Does Verizon Really Need the iPhone?

The bricks just keep being thrown through AT&T’s (T) reputation window.

This time, TechCrunch’s MG Siegler has an entertaining rant on how Apple (AAPL) needs to dump AT&T and put the iPhone on Verizon Wireless (VZ). As noted before, the iPhone may be the worst thing that has ever happened to AT&T’s reputation over the long run.

But Siegler reckons that Apple can dictate terms to Verizon Wireless and simply appear. Siegler writes:

Apple no longer needs AT&T. Thanks to its huge success, it can dictate its own terms to other carriers now, and ensure it controls the iPhone ecosystem — its top priority. Verizon, as the nation’s largest carrier, is likely to give it the most resistance. But that resistance is futile. The iPhone will eventually be on Verizon, on Apple’s terms. It’s just a question of when.

The first part of that riff is true. Apple doesn’t need AT&T. The second part of that—Apple dictating terms to anyone—may not apply.

Why? Beyond AT&T Apple doesn’t have that many options. What’s Apple gonna do? Go to T-Mobile? Good luck with that one. Sprint? Possibly, but its network and customer service—both improving by the way—have been lambasted over the years. That leaves Verizon Wireless. Here’s why Verizon Wireless may not be so enamored with Apple:

• Verizon Wireless hasn’t been crippled even though it would happily take the iPhone. The iPhone only has meant that AT&T can sorta, kinda almost tie Verizon. AT&T ended the first quarter with 78.2 million subscribers. Verizon Wireless had 86.6 million, inflated by 13.2 million from the Alltel purchase. AT&T’s retail churn rate has improved to 1.2 percent, still behind Verizon’s 1.14 percent. The mass exodus from Verizon to AT&T just isn’t happening.
• The Apple-AT&T partnership is great marketing—for Verizon. Verizon is smiling every time one of these AT&T sucks tales emerges. Verizon Wireless can mock AT&T as long as the iPhone fans jeer.
• Verizon Wireless already has a bevy of devices that seem to be working. Granted, these devices aren’t the iPhone, but a look at the financials and churn rate indicate that Verizon Wireless can do fine without Apple.
• Perhaps the iPhone is just a network killer. RIM’s co-CEO Jim Balsillie revealed the company’s secret sauce a few quarters back: BlackBerries are easier on wireless networks. Is Verizon Wireless really in a rush to see if the iPhone will kill its network too? Probably not when you can just mock AT&T all day.

Does Verizon Wireless really need Apple? The case isn’t that clear. If Apple really wants great carrier terms it may want to try Sprint (S).

Comments

[Prudent Man...:]

Does anyone "need" and iPhone?

If these companies don't come up with something besides how employees can waste time communicating with each other or surfing the web they will become mature organizations and stagnate.

The last thing the world needs is a new phone or computer. Most of us don't use the ones we have to their full capacity, like a Porsche in Manhattan attractive but not functional.

Jul 19 11:05 AM

[See through it:]

The Iphone is a network killer because it provides the best internet experience. Seventy five percent of all of the mobile internet traffic is from the iphone which has only a 2% market share. Ultimately, the network that doesn't have the iphone will be the network that dies. The trend is your friend as long as your swimming with the tide.

Jul 19 11:11 AM

[Don Bowey:]

You said "As noted before, the iPhone may be the worst thing that has ever happened to AT&T’s reputation over the long run."

You must be one of the non-technical writers who think the iPhone "consumes" bandwidth. It doesn't. It uses whatever bandwidth is available at any time, which is totally a function of AT&T's Network.

AT&T damages their own reputation by not increasing bandwidth availability ahead of service demand, By the way, what makes you think the Verizon network is any better? Quit blabbing things as truth, which are only conjecture.

Jul 19 12:09 PM

[Roger Knights:]

"AT&T damages their own reputation by not increasing bandwidth availability ahead of service demand"

It's incredible to me that Apple, which could see this demand surge would arrive, didn't offer years ago to pay for AT&T's network expansion via buying a couple of billion worth of new preferred shares.

