Verizon Gets Bigger: Watch Out, Google

Silicon Valley is left with two major questions in the wake of Verizon's (VZ) announced plan to buy Alltel Corp.(AT):

1. Will the deal help or hurt efforts to pry open America's closed cell phone system to accept any device and any applications?
2. Will Verizon start selling the iPhone (AAPL)?

For techies, the crucial fact is that the combo makes Verizon even more powerful -- especially in Washington, D.C. The deal puts Verizon back ahead of oligopoly tag-team member AT&T (T) as the nation's biggest cell phone operator. (Ailing Sprint (S) is a distant number three; nobody else is big enough to count.)

That means Verizon will continue to throw its weight around. Techies are hoping that Verizon's recent agreement with the FCC to open next generation networks to hardware and software will lead to better service and more innovation -- and, not incidentally, markets for new products and funding for startups.

But from the perspective of Google (GOOG), a passionate activist for open cell networks, Verizon already is reneging on its promises.

It was Google that pressed the FCC earlier this year to force open networks for spectrum recently awarded to Verizon, AT&T and others. Google CEO Eric Schmidt was so giddy with Verizon's apparent cooperation that he told Porfolio just a few weeks ago: "these guys are good. (Verizon Wireless CEO) Lowell McAdams came by, literally, the senior leadership of Verizon actually visited Google to talk to us about his and make sure they got it right." Wasn't Schmidt skeptical? "I was initially, but actions speak louder than words, and I think Verizon has shown a committment to open access...I wish everybody would do it."

A few weeks later, Google sent a formal complaint to the FCC, charging, in effect, that Verizon was trying to sneak its way around the open-systems agreement.

Google's main beef: Verizon now says it will offer a two-tier system. The first tier will look much like the current system, closed, with subsidized handsets and Verizon-approved software. The other tier will be open. For the same monthly service bill as the closed system, customers can pay whatever they want for handsets and use them on the network, put whatever software on them they'd like on them, and if they have problems getting it all to work, don't call Verizon. Oh, and Verizon won't feel obligated put its own applications software on the open tier.

Lawyers and bureacrats can try to determine whether this scheme meets the FCC mandate to offer "any handset, any application."

For his part, Verizon Wireless CEO McAdams, told  attendees at a tech conference last week: "We're not stupid...I need to make some kind of return" on Verizon investments.

Concerning the iPhone, Verizon CEO Ivan Seidenberg so far has refused to let Steve Jobs set thet terms of Verizon service, which is why the iPhone so far is only available on AT&T. The Alltel deal likely won't affect decision-making on whether to carry the iPhone. Other device makers are madly trying to come up with products that comes close to recreating the look and feel of the iPhone, ar at least offer close-enough functions that they can compete on price. If they're successful, Verizon can stand up to Jobs. But if the iPhone takes enough market share, Seidenberg will be forced to get in line and kowtow to King Steve.

Comments

[seeksome]

Good for VZ stick it too those punks at GOOG who get whatever they want though it should be an open system.To get what you want at the price you want to pay go to:seeksomething.com

[RichardSchweitzer]

VZ and VOD definetly are NOT stupid. GOOG has available exacltly what the rules called for.

[NextelAccessories]

Sprint is coming out with Samsung Instinct, could be an iPhone killer.

[hdtraveler]

Two comments, 1) 45% of Verizon is VOD that is not a USA company so think about that when you sign up for verizon. 2) Apple and AT&T have a 5 year agreement on the IPHONE so verizon has no chance to offer it for 4 more years

[getsome]

Good for GOOG to go after VZ. Their service sucks and Google has always had an altristic business model concerning the free use of the internet and systems that use it. Do your homework...

[getsome]

Use spellcheck getsome. Yes, Mr. Me.