Apple drops the AI ball and leaves no clear upside for telcos

Apple's deal with OpenAI is an admission of failure by a company that likes to do everything itself, and it brings no obvious edge opportunity for network operators.

Iain Morris, International Editor

June 12, 2024

5 Min Read
Attendees at latest Apple conference
The worshipful gather to hear Apple's latest pronouncements on AI.(Source: Apple)

In what might be a case of fiction anticipating reality, the movie Her features Joaquin Phoenix as Theodore Twombly, a man who falls in love with his AI chatbot, voiced by Scarlett Johansson, and has as intimate a relationship as possible with it. A decade since it was made, Johansson has threatened to sue OpenAI, the world's most famous AI company, for using her voice without permission. This week, Apple announced it will integrate OpenAI's ChatGPT technology into future iPhones, creating the perfect environment for millions of real-life Twomblys to elope with their gadgets.

ChatGPT has been out there for nearly two years, of course, and people have engaged with it in strange ways. But integration with Apple's operating system, iOS, will inevitably take this to a new level. Apple customers are already on unusually intimate terms with their iPhones, caressing and poking their smooth, curvy bodies even when devices just aren't in the mood. Now they will be able to exchange pillow talk as well. Any lovers' tiffs could have fatal consequences for iPhones hurtled angrily across bedrooms.

This latest dystopia comes from a company that has for years resisted the incursion of foreign tech into its products. Apple famously tore out the Intel processors and replaced them with homemade chips in its latest laptops. It has been attempting (with less success) to produce an in-house alternative to Qualcomm's modems for its smartphones. Apple's iOS is proprietary. On AI, however, the manufacturer now led by Tim Cook seems to have accepted it just can't compete.

Siri, Apple's iOS chatbot, looks increasingly outdated, a bleeping R2-D2 next to the replicants of Blade Runner. It is being supercharged with internally built foundation models under the banner of Apple Intelligence, but the real smarts will come from OpenAI. Anyone familiar with Apple's modus operandi will know that if Apple could do it, it would do it. Its partnership with the company founded by Sam Altman, who respectfully kept out of the spotlight at Apple's developer conference this week, is an admission of failure.

The deal might still buoy iPhone sales (although Apple's share price slipped nearly 2% yesterday), but it represents a shift in the balance of power that could become more important in future. A possible danger is that Apple allows OpenAI into the castle only for its customers to show they care little. Not everyone predicts the dawn of the Twomblys. In a LinkedIn post, Ronan De Renesse, a senior research director at Omdia (a Light Reading sister company), said Apple's moves are "just in case AI becomes a big device purchase driver. Personally, I don't believe it will." In a possible sign of AI fatigue, ChatGPT traffic fell 64.7% last month, according to Similarweb, another market research firm, noted De Renesse.

No obvious upside for telcos

Telcos may wonder what, if anything, this all means for them. iPhone launches can, of course, boost the adoption of data services and generate more customer engagement with networks. But this rarely translates into revenue growth now that telcos offer such generous bundles of data. Nvidia, the AI chipmaker whose market cap now exceeds Apple's, wants to convince telcos that their edge infrastructure could be used to process AI workloads. That way, they might buy its chips. But monetization of edge-based services – AI or no AI – has eluded telcos until now, and Nvidia's chips aren't cheap. As Apple sees it, that edge infrastructure just isn't needed, at least not for AI on iPhones.

Apple seems to think that most processing in this AI "inference" phase (as opposed to the training of large language models) can be done on its devices. The LinkedIn reaction of Bruno Zerbib, the chief technology officer of Orange, was to welcome this for reasons "including transport of those high bandwidth inferences on the network." Processing on the device, essentially, relieves pressure on the network.

But for anything that cannot be done on the iPhone, Apple seems to believe it can leapfrog what many telcos would call the edge and make straight for its own data centers. A new system dubbed Private Cloud Compute would run AI workloads on Apple's own silicon. Unlike Nvidia's chips, that is not sold for inclusion in servers hosted in telco or other third-party facilities.

Telco equipment vendors might feel happier if AI traffic on networks forces operators to invest. "This move will also bring massive demand to communication service provider networks and AI inference sites, be it on device, on-premises, at the network edge or in a metro data center," said Jürgen Hatheier, the international chief technology officer of Ciena, an optical equipment provider, in an opportunistic response to Apple's update distributed by email.

"As a result, service providers are investing to upgrade and fortify their networks and connect the data center sites that process all of this data, to ensure users can experience a reliable and positive AI experience," he continued. Many disagree with his assessment that chatbot traffic will necessitate spending. And without generating new revenues for telcos, it will leave them in even worse financial health.

Apple's emphasis throughout is on privacy, but generative AI seems to have scant regard for such decorum. It has already earned a reputation for itself as a serial plagiarist, ripping off artists, writers and, indeed, just about anything humans have uploaded to the Internet. OpenAI's run-in with Johansson offers proof of that to its critics, who now include tech billionaire and purported free-speech activist Elon Musk.

"It's patently absurd that Apple isn't smart enough to make their own AI, yet is somehow capable of ensuring that OpenAI will protect your security and privacy," he wrote on his X social media website (formerly Twitter) this week. "Apple has no clue what's actually going on once they hand your data over to OpenAI. They're selling you down the river."

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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