If iPhone comes to Verizon: We Got Answers

If iPhone comes to Verizon: We Got Answers

Summary: ZDNet Senior Editor Sam Diaz proposed five important questions regarding Verizon's possible addition of the iPhone next year. We attempt to answer them.

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ZDNet Senior Editor Sam Diaz proposed five important questions regarding Verizon's possible addition of the iPhone next year. We attempt to answer them.

Yesterday, a report issued by Bloomberg indicated that in January of 2011, Verizon Wireless will launch Apple's iPhone, ending a five year exclusivity agreement with AT&T.

Upon receiving this news, ZDNet Senior Editor, Sam Diaz, posited several questions that a lot of people probably want answered. Sam cracked the door open a little bit and left a lot of room for extrapolation. I'm going to put my crystal-ball New Media Jackass hat on and try to answer a bunch of them.

Without further ado, here's my best shot at what is likely to occur.

What will happen to AT&T’s sales and subscriber numbers? Now that the news is out that Verizon is likely to start selling the iPhone in January, many people who are AT&T subscribers with existing older-model iPhones or phones from another manufacturer are likely to wait for their 2-year contract to expire and then move to Verizon, causing a possible "Osborne Effect" in current iPhone sales on AT&T.

It was reported late yesterday on Boy Genius Report that Verizon will activate and sell handsets in 25 US major cities that will work on its 4G LTE network in November.

This would seem to indicate that the new Verizon version of the iPhone 4 would be dual band LTE/EV-DO CDMA capable, adding that extra carrot for AT&T Wireless customers to eat a substantial termination fee (up to $350 depending on how much was left of the contract) or just walk away out of contract.

It also magnifies the Osborne effect because if the said LTE network launch and iPhone availability is confirmed for a 4Q 2010/1Q 2011 time-frame, many potential iPhone buyers will want handsets that are capable of operating on a much faster network, and will hold off on purchasing AT&T's iPhone models.

AT&T is also planning to introduce a 4G network of its own, but estimates are that the company is at least a year behind Verizon in deployment.

With real world data rates from current Verizon trials on LTE reporting from 5-12 Mbps downloads and 2-5Mbps uploads, that's one hell of a carrot, even if the handsets have to fall back to 3G or even 1XRTT in areas where LTE coverage could not be guaranteed.

AT&T's defense in this situation would be to try to retain their existing customer base and offer competing technology or special offers. A new iPhone model for AT&T is unlikely in the first part of 2011 given the most recent introduction of the iPhone 4, so what is likely to occur is that Microcells will be heavily discounted or given away for free for renewed contracts or disgruntled customers with existing iPhones that threaten to walk away.

Additionally, AT&T may also have to significantly boost the number of access points for their national hotspot service. The company already offers their service for free for customers using their phones at Starbucks and other locations, but as Starbucks is going free Wi-Fi anyway, they'll have to up the ante, significantly.

What would this do to AT&T’s network quality? Sam indicates that a massive walk-off of a large portion of AT&T's 12 million+ iPhone users might alleviate a large amount of network congestion from data-hungry customers and improve quality-of-service for the rest of the company's 75 million customers.

Maybe, but then AT&T has much bigger problems than their network quality if a ton of their customers using iPhones were just to jump ship.

If AT&T proposes enough incentives to its customers in order to retain their loyalty, said walk-off might not occur, and then you'd have status quo.

Additionally, now that the news is out -- and one must assume that AT&T has some intelligence about the veracity (or lack thereof) of the situation -- that the company will react and make network and capacity upgrades accordingly in order to remain competitive.

What would this do to Apple’s sales of the iPhone? As mentioned above, an Osborne effect -- as proposed by ZDNet Editor-in-chief Larry Dignan back in late March -- is likely to occur. Dignan believes this will freeze all smartphone upgrades, including ones for existing Verizon customers.

