Apple moving the iPhone through regional operators, starting with C Spire

Apple’s iPhone U.S. expansion strategy has begun to take form. It’s not just striking exclusive one-off deals with the nationwide operators but moving down the ranks to the regional operators. C Spire became the first non-Tier I operator to offer the iPhone 4S, revealing the news with little pomp when it began marketing the device's forthcoming availability on its Website and by issuing what has to be the shortest press release in telecom history.

The statement’s full text: "C Spire Wireless announced today that it will launch iPhone 4S, the most amazing iPhone yet, in the U.S. in the coming weeks."

C Spire, which recently changed its name from Cellular South (CP: Cellular South renames itself C Spire, gets all snuggly and personal), then referred all questions to Apple.

While the industry read the news with somewhat of a shock, scaling down to the Tier II and Tier III operators was the next logical step in Apple’s expansion strategy--as Connected Planet has pointed out before (CP: New iPhone 4S welcomes more carriers—but skirts the 4G debate). Apple, however, hasn’t exactly been very public about its intentions, not even mentioning the new carrier deal in its earnings call on Tuesday (CP: Apple disappoints a high-shooting Wall Street).

There is this myth of iPhone exclusivity perpetuated in the U.S., while in many European markets, the iPhone is available through as many as five national operators. Every new operator deal represents a new sales channel for Apple. It doesn’t want to limit the iPhone to specific carriers, though it does stagger operator launches in order to maximize hype and maintain its pricing power (hence the delay between Verizon and Sprints’ launches of the iPhone). The reason the iPhone has been much slower to proliferate among U.S. operators than in other markets is in part due to unlocked device regulations in other countries but primarily due to the unique circumstances of the U.S. wireless market.

Until the CDMA iPhone 4 and the new 4S emerged, Apple had little choice but to strike an exclusive deal through AT&T. It was the only nationwide operator that supported the cellular and PCS bands and GSM/high-speed packet access (HSPA) radio technologies embedded in the iPhone 3G and its  future iterations. The majority of U.S. operators use CDMA networks, the remaining nationwide GSM operator T-Mobile ran 3G on different bands, and the only operators that shared AT&T’s 2G-3G configuration were a few small regional or rural operators like Cincinnati Bell.

With the CDMA iPhone 4, Apple’s U.S. and global horizons suddenly expanded. The iPhone 4 and new 4S can now run on the vast majority of U.S. networks, though there are still some huge exceptions. T-Mobile is the biggest, though Leap Wireless and MetroPCS are almost as noteworthy. Both use CDMA at PCS, but their recent expansions have been over the Advanced Wireless Service (AWS) bands, which T-Mobile also uses for HSPA+. Not that Apple is eager to jump in to bed with either one of those operators. Prepaid might be a problematic market for the iPhone, since operators don’t subsidize phones--A customer buying a prepaid iPhone would pay a fortune. Apple started selling an unlocked version of the iPhone 4 in June for $650 a pop (Unfiltered: iPhone 4S available for pre-order, unlocked models coming in December).

C Spire certainly isn’t the largest regional operator that Apple could target for its expansion. It has about 900,000 customers in the multiple markets in the southeast. The biggest regional operator that could offer the iPhone 4S, as is, would be U.S. Cellular, but there are dozens of other CDMA carriers with the proper configuration of CDMA 1X and EV-DO on the PCS and Cellular bands. Another opportunity for Apple would be the MVNOs, which predominantly use the networks of the Big Three operators, all of which are supported on the iPhone.