Verizon Needs The Apple iPhone More Than Apple Needs Verizon

  • Posted: 14 August 2010 01:03 PM

    My latest missive at Eventide.

    Snippet: Under the current arrangement with AT&T, Apple predominates the carrier in the relationship with the iPhone customer. AT&T takes a subordinate position in the three-way relationship. What must occur for Verizon to secure a contract with Apple for the iPhone is a willingness to subordinate its position with the customer and cede the typically predominant position of the carrier to Apple. All of the technical and network compatibility issues aside, when a deal is struck with Apple for the iPhone is when Verizon chooses to accept Apple’s demand for the prominent position in the relationship with the customer.  Apple will have it no other way.

         
  • Posted: 14 August 2010 05:00 PM #1

    I hope it’s T-Mobile. Let Verizon make it with Android.  2 more years ought to do it before we need Verizon.

         
  • Posted: 14 August 2010 05:28 PM #2

    A deal with Verizon is only a win-win if its Apple that has the customer relationship with the device and attendant services (which also means revenues).

    Carriers are generally despised by their customers, as Jobs famously pointed out once.  Let’s call it the ‘orifice factor’.

    Apple can do little about network coverage issues, but they can lock out the carrier in all other matters where their incompetence is well proven.

    Apple NEVER needs Verizon beyond a relationship that they now have with any other operator.  The Chinese would have been the ones to radically changed that relationship, and they did not nor will they.

    And I guarantee you, if the day comes that Verizon is punting iPhones will also come the day when we see just how cocky they will be when their networks nationwide in a single weekend get inundated with data junkies.  At least ATandT now has substantial experience in what it means to meet record levels of data usage in a network. Verizon will be spring chickens.

         
  • Posted: 14 August 2010 06:29 PM #3

    Mike in Helsinki - 14 August 2010 08:28 PM

    A deal with Verizon is only a win-win if its Apple that has the customer relationship with the device and attendant services (which also means revenues).

    Carriers are generally despised by their customers, as Jobs famously pointed out once.  Let’s call it the ‘orifice factor’.

    Apple can do little about network coverage issues, but they can lock out the carrier in all other matters where their incompetence is well proven.

    MiH, that’s much the point of the blog post. You said it more bluntly.  grin

    I suspect, in addition to Apple being unproven at the time in the smartphone market, Apple’s insistence on preeminence in the relationship with the customer is what compelled Verizon to pass on the original iPhone.

    It makes no sense for Apple to enter into a carrier relationship with Verizon for the iPhone unless Apple is preeminent in the relationship with the customer. It works for Apple. It works for the customer. It’s up to Verizon to determine when it’s right for that company to subordinate its position to the position of Apple with the customer in order to grow its subscriber base and keep AT&T from supplanting it as the #1 domestic wireless services provider. I don’t see Apple doing a deal with Verizon any other way.

         
  • Posted: 14 August 2010 09:30 PM #4

    What must occur for Verizon to secure a contract with Apple for the iPhone is a willingness to subordinate its position with the customer and cede the typically predominant position of the carrier to Apple ... Apple will have it no other way.

    Agreed.

    I have come to believe that political rather than technological or market factors are the primary reason why Apple has not yet moved their phone to Verizon. Apple wants things a certain way. Verizon is unwilling to kowtow to Apple. And so, despite the mounting evidence that Apple will have a Verizon phone soon, I remain skeptical. I know Apple isn’t giving in. And I doubt Verizon is willing to give up everything that’s needed. Which means, there is not going to be a deal and there is not going to be a Verizon iPhone any time too soon.

         
  • Posted: 14 August 2010 09:45 PM #5

    FalKirk - 15 August 2010 12:30 AM

    What must occur for Verizon to secure a contract with Apple for the iPhone is a willingness to subordinate its position with the customer and cede the typically predominant position of the carrier to Apple ... Apple will have it no other way.

    Agreed.

    I have come to believe that political rather than technological or market factors are the primary reason why Apple has not yet moved their phone to Verizon. Apple wants things a certain way. Verizon is unwilling to kowtow to Apple. And so, despite the mounting evidence that Apple will have a Verizon phone soon, I remain skeptical. I know Apple isn’t giving in. And I doubt Verizon is willing to give up everything that’s needed. Which means, there is not going to be a deal and there is not going to be a Verizon iPhone any time too soon.