I'm not sure I buy that, but certainly this is going to make a lot of people stop and think about whether or not they want to re-up their contracts with new phones at any wireless carrier. However, while there would be a temporary lag in sales for Apple, the upsurge from a Verizon launch is likely to be tremendous.

Today, Henry Blodget at Silicon Alley Insider reports that Oppenheimer Investments AG is predicting 12 Million iPhones would be sold on Verizon if and when the handset launches on the carrier next year. I don't think that's an unrealistic number given the size of the current customer base and the expanding popularity of the iOS platform.

What could this mean for Android adoption? I'm going to say that while an iPhone arrival on Verizon will definitely cause some existing customers on the Android platform to switch, and some considering a Droid purchase to go with iPhone instead, Android has developed into an exciting competing platform and continues to enjoy many advantages that Apple's platform does not.

I'm not sure that even someone as pragmatic as myself who uses and enjoys both platforms -- an iPad and a Droid -- is willing to ditch Droid for an iPhone.

For starters, the Wi-Fi tether capability in Froyo is likely to continue to be a prime differentiating feature, as does the seamless integration with Google's services. To date, the iOS platform still does not seamlessly integrate well with GMail, Google Docs and Google Calendar, and key features in Google's web services will continue to premiere and innovate on the Android platform, not on iOS.

One can also not assume that Android development is going to stand still and that Verizon will want to cannibalize the branding and market share it has established with the Droid.

Whether or not a Verizon iPhone does or does not launch at the carrier in 2011, there will be more powerful, more compelling Droids, particularly ones which are likely to launch in the same Q1 LTE network introduction timeframe as a said Verizon iPhone.

Google, Verizon and the Android manufacturers -- HTC, Motorola and Samsung -- are likely to up the arms race with transflective screen technology as well as with faster processors, larger amounts of memory and storage, higher megapixel cameras with better video recording capability, as well as vastly improved enterprise integration.

And I agree completely with TechRepublic's Jason Hiner that Apple will never be able to cozy up to the enterprise -- this is Google's market to lose if they don't continue to improve integration with Exchange, SAP and other key business software platforms such as Salesforce.com and Microsoft Sharepoint.

Additionally, the fact that Android Froyo can run Flash and other applications using the Native Interface and Apple's platform cannot is not a trivial issue either.

I don't expect Google's innovation to stop once iPhone arrives at Verizon. If anything, it will increase their competitiveness and likely expedite improvements in the software.

Can Verizon’s network really manage the demands of iPhone users or will it buckle the way that AT&T’s did? If Verizon's long trial period of LTE is of any indication, they've been planning for iPhone's and a massive upsurge of other data-hungry smartphones like the Droid for a very long time. They know that a botch of an iPhone launch would mean total disaster for the company.

Additionally, given the huge popularity of Verizon as a enterprise data carrier for BlackBerry, the company would want to make absolutely sure that their reliability would not be compromised by introducing such a data-demanding customer base on their network.

So I'm going to put a stake in the ground and put my reputation on the line and say yes, Verizon will be able to manage the demands of their entire data network if the iPhone is introduced onto their system.

Do you have other alternative answers to Sam's Five Questions? Talk Back and Let Me Know.

Topics: iPhone, Hardware, Mobility, Smartphones, Verizon

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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78 comments
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  • Maybe too late. By that time all those people who cant wait to ditch iphone

    will have lots of WP7 phones to choose from on verizon which will be more appealing than either 4G iphones or androids...
    Johnny Vegas
    • RE: If iPhone comes to Verizon: We Got Answers

      @Johnny Vegas
      Ain't that the truth
      Loverock Davidson
      • Now take a break and support your fellow spammers, you deserve it.

