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Apple’s Watch Series 3 Will Test the Waters for Cellular Wearables

On Tuesday, Apple introduced a new generation of products. In addition to three new smartphones, the iPhone 8, iPhone 8 Plus and iPhone X, it unveiled the third generation of its Apple Watch line of smartwatches.

As anticipated by CCS Insight, Apple introduced a wide-area network version of its watch. There are few cosmetic differences between the cellular version and its local-connectivity sibling — other than a red dot on the crown — but the genetic make-up of the two devices is actually quite different.

The GPS + Cellular variant of the Apple Watch Series 3, with a starting price of $399, has an embedded SIM card and cellular antennas in a very small package. As smartphones are getting larger, Apple has introduced what is essentially its smallest phone to date.

This isn’t the first cellular-enabled wearable to hit the market. Huawei, LG, Samsung and others have launched their solutions in various markets worldwide. Apple’s unveiling of such a device drew applause, but the release of products with similar capabilities from other device makers has generally been met with apathy.

In an era when people are hardly ever without their smartphones, the question to ask is why mobile subscribers would change their behaviour and incur the additional expense of another cellular device to their monthly operator bills. Not only does the cellular version of Apple’s watch cost an additional $70, but it will also add a monthly fee of about $10 (or £5 in the UK on the EE network) as a mobile connected device.

At its launch event, Apple cited the classic sports use, highlighting that the watch allows the wearer to go for a run without carrying a phone. There was also an ambitious live demonstration with an employee on a paddleboard taking a call during the keynote presentation.

Notably, Apple’s cellular watch uses the same phone number as the iPhone it’s associated with, so it can provide a seamless phone replacement to receive calls and messages, as well as other functions such as music streaming. This is a main point of differentiation from rival cellular-enabled smartwatches to date. In most cases, they’ve had a different number and relied on call forwarding features.

Apple has used its clout to get operators to carry out the necessary technical upgrades to their networks to offer a complete solution rather than a workaround. Our understanding is that networks have implemented IP Multimedia Subsystem framework capabilities to allow calls and messages to be forked between the iPhone and the watch.

Apple has amassed an impressive number of operators that will support this technology at launch, in markets including Australia, China, France, Germany, Japan, the UK and the US. We expect others will follow. Furthermore, operators have also implemented sensible tariffing that links the watch to the main cellular subscription.

We expect other smartwatch makers as well as traditional watchmakers and mobile operators to monitor the performance of Apple’s cellular device very closely. Now that a connected watch is presented as a truly seamless solution, it could become an increasingly attractive device for consumers and enterprise users in many markets.

Beyond simple calls and messages, the Watch also has many other applications, particularly in the area of health and well-being. Apple spoke of many health-related developments such as its work with medical experts to find ways to use the watch’s heart-rate monitor to detect abnormal heart patterns that lead to strokes or heart attacks. This is an area that other players such as Fitbit are also working on. This adds another dimension to the product, which clearly has growing potential to become a part of healthcare providers’ services.

However, it’s important to note that the main motivation for operators is that the watch is another device to add to an account and another way to lock customers in.

After 10 years in the mobile industry, Apple is again testing the waters with a new product category. In the same way that the iPhone wasn’t the first smartphone, the Series 3 cellular watch isn’t the first of its kind, but a decade from now we could be looking back and noting that this announcement was a major shift in the market for smart wearables.