    What I find interesting is the amount of indirect pressure in the form of silly polls and other “news” reports to suggest that somehow Apple is making a mistake by not doing a deal on Verizon’s terms. Let people remember it was Verizon, not Apple that made one of the biggest and well-known tech industry blunders of the past several years. Verizon passed on the original iPhone.

    As I said in the blog post, what benefit is to Apple to do a deal with Verizon so that that consumers can switch to Verizon for their next iPhone contract?

    Verizon offers nothing to Apple if a deal is done on Verizon’s terms. Verizon has far more to lose than Apple if a deal isn’t accomplished.

    There’s no shortage of iPhone 4 demand now.

         
  • Posted: 15 August 2010 10:57 AM #6

    I see no mention of a Sprint Iphone. Why is this possibility dismissed? Wouldn’t Sprint have the most to gain? There are many people that refuse to use ATT that would give Sprint a try if they had an iphone. What am I missing?

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  • Posted: 15 August 2010 11:29 AM #7

    jeffi - 15 August 2010 01:57 PM

    I see no mention of a Sprint Iphone. Why is this possibility dismissed? Wouldn’t Sprint have the most to gain? There are many people that refuse to use ATT that would give Sprint a try if they had an iphone. What am I missing?

    Sprint is a real possibility.

         
  • Posted: 15 August 2010 12:46 PM #8

    The biggest barrier to an Apple-Verizon deal is the ego of Ivan Seidenberg, the Verizon Chairman and CEO. He has a visceral dislike of Steve Jobs and would rather risk damage to Verizon business interests than have it look as if Verizon (and Seidenberg) blinked first in a confrontation with Apple. Under Seidenberg, Verizon is likely to pretend that its Android products are a good substitute for an iPhone product.

    I believe that it will be a long time—if ever—before a Verizon run by Seidenberg is willing to do business on Apple’s terms and I therefore expect that the first CDMA iPhone will be headed towards Sprint and/or China Telecom.

    [ Edited: 15 August 2010 12:48 PM by Hannibal ]      
  • Posted: 15 August 2010 03:18 PM #9

    Hannibal - 15 August 2010 03:46 PM

    The biggest barrier to an Apple-Verizon deal is the ego of Ivan Seidenberg, the Verizon Chairman and CEO. He has a visceral dislike of Steve Jobs and would rather risk damage to Verizon business interests than have it look as if Verizon (and Seidenberg) blinked first in a confrontation with Apple. Under Seidenberg, Verizon is likely to pretend that its Android products are a good substitute for an iPhone product.

    I believe that it will be a long time—if ever—before a Verizon run by Seidenberg is willing to do business on Apple’s terms and I therefore expect that the first CDMA iPhone will be headed towards Sprint and/or China Telecom.

    Interesting observation.

    As I mentioned in the original blog post, AT&T is poised to supplant Verizon as the nation’s #1 wireless services provider. The Apple iPhone is the singular factor in AT&T’s recent success.

    Vodaphone Group, the 45% partner in the Verizon Wireless joint venture, offers the iPhone in some of its own European markets. The pressure for a deal is really on Verizon, not Apple.

         
  • Posted: 15 August 2010 03:22 PM #10

    I believe that it will be a long time?if ever?before a Verizon run by Seidenberg is willing to do business on Apple?s terms

    Still Seidenberg may be willing to please his costumers and get new ones….

         
  • Posted: 15 August 2010 04:00 PM #11

    Hamourabi - 15 August 2010 06:22 PM

    I believe that it will be a long time?if ever?before a Verizon run by Seidenberg is willing to do business on Apple?s terms

    Still Seidenberg may be willing to please his costumers and get new ones….

    And respond to the interests of the minority stakeholder in Verizon Wireless.

         
  • Posted: 15 August 2010 08:03 PM #12

    Hannibal - 15 August 2010 03:46 PM

    The biggest barrier to an Apple-Verizon deal is the ego of Ivan Seidenberg, the Verizon Chairman and CEO.

    I am not a Verizon watcher so I’m speaking purely though personal observation. I remember Verizon before the iPhone and they were the worst of the worst. They would take phones and disable functionality so they could sell terribly implemented and outrageously expensive Verizon services instead. It is not at all surprising that Verizon turned Steve Jobs and the original iPhone down. The surprise would have been if they hadn’t.

