Apple and Verizon will Kiss and Make Up

| Editorial

I don't really believe that Apple and Verizon have severed ties for good. There's too much money at stake on both sides. The current activities are just a pillow fight. Maybe plate throwing.

In a figurative sense, every morning Steve Jobs looks at his Numbers spreadsheet and is dismayed to find out how many iPhones Apple has not sold because it's not available from Verizon. Similarly, Ivan Seidenberg looks at his Excel spreadsheet and estimates, because he doesn't have the iPhone, how much money he's losing and how much pain he could be causing AT&T.

I find it hard to believe, and this is my opinion, that discussions are over forever. He's what I'm thinking, based on the stories I've read.

  • Each company realizes how much money there is to be made.
  • Ivan Seidenberg, under pressure, came back to Apple and made an overture. "Here's what we want."
  • Steve Jobs said: "No. This is how we sell the iPhone."
  • They tussled for awhile, neither side gave in, and talks broke down.
  • Now Verizon is having a hissy fit. They're running TV commercials, "There's a map for that," set to the kind of music Apple uses that poke a finger in AT&T's and Apple's eye. The embracing of the Droid phone is a counter punch.

In time, each company is going to realize that these antics aren't helping either company make a boatload of money or appeal to customers. The pissing contest will continue for a few months while each CEO ponders the big bucks being lost.

The trend in this chart suggests what will drive Verizon's eventual decision.

SAI chart, smartphone market share

Credit: Silicon Alley Insider Chart of the Day: Oct 27

Eventually, Apple's iPhone will become so formidable in its market share of smartphones that Verizon will agree to Apple's terms - just to get into the game. By the spring of 2010, with an estimated 150,000 iPhone apps and Droid sales that didn't meet expectations, Verizon won't have a choice.

Of course technology is always easier than politics. Chipsets can be created that get the job done in terms of Verizon's CDMA and emerging 4G network. That's an engineering detail compared to the powerful personalities and politics in place.

Whenever I see this kind of corporate friction on the surface, I know there's something brewing underneath.

Finally, if Verizon thinks that geeky ads for the Droid and a long list of technical features will appeal to customers, as opposed to tech writers, they are mistaken. Even PCWorld has its doubts. Apple's competitors are throwing all the old-school techniques at the iPhone, and they're not going to work.

In my opinion.

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Comments

fultonkbd

You know what they say about opinions?... all joking aside, my opinion is that Verizon won’t get the phone until they roll out the 4G network. Until that… let them pillow fight all they want.

Tiger

He should have titled it IMHO.

Does anybody REALLY believe Steve Jobs looks at a spreadsheet every morning to see what he’s not making? With $34 billion sitting in the company’s coffers. 104k apps approved for the iPhone. Mac sales up phenomenally.

Why in the heck would he want to create a phone for a network they don’t work on now and throw a whole other fabrication mix into one of the most widely successful product lines in history? Oh that’s right, he said no.

Bosco (Brad Hutchings)

The Droid commercials are cute. Did you know you can get the song (by MoZella) at iTunes Store:

http://itunes.apple.com/WebObjects/MZStore.woa/wa/viewAlbum?i=335337263&id=335336940&s=143441

It is a very popular song grin.

jtsnyc47

The trend in this chart suggests what will drive Verizon’s eventual decision.

It’s not theirs to make. It’s Apple’s. And it won’t happen before Verizon has the wide-spread LTE infrastructure that would make it worth Apple’s while.

If you’d like to read an intelligent treatment of the subject, try reading Daniel Dilger.

John Martellaro

Hey, I never said I’m intelligent.  Just entertaining.

Nemo

I, for one, think that Mr. Martellaro is both intelligent and entertaining and usually correct in his analysis.  And I hope that he is right here in his view that Apple and Verizon will within a reasonably short time strike a fair deal.  However, I think that the matter has yet to be decided on the field of battle.  If Apple can continue to consume market share with the iPhone and any other mobile device that it puts into the market, then Mr. Seidenberg will have to accept that the iPhone and any other of Apple’s mobile devices that achieve similar success bring unique value to the table, and he will have to pay for that value by accepting Mr. Jobs non-negotiable terms.  If, however, Mr. Seidenberg’s counter attack with Android smartphones and perhaps the Pre works, then he will not need to and will not accept Apple’ terms. 

With both Mr. Jobs and Mr. Seidenberg taking the view that “If we are not victorious, let no one come back alive,” it will take a while yet and result in the loss of many millions of dollars for the matter to be decided in battle.

Peter

I’ll agree, but I think it’s a study of the obvious.

Verizon said recently that “the ball is in Apple’s court.”  In other words, if Apple builds an iPhone which will work on Verizon’s network, Verizon will carry it.  I have no doubt of this—they’d be crazy not to.

Will Apple build an iPhone which will work on Verizon’s network?  That’s the question.