        @Loverock Davidson <br><br>You already spouted more than enough bullsh1t here, don't you think?<br><br>Now take a break, support your fellow spammers and buy a nice pair of snickers.<br><br>PS: Tell vegas boy to do the same, you spammers should unite and support each other. Remember: <b><blink>Free Shipping</blink></b>.<br><br>PS2: Do you get paid to spout all that bullsh1t? And you never get tired of it?
        OS Reload
      • RE: If iPhone comes to Verizon: We Got Answers

        @Loverock Davidson
        Good Job Steve !!! http://magazine.joomag.com/Steve_Jobs/3707
        lindliberty
    • RE: If iPhone comes to Verizon: We Got Answers

      @Johnny Vegas

      WP7 phones? LOL, really? They won't be able to touch iPhone or even Android for a very, very long time. Even if they come out competitive feature-wise (which is doubtful), they're way, way, behind in apps and will be for a long time.

      I predict that only true MS fanbois or those forced by their corporate IT will be using WP7, and I think the whole platform will probably wither on the vine. They wasted too many years torturing their users with seriously crappy WinMobile on their phones, and now iOS and Android own the consumer smartphone market (with RIM being the corporate IT choice for the moment, but for how long is up for debate).
      RealNonZealot
      • RE: If iPhone comes to Verizon: We Got Answers

        @RealNonZealot
        Really?
        >.Even if they come out competitive feature-wise (which is doubtful), they're way, way, behind in apps and will be for a long time.

        How do you know whether they have apps or not? Any references or proof?
        Ram U
      • It is never too late....

        @RealNonZealot ...never too late
        Nsaf
      • RE: If iPhone comes to Verizon: We Got Answers

        @Rama.net: The mere lack of information or proof is very indicative of a lack of available software; if there were software available for WinPhone7, don't you think we would have heard about it by now?
        Vulpinemac
      • RE: If iPhone comes to Verizon: We Got Answers

        @Rama.net Microsoft is publicly offering to pay iPhone developers to come over and not having an overwhelming response to the offer. That should speak volumes in and of itself.
        rdawson@...
      • RE: If iPhone comes to Verizon: We Got Answers

        @RealNonZealot Does anyone know anyone who has a KIN??
        mark fitch
      • RE: If iPhone comes to Verizon: We Got Answers

        @RealNonZealot Well WinMobile wasnt really bad. I had both a WM5 and WM6 phone and they worked great. Never had any issues with them overall. And there were plenty of free apps to choose from if you knew where to look. But now that I have seen WP7 I moved to Android. Knowing it would be useless to wait around for a locked up OS like WP7, with no real support from anyone.
        Jimster480
      • RE: If iPhone comes to Verizon: We Got Answers

        We can expect some WinPhone7 software at launch, but realistically you're not going to be talking about a well-fleshed-out app store. They're building that market from scratch and it takes a few years to do that.

        My personal call on this is that they are too late. It was one thing to be caught flat-footed by the iPhone (especially after Ballmer stood up and poo-poohed Apple's ability to compete in that market!) but another to take five years to respond. They're two years behind *everyone* else, and Android -- the first of the real competition to make it to market after the iPhone -- seems to be doing really well in the market for those who either prefer not to use the iPhone or prefer not to use AT&T. By the time WinPhone7 shows up, even in its early limited-function and application form, Android will have had three years to build its market. I think the market will remain dominated by Android and iPhone, with Android taking the lion's share over time with fragments into many market niches and iPhone remaining a premium choice.

        I think Microsoft blew this one badly, and it seems from their various phone initiatives since the iPhone that they think they blew it too -- they seem to be throwing a bunch of variants at the wall to see if any of them stick. So far they're batting zero (WinMob is obviously dying despite refreshes and the Kin looks to have bombed outright) and I think it's a risky bet to think that they can save the franchise with a very-late-to-market mulligan that is down on both apps and features, and largely a version one piece of software with the bugs that is likely to entail.