Jul 19 12:25 PM

[Telephone:]

Verizon and Verizon Wireless need the iPhone to carry forth their agenda of being number one. However, executive ego will not allow them to cut the deal. Denny Strigl who was the president of Verizon Wireless (the guy who turned down Steve Jobs and the iPhone) is now the CEO of Verizon. He will not admit he made a mistake nor allow a deal to be struck. He is a "lifer" in the telephone business and his reality will only let him see everything as a POTS line. It is not his fault, he just cannot escape his past. (Why do you think their BlackBerrys devices have a "Flash" feature like a POTS line? Why do they cripple features on their devices? Why are they spending millions on building their own app store?) It is really sad when you look at it deeply.

Jul 19 01:17 PM

[MarkinAZ:]

IF (and only IF) Apple gives a damn about the millions of long suffering iPhone customer base and what those brave loyal souls have endured with AT&T Wireless - then the choices become easy. 1.) Dump AT&T and jump to Verizon as they move to beyond G3 networks happens. GSM vs CDMA or whatever Verizon is using won't matter much longer as all of the carriers migrate to the next generation network LTE - which can as easily carry a voice call as a data call over either their data side or their "voice" side of the radio unit. 2.) Buy AT&T (yes, Apple can easily afford it!) and improve their BOTH the customer service and the network itself . 3.) OR APPLE COULD SAY "to hell with it - our business is making a primo quality smart phone at a premium price" and open it up to Sprint/Verizon/T-Mobil... AT&T. Sell iPhones and stop forcing the iPhone buyers to one particular vendor over another. Choice and quality will dictate who the winner is. But win, loose, or draw - Apple would garner tons of business and tons of cash doing this. APPLE would have to set some minimum standards for network usability and access and put teeth into those standards (like if your network doesn't meet them, no more iPhone for you Mr. Network Provider.) It certainly is not a major stretch of tech to build the GSM and CDMA tech into one phone. Blackberry does it in their World Phone sold by Verizon now! Ultimately offering consumers the ability to switch vendors WITHOUT buying a new phone might just be the ticket to improving US Vendor Wireless coverage and heaven knows I'd GLADLY pay an extra $100/$200 dollars per unit for that ability alone! Do what's good for Apple and what's good for the customers - and let the network providers deal with the real world market for a change without locking customers into one vs the other because of radio spectrum or technology. The free PR and visibility and general KUDO's Apple would garner from "Putting the Customer First", would alone, cement Apple's place as the preeminent cell phone maker, world wide, for the next decade or so! And I'd finally see my Apple Shares break $500 for the first time, too! (Not a bad side benefit me thinks!)

Jul 19 05:43 PM

[Frank Castle:]

I love how everyone assume Verizon will just agree to all these Apple terms now .. it's just not going to happen. Apple knows this as Verizon is the one driving it. That is how they are and will always be. They know they have the best voice network in america and Apple will pay dearly to get on it. Now LTE could change everything but I seriously doubt:

A. LTE will have any widespread coverage until 2011 if not later. Large parts of the country are not even 3G capable still. So expect larger metro roll out mid 2010 and other metro 2011 or later. CDMA will be around at least another 3-5 years as it would cost $$$$$ to upgrade all that backhub, routers etc. More then Apple is willing to kick into the pot. Don't see them offering to do that either.

B. Carriers will be hell bent even with LTE to allow devices to just use their network. They will fight that hard and expect to pay some serious roaming costs as again there will be little LTE capacity across the states.

iPhone makes the most sense going to TMO and getting data plans cheaper. Apple could use the same device and gain another chunk of users.

FYI there have been plenty of reports that iPhone is a bandwidth pig and does not optimiza data packers as cleanly as Blackberry. Speak to any telecom tech and they will tell you the same. Yes the other side is iPhone users are just data pigs as well so expect the days of unlimited data to end next year.

Jul 19 08:58 PM

[AdamC:]

The question to ask is do Apple need VZ?

The churn rate is low because of the contracts the subscribers had signed with VZ and they also inherited 13 millions customers from Alltel (without which ATT would have the most subscribers).

VZ cripple phones to save bandwidth and most of their users don't surf the net because of the crappy user experience. Wit the iPhone VZ may also experience the same problem as ATT because of the consumption of bandwidth.

