Verizon-iPhone Deal: Winners and Losers

By James Mowery

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When would this crime against technology end? Day after day, it seemed as if the chances of Verizon getting the iPhone weakened while the certainty that AT&T would have its clutches on the iPhone for another year grew stronger. As 2010 winds down, it seems as if there is no hope for an iPhone on Verizon; maybe by next year’s end? Oh, how quickly things can change.

Verizon has been rumored to finally be receiving the iPhone next year. If true, it would be huge. In fact, it would be one of the biggest deals in the mobile industry. Furthermore, it would mark the end of an exclusive deal that AT&T and Apple have maintained since 2007, when the iPhone entered the market.

There was a five-year deal between AT&T and Apple for exclusivity over the iPhone, in which AT&T is the exclusive network for the iPhone in the U.S., but the deal’s terms changed. This rumor might be the result of those changes. And if so, it is about time. There have already been discussions in congress about how this exclusivity has been affecting consumers. Those consumers wanted that deal to end. I wanted it to end. Now we find out that our wishes could be coming true.

It would be a relief to many. This would end a burden to AT&T customers who are less than satisfied with the service that AT&T provides. It would enable them to switch to Verizon while also giving Verizon customers, who have clamored for the iPhone for years, the opportunity to purchase and use the iPhone on Big Red’s network.

The Wall Street Journal, while still a rumor at this point, reported that Apple is making plans to produce millions of CDMA-enabled iPhones for Verizon:

Apple plans to begin mass producing the new iPhone by the end of the year, and it would be released in the first quarter of 2011, these people said. The phone would resemble the iPhone 4 currently sold by AT&T, but would be based on an alternative wireless technology used by Verizon, these people said.

The new iPhone spells the end of the exclusive arrangement that AT&T has had since 2007, when Apple Chief Executive Steve Jobs introduced the original iPhone. Since then, the iPhone fueled much of the AT&T’s growth.

Growth? If this pans out, any short-term potential for AT&T growth would be done for. But the company has argued that they expect not to lose too many of their existing customers if the iPhone landed on Verizon. It is what the company has to say — telling the world that you’re probably going to lose every single frustrated customer who has stuck with just to have the iPhone just doesn’t sound appropriate. However, the company must be worried about the implications. Even if the service is satisfactory for many, the public perception of AT&T’s service is at an all-time low. Ironically, through AT&T’s pain, many others would benefit.

The impacts of this deal would be felt throughout the entire mobile industry. And yes, there will be those who will fair better than others.

The Winners

Apple would benefit. Many Verizon customers would want to purchase the iPhone. We don’t even need figures or statistics — this is common sense. Apple would sell a significant amount of hardware from this move. There are also going to be plenty of AT&T iPhone customers that would probably follow Apple to Verizon; they would be required to purchase a new iPhone, which is more money to Apple. The reason is because the GSM version of the iPhone isn’t compatible with Verizon. But it gets even better.

The whole Apple ecosystem would benefit. More iPhone sales means more iTunes market sales. People are going to want to load their new iPhones up with apps, e-books, audiobooks, music, and more. Also, if a CDMA version of the iPhone would support Verizon’s LTE network, it could potentially boost marketplace sales too, because of better download speeds. More speed, theoretically, leads to more usage cases.

Verizon would benefit. The one thing that Verizon doesn’t have is the iPhone. Without it, Verizon has never truly been “great.” But that could change. With Apple and iPhone on Verizon’s side, there would be nothing stopping Verizon from becoming an even more powerful force in the mobile space. Ironically, this could be a bad thing for competition and consumers in the future (more on that in a bit). Regardless, Verizon couldn’t ask for more (well, they could ask for more money from consumers, but I’ll try to remain optimistic).

Consumers would benefit. Well, most consumer would benefit. The allure of a Verizon-iPhone combination is that Verizon offers the most 3G access throughout the country. This is fact. Even from personal experience, Verizon’s service is much more reliable than AT&T’s. This deal would enable consumers to have a better mobile experience on a more reliable network with substantially more coverage. Consumers win! It’s not as good as having the iPhone being available on every carrier (that would be very nice), but at least consumers would have two of the best options. (Remember, competition is good.)

Windows Phone 7 would benefit. Say what? Yeah, this is, admittedly, a long shot, but I think that Microsoft would be better off knowing that the iPhone would be available to Verizon, at least given the situation as it stands. Microsoft’s last hope in mobile will have a window of exclusivity to AT&T when it launches, and knowing that the iPhone would no longer be exclusive on AT&T means that Windows Phone 7 could perform better. The situation would also give AT&T a reason to heavily promote Windows Phone 7 (expect to see an incredible amount of advertising). This, too, isn’t as ideal of a situation — as opposed to the Windows Phone 7 became exclusive to Verizon and the iPhone remained exclusive to AT&T — but this would be the next best thing.

And the Losers…

Other phone platforms would suffer. Android will see some of that incredible growth take a bit of a dip. However, the long-term prospects of Android will remain strong as ever. Research In Motion and Blackberry are barely worth mentioning and already in enough trouble, but having another competitor on the nation’s largest network (and one that is superior) is another nail in the coffin. The webOS platform hasn’t ever stood a chance, but this news impacts its Verizon offerings.

Other phone networks would suffer. Sprint and T-Mobile might lose some subscribers to Verizon — I certainly don’t see them benefiting in the short term from this news. And AT&T is guaranteed to lose some (if not many) of its iPhone subscribers to Big Red. It’s not too difficult that Verizon would growth tremendously over the next few years if it had the iPhone, as long as their pipes could keep up with all the potential usage (which would be ironic, say, if Verizon experienced all of the issues that AT&T did).

Data pricing will suffer. While the concept of “unlimited data” has never been anything more than a dream (there is always a cut-off point), the pricing for data in the past has typically remained as a flat fee. A $30-per-month expense for data would take you far. Unfortunately, this is no longer the case. AT&T recently changed its data pricing to tiered. Verizon, too, is expected to change to tiered data pricing sometime in 2011. Sprint is also mulling that decision, even though its $10 4G access charge for 4G phones, even if you don’t live in a 4G area, already feels like a data tier. The iPhone has certainly played its part, however minor, in this; however, the greed of these mobile providers will always remain the most significant factor in data pricing.

Either way, this is huge news. You better believe that everyone in the mobile and tech industry will be watching for confirmation. Unfortunately, it might be awhile before Verizon or Apple admit that they are working together, if they are actually working together, of course.

About James Mowery
James Mowery is a passionate technology journalist, entrepreneur, and Apple enthusiast who has written for various top-tier publications like Mashable, Techi, and CMSWire. Follow him on Twitter: @JMowery.

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