    Verizon is awful, but they’re not stupid. After the iPhone and AT&T rocked their world, they recovered brilliantly by embracing Android and creating the Droid. But they never, never, never would have have given a phone maker so much latitude if they hadn’t been forced to. Look at the Droid. It’s made by Motorola but it’s really a Verizon product. It’s Verizon branded, Verizon advertised and Verizon controlled.

    Verizon is smart enough to know that the iPhone is pure gold and they’re greedy enough to want a piece of that action but they’re a proud company and a controlling company. I’m still having a hard time seeing them capitulating to Apple’s demands. As John Gruber mused in a recent podcast (the “talk show”) a simple thing like not allowing a tiny Verizon logo on the iPhone may be enough to keep two communication titans from agreeing to a multi-billion dollar mobile arrangement.

    [ Edited: 15 August 2010 11:57 PM by FalKirk ]      
  • Posted: 15 August 2010 09:32 PM #13

    FalKirk - 15 August 2010 11:03 PM

    Verizon is awful, but they’re not stupid. After the iPhone and AT&T rocked their world, they recovered brilliantly by embracing Android and creating the Droid. But they never, never, never would have have given a phone maker so much latitude if they hadn’t been forced to. Look at the Droid. It’s made by Motorola but it’s really a Verizon product. It’s Verizon branded, Verizon advertised and Verizon controlled.

    I don’t think Verizon has recovered brilliantly at all. I posted the performance numbers in the original blog post.

    The company in underperforming for shareholders and there’s nothing unique about the Droid to keep customers from fleeing at the end of the contract period. Android phones are proliferating like dandelions on a suburban lawn. The iPhone is keeping customers with AT&T and the Droid campaign has been extraordinarily expensive. Absent the iPhone AT&T will supplant Verizon as the nation’s #1 wireless carrier.

    If you look at the ratings of the two companies, AT&T is clearly more highly rated by the Street and has higher growth estimates. If anything, the Droid slowed AT&T’s assault but has not stopped it.

         
  • Posted: 16 August 2010 12:10 AM #14

    DawnTreader - 16 August 2010 12:32 AM

    I don’t think Verizon has recovered brilliantly at all.

    I’m surprised at your response. Where would Verizon be today if they hadn’t embraced Android and promoted Droid? Wouldn’t they be in far worse shape than they are today?

    Are you saying that Verizon is in worse shape after having embraced Android Phones? Are you saying that they had another obvious course that they eschewed for the Android? Or are you simply saying that despite Android, they’re still worse off?

    It seems to me that Android saved Verizon from being run over by AT&T and the iPhone. That doesn’t necessarily mean Verizon hasn’t been hurt by the iPhone. But it seems to me that Verizon had no answer for the iPhone and Android has provided Verizon with a very credible contender.

         
  • Posted: 16 August 2010 12:38 AM #15

    FalKirk - 16 August 2010 03:10 AM
    DawnTreader - 16 August 2010 12:32 AM

    I don’t think Verizon has recovered brilliantly at all.

    I’m surprised at your response. Where would Verizon be today if they hadn’t embraced Android and promoted Droid? Wouldn’t they be in far worse shape than they are today?

    Are you saying that Verizon is in worse shape after having embraced Android Phones? Are you saying that they had another obvious course that they eschewed for the Android? Or are you simply saying that despite Android, they’re still worse off?

    It seems to me that Android saved Verizon from being run over by AT&T and the iPhone. That doesn’t necessarily mean Verizon hasn’t been hurt by the iPhone. But it seems to me that Verizon had no answer for the iPhone and Android has provided Verizon with a very credible contender.

    To recover brilliantly would suggest they have completely mitigated the damage of the biggest telco blunder of the past several years - passing on the original Apple iPhone. From a profitability standpoint I see nothing brilliant and the Street concurs. The most recent quarterly results were underwhelming including negative growth in revenue.

    You asked: “Where would Verizon be today if they hadn’t embraced Android and promoted Droid? Wouldn’t they be in far worse shape than they are today?”

    I ask you: Where do you think Verizon would be today if they had not passed on the iPhone. Compare what you believe would have been results and tell me again how the response has been in any way brilliant.

    Brilliant would be to say: “We blew it on the iPhone. We know that. We apologize to our customers, our shareholders and our Verizon Wireless partner. We learned from the mistake, we’ll get the iPhone and we will provide the best iPhone serve possible to make it up to all of you.”

    In my view, adaptation is a sure sign of intelligence. Apple is brilliant. Verizon is not. The iPhone is an example of design brilliance. The Droid is not.