Apple Watch Has No Time for Operators

For its latest device, Apple appears to have called time on its dealings with mobile operators. Launched to predictable ballyhoo on Monday, the new Apple Watch will hit retail stores in nine countries at the end of April. Unlike the iPhone and the iPad, however, it will not be sold through the likes of AT&T and Telefónica. At least, that looks to be the case, judging by the information that has flowed from Apple so far.

What seems clear is that customers will pay a one-off fee, starting at $349 and passing the $10,000 mark for those who like a bit of gold-plated wrist bling to go with their Gucci shoes. It connects over WiFi and Bluetooth and needs to be synched with an iPhone 5 or a later model to work properly. Cellular is not in the frame.

In other words, there is no real upside for the operator community. Watch customers will not pay monthly subscription fees to their service providers for the privilege of using Watch features. Perhaps the best operators can hope for is that Watches overtake iPhones on the popularity scale, persuading consumers using lower-cost smartphones to upgrade to pricier iPhone subscriptions. That seems improbable, although attachment to the Watch might help to reduce iPhone churn.

The Apple Watch is clearly not the only wearable device that cuts operators out of the deal in this way. But operators may be disappointed nonetheless. After all, it was Apple Inc. (Nasdaq: AAPL) that shone a light on the mobile data market when traditional handset makers had left them groping in the dark. If any player was going to help them "monetize" wearables, it was surely Apple.

Of course, the smartphone industry had been fumbling for several years when Apple came along. Consumers have only just started trying on wearables. There seems little doubt that future "Internet of Things" devices will rely on 4G and even more advanced cellular technologies for connectivity. Indeed, one of the big attractions of 5G is that it will spur the development of new IoT products and services by reducing latency and providing additional capacity for a welter of connected gadgets. (See Growth of the 5G Ecosystem, 5G Visions Dazzle at MWC, 5G Use Cases, Pre-Standards Groups Proliferate and TeliaSonera Preps Multi-Country VoLTE .)

Want to know more about 5G? Check out our 5G content channel here on Light Reading.

That does not mean consumers will pay a separate monthly subscription for each connected gadget, though. Operators might convince their customers to part with a few more dollars each month for a smart watch or tracking device, but there is obviously a limit to the amount of disposable income the average person can or will spend on communications services.

A likely scenario is that operators will sell a bundle of wearables for a fixed monthly fee. Claudia Nemat, Deutsche Telekom AG (NYSE: DT)'s Europe chief, hinted as much in an article recently published on the German operator's website. "If we are all going to have five or even ten such wearables in the future, then the simplest thing will be to have one contract with a single service environment that users can activate on all their devices with just one click," she said. (See Deutsche Telekom Says Europe Risks Being 5G Flop.)

Persuading Apple to be a part of this "service environment" will be a tough sell, but it seems inconceivable the iPhone maker will not have some kind of wearables relationship with operators in future. A 4G-enabled Watch could be sold to iPhone-less consumers through service providers, or bundled with iPhone subscriptions for a slightly higher fee.

Many companies developing wearable gadgets hope the Apple Watch will have a galvanizing effect on the industry. If that happens, operators will quickly need to work out how to make wearables fit as comfortably as possible.

For more information, see Apple Watch to Hit Shops on April 24.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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