Jobs instead succeeded in turning the carrier into a dump pipe when it came to application downloads

At a Law Seminars International event in Seattle, cellular industry veteran and venture capitalist John Stanton revealed that Apple, Inc. (AAPL) and its leader, the late CEO Steven P. Jobs, tried unsuccessfully for three years to flesh out plans for a private network to power the iPhone.

I. Apple Wireless?  It Almost Happened.

The independent network would have relied solely on Wi-Fi, versus conventional wireless standards like GSM or CDMA  (3G).  Mr. Stanton claims to have worked with Mr. Jobs from 2005 through 2007 examining the feasibility of the proposal.

He explains, "He wanted to replace carriers.  He and I spent a lot of time talking about whether synthetically you could create a carrier using Wi-Fi spectrum. That was part of his vision."

Steve Jobs
Late Apple CEO Steve Jobs hoped to cut wireless carriers out of the equation with his iPhone project.  [Image Source: AP/Paul Sakuma]

Mr. Stanton points out that while Mr. Jobs' plan failed to be realized, that the work forced cellular service providers, like the original iPhone (U.S.) carrier AT&T, Inc. (T) to make costly concessions.  Among them was the 2008 launch of the App Store.  

While Apple's marketplace was not the first of its kind, it was the first major smartphone applications depot to see success and the first to escape giving carriers a cut of the revenue.  In making sure that revenue was only divided between itself and developers, it essentially reduced carriers to "dump pipes", much like landline data service providers.

It was a model that Google, Inc. (GOOG) would go on to follow, launching the Android Market in Oct. 2008.  Together, these two app stores account for the majority of application downloads worldwide, and give nary a penny to carriers, except secondarily through data fees.

For carriers, Mr. Stanton suggests, it's a frustrating experience.  He comments, "If I were a carrier, I'd be concerned about the dramatic shift in power that occurred."

II. Stanton Made Many of the Cellular Networks We Know Today

Mr. Stanton used to work on the carrier side, riding the wild wave of acquisitions that consolidated the American cellular market to four major providers.  He began his career in 1983 working at McCaw, a cable television company.  At the time the company was interested in expanding into cellular communications, and it picked Mr. Stanton -- a Harvard Business School grad -- to lead the effort.  The result was the first nationwide cellular carrier, McCaw Cellular Communications -- a company that would later be swallowed up (merged, technically) with AT&T Corp., forming AT&T Wireless.

In 1988 he founded Stanton Communications, a company that focused heavily on cell phones and pagers.  That same year he founded Pacific Northwest Cellular Comp., which would go on to become the nation's eighth largest cellular service provider.  In 1992 he acquired a controlling interest in another top provider, General Cellular.

He merged the two carriers in 1994 to form what was billed as "the largest rural cellular-service provider in the United States" at the time, Western Wireless Corp.  That year he founded a new subsidiary called VoiceStream PCS.  VoiceStream was among launched in 1996 with the help of a Western Wireless initial public offering of stock.  VoiceStream was arguably the first carrier to go all digital and consolidate paging, text messaging, and caller identification (caller ID) into a single service.

[Image Source: Creative Touch]

In 1999 Mr. Stanton spun off VoiceStream to form an independent carrier.  For a time Mr. Stanton served as CEO and Chairman of the Board at VoiceStream and Western Wireless.  VoiceStream invested in some key startups who were in their infancy at the time, including Danger -- the company which made the popular Sidekick early feature phones -- and Research In Motion, Ltd. (TSE:RIM).  RIM would go on to launch its first BlackBerry smartphone shortly thereafter, in 2003.

In 2002, VoiceStream was acquired by Deutsche Telekom AG (ETR:DTE) and folded into T-Mobile USA.  Western Wireless was bought by Alltel Corp. in Aug. 2005.  Alltel in turn would get scooped up by Verizon Wireless, the joint venture between Verizon Communications Inc. (VZ) and Vodafone Group Plc. (LON:VOD).  The move created the largest carrier in the nation, pushing Verizon Wireless ahead of the merged Cingular/AT&T Wireless network in Jan. 2009.

The tech pioneer in his talk emphasized the importance investing in smaller promising companies and avoiding paying large fees to aging veteran players played in his success.  He comments, "We had investments in those spaces because in part we were the little guy and we wanted access to unique devices."

The commentary seemed somewhat aimed at Sprint Nextel Corp. (S) who recently agreed to pay an incredible $15.5B USD for a four-year deal with Apple's iPhone, a move blasted by analysts.

John Stanton
John Stanton founded much of the cellular infrastructure that comprises America's current networks [Image Source: Jacob Kepler/Bloomberg]

It's hard to question his advice -- he's among the wireless industry's greatest success stories, accruing a fortune of $1.1B USD at last count.  He joined with Microsoft Corp. (MSFT) CEO Steve Ballmer in becoming a minority owner of the NBA's Seattle Supersonics, which have since moved to Oklahoma City and become The Thunder.  He also holds a stake in the Seattle Mariners.

Sources: PCWorld, Funding Universe

"Folks that want porn can buy an Android phone." -- Steve Jobs

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