First, they’ll have to make a phone that uses CDMA for voice.  Verizon is beginning to deploy their 4G Network using LTE, but that’s just for data.  Verizon phones will continue to use CDMA for voice for the forseeable future.

The question is, would it be worth it to Apple to support the two different standards?  Perhaps.  The disadvantage to Apple would be having to support two different iPhones.  Remember that Apple is careful about what they do with the hardware in their phones because different chipsets eat different amounts of power and trying to optimize everything for the best battery life could be troublesome when having both a GSM and a CDMA radio.  Apple would rather just do this once.

On the other hand, there are two big CDMA providers in the world:  Verizon here in the states and China Telecom in China, so you could end up with a large number of sales which might make development worth it.

UrbanBard

I don’t believe there is anything that Apple can do for three to four years. The 4G technology isn’t ready. And the mobile phone ISP’s service is not ready either.

AT&T had to spend billions of dollars just to get up to EDGE (2.5G) technology for the original iPhone. Verizon has a better and wider located 3G phone service, but its data delivery is rather bad. Verizon’s CDMA technologies won’t allow you to view the web and talk on the phone at the same time.

Both Verizon and AT&T are moving toward 4G service, but it will take time to build. Apple is better off toughing this out and not creating a CDMA iPhone. Much of the iPhone’s growth is in the world market and that is in GSM technologies.

Apple picked the best of its possible choices and has been forcing the mobile phone industry to follow its lead. People have a right to complain about AT&T’s service, but Apple didn’t have a better alternative.

Verizon would not have been a good choice, even if they were willing, at the time. Their sour grapes is amusing though.

Jeff

Apple doesn’t need Verizon at all and that is the major factor in the decision against producing a CDMA based telephone. According to the graph, the iPhone while tied to a sinlge network, AT&T, is about to overtake RIM which makes devices for all of the networks. Apple simply does not need Verizon. Besides, Verizon is an outdated company whose culture is rooted much more in the old GTE than the Bell system.

Verizon’s mindset has never been more apparent in their rejection of the iPhone in the first place. They had no concept and no clue what this device would do in the marketplace. The executives at Cingular had no such hesitation. Given the difference in enthusiasm, it’s no wonder Apple remains more than content to stay exclusively with AT&T. If Apple decides to open up the device to other carriers, T-Mobile will get the device. There would seem an infinitesimally low chance Apple will make a CDMA phone at all.

Making a CDMA phone only opens up only a few additional markets and it is unlikely the iPhone would ever sell well in Korea. It potentially could do better in China, but China has other GSM based companies Apple could partner up with.

In any case I’m happy with AT&T just as I was with Cingular previously. I’ve had very good experiences with their customer service. I’m very happy with their 3G coverage and the excellent speed of the network. My iPhone is noticeably faster than my friend’s Blackberry storm on Verizon’s supposedly superior network.  He was also amazed that I could talk on the phone while pulling up my email simultaneously.

My experiences with Verizon were also very negative. Needless to say, I am no longer a Verizon POTs customer either. They are simply the old GTE with a new name. It’s hard to believe that Vodafone would have partnered with them. I’m not even certain why they would continue the partnership. Perhaps they will rethink the partnership now that they have the iPhone for themselves.

Verizon wireless in its present form will very likely never get the iphone. Verizon wireless executives are too painfully aware of this. It’s why they are so desperate to find anything to stem the bleeding in the gaping wound in their company that Apple has opened up.

Me

There’s no way anything is going to happen before Verizon and Apple are both on LTE, Apple aren’t interested in playing in the CDMA paddling-pool because every CDMA operator in the world seems to have a different idea of how to implement it, meaning that instead of making one radio model at a time, Apple would be faced with having to spend a whole lot of engineering time for each new operator.

Hence the reason that the selection of CDMA phones always sucked.

Wait until AT&T, Verizon and Apple have all deployed LTE and watch the exclusive contracts go up in smoke.

Justa Notherguy

Actually, you’re all wrong. Check back in six months, to see where Android stands and the extent of Verizon’s sales, thereof.

If the suits in Basking Ridge think Android has succeeded in stanching the churn, that’s strike #1 against any iPhone deal. Not in 2010 or 2011…ever. And if they think Android has fully reversed the trend - helping Big Red to grow market share over recent Qs - then that will be strike #2.

Never forget, this is Verizon Wireless, kids. When the ship feels yar and seems to be running strong, VZW’s captains tend to lead from a position of hubris and spite. To hell with common sense—we’re the Phone Company, dammit!

Strike #3? That’s when the iPhone resale license proposal comes wrapped in take-it-or-leave-it provisions. Remember, this is Apple, Inc.; Mr. Jobs practically _invented_ hubris and spite. Business realities, my tuchas—I invented the iPhone! Have you heard of it? LOL

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