

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