And why should Apple make a CDMA phone when there is no future in its future?

By the way selling in other markets more than make up for the loss of sale without VZ.

Jul 19 10:26 PM

[Czarembo:]

I've got news for you, both GSM and CDMA are going to be history in future mobile phones. They'll be replaced by WCDMA, which will at least provide a standard between carriers.

Jul 19 11:22 PM

[vassar:]

I think ATT is getting a bum rap. I rarely have problems with ATT, certainly no more than I did when I had Verizon.

Unfortunate for ATT but they are the current popular whipping boy.

Jul 20 08:53 AM

[Geddy:]

Verizon's network is MUCH better, just check any reputable publication. I believe everyone forgets that VZW was the first choice by Apple for the iPhone and turned it down...probably a good decision in hindsight.


On Jul 19 12:09 PM Don Bowey wrote:

> You said "As noted before, the iPhone may be the worst thing that
> has ever happened to AT&amp;T’s reputation over the long run."<br/>
>
> You must be one of the non-technical writers who think the iPhone
> "consumes" bandwidth. It doesn't. It uses whatever bandwidth is available
> at any time, which is totally a function of AT&amp;T's Network.<br/>
>
> AT&amp;T damages their own reputation by not increasing bandwidth
> availability ahead of service demand, By the way, what makes you
> think the Verizon network is any better? Quit blabbing things as
> truth, which are only conjecture.

Jul 20 02:05 PM

[Geddy:]

Put down the crack pipe AdamC, VZW has the best network bar none (again, check any reputable publication). Go back to your job selling phones for AT&T!


On Jul 19 10:26 PM AdamC wrote:

> The question to ask is do Apple need VZ?
>
> The churn rate is low because of the contracts the subscribers had
> signed with VZ and they also inherited 13 millions customers from
> Alltel (without which ATT would have the most subscribers).
>
> VZ cripple phones to save bandwidth and most of their users don't
> surf the net because of the crappy user experience. Wit the iPhone
> VZ may also experience the same problem as ATT because of the consumption
> of bandwidth.
>
> And why should Apple make a CDMA phone when there is no future in
> its future?
>
> By the way selling in other markets more than make up for the loss
> of sale without VZ.

Jul 20 02:06 PM

[buoy:]

Not sold on VZ, seems to have quirks of its own.

Jul 20 03:22 PM

[casualsuede:]

I think the question is right, but the answer isn't about Apple.

I think the answer is : The prosumer market has just begun, will Apple still be "special" in two years.

Apple capitalized on the market, bringing out a device during a time when the smartphone was shifting from a enterprise/business mobile tool to a game changing device.

They entered the market when all they had was RIM and WinMo 6.0, devices that were not consumer friendly. While RIM has caught on, as the business prosumer device, all WinMo devices (from Motorola, HTC, Samsung) was basically a bust with the regular crowd, who may have tried them out, but since have moved on to RIM or Apple, and not devices with WinMo 6.1 or 6.5.

Now Apple has capitalized on further missteps. The G1 was a poor execution of the Android Cupcake OS, Nokia continues to fail with Symbian, Palm released a great OS, but only Sprint (what were they thinking?) and WinMo 7, which promises to be the next great thing, will most likely come out in 2010 (and Q4 at that).

But Android Donut and WinMo 7 has the potential to become powerhouses, if their OS is friendly. Android has low hardware requirements, while WinMo7 is looking at the higher end market.

They will also be strongly supported by handset manufacturers, such as Samsung, LG, Motorola, HTC and people like Nokia is on the edge (there are reports that they are looking at an Android device, and rumors that they may BUY Palm). This is a group of multinationals that represent competition that Apple has NEVER faced. It is even stronger than their computer marketplace that they are losing marketshare in.

The problem with Apple is that they have a closed OS. They want it all for themselves, and while they only had to compete with hardware manufacturers with business based software, now Verizon will have Android and the possibility of a half dozen Android devices (as well as several RIM and eventually several WinMo 7 devices).

At one point in the market, Nokia was thought to be indestructable. Motorola was indestructable with their RAZR for several years.

No one can stay on top forever. Apple will face their real test in the market in 2010.

Jul 21 12:25 AM