        We'll see, but I would not bet on Microsoft in this race. Maybe if it were coming out in 2008 instead of late 2010 or early 2011.

        jim frost
        jimf@frostbytes.com
        jimfrost
    • RE: If iPhone comes to Verizon: We Got Answers

      @Johnny Vegas Can you name a competitive Windows Mobile phone currently on the market? Neither can I. When WP7 finally ships it will not have multi-tasking and some of the other features that Android and iOS currently have.

      The one thing Microsoft has that Palm didn't have in trying to reinvent their smart phone offerings is cash on hand, but that won't be enough to make a dent in Android's or Apple's increasing share of the smart phone market for a good 18 months after WP7 launches. Now factor in that Google and Apple are not going to sit still to wait and see what Microsoft does and they are still going to be behind for some time in this race.
      rdawson@...
    • RE: If iPhone comes to Verizon: We Got Answers

      @Johnny Vegas But why would anyone want to? WP7 will not have copy and paste - which is something that people kept harping on Apple about not having on the iPhone (mainly the WM and Android zealots who would not consider buying an iPhone anyhow)... Sorry but with iPhone and Android around WP7 is largely irrelevant.
      athynz
    • RE: If iPhone comes to Verizon: We Got Answers

      @Johnny Vegas
      I don't think Microsoft is agile enough to keep up with the copetition. Windows mobile 6.0 or 6.X is still miles away from the Droid and slightly behind the iPhone. I see theDroid as the one to lead, while the others will play catch up.
      alfitz@...
    • Keep dreaming Johnny

      You and Lovecrock should get together and hold a MS lovefest.
      @Johnny Vegas
      GoPower
    • RE: If iPhone comes to Verizon: We Got Answers

      @Johnny Vegas windows phones ....really????
      mark fitch
    • ROFL

      @Johnny Vegas Obvious Troll is Obvious. WP7 is a complete Joke. I was a former WM Supporter. I was waiting for a long time for some new nice WM Phones to come out. But when I saw WP7 I realized that Android is the only option. WP7 is a locked down POS with all the same issues (probably even more) than the iOS which is already not that great.
      Jimster480
    • Re: HTC Mondrian w/ 1.3gHZ proc will be a Beast!

      @Johnny Vegas Android doesn't care about having competition. The more to gangbang crApple the merrier to them. It's going to be a dogpile party, though. lol.... WP7, RIM, Android, and Nokia will finish them off with the Heavy Weight Topper to crush Apple to Infinity and Beyond!<br><br>But honestly this.... this... iPhone on Verizon "We Rule the Air" (which they do) network is getting old and as bad as "Sony's MGS4 is coming to Xbox 360", wishful thinking!<br><br>Truth... yes Verizon owns more Cell towers than any wireless carrier in America. They also own more Fiber Optic Backhaul services and equipment as well. Even to the point that they are also the largest Fiber Optic Wholesaler in America.

      But #1- They just joined WAC International Group of some 40 Wireless service providers that are making their own cross platform App and Widget Market. The negotiations with Apple on fell on their arse. Apple refuses to share App income or allow Verizon to serve up their own services and app market to iPhone users.... PERIOD! .....done deal... NO iPhone4 for Verizon EVER!!!<br><br>When asked the CEO said, "We are quite happy with what Android is doing for us with Motorola Droid, HTC Incredible, and now with Droid X. The line of Samsung Galaxy S Android phones will be a nice addition as well...... At this time that phone is not in our future".<br><br>An unnamed Verizon employee is quoted as "that word is no longer in our vocabulary". Now you can WISH ALL YOU WANT, but it ain't going to happen Xbox fanboys found out!<br><br>Although there is a custom CDMA version of iPhone 4 going into China and possibly India. But that's it!!!
      i2fun@...
  • Great article, I think you're spot on.

    I've been waiting for this to happen for a while now and I think your prediction on how the market will react is pretty dead on. Although I prefer the android OS as opposed to iOS I think competition will only help to make both systems better in the long run. It is good to see an article where the author is not biased, as I see far too much of that on this website.
    Sarbustal