Market Share, Installed Base

 
 
By Don Reisinger  |  Posted 2010-03-30
 
 
 

10 Reasons Why Verizon Might Regret Getting the Apple iPhone


News reports say that Apple is planning to bring its wildly popular iPhone to Verizon Wireless' network. According to the reports, the deal will make the iPhone available on both AT&T's network and Verizon's as part of Apple's desire to increase the availability of its smartphone.

Although Apple has yet to comment on whether or not the iPhone will be available on Verizon's network, it seems rather likely. In most countries world where the iPhone is available, the smartphone can be used on multiple carrier networks. It's a model that has worked extremely well across Europe and helped Apple increase market share in those countries at an astounding rate.

In the United States, the issue is a bit more complicated, since the iPhone running on AT&T's network is based on GSM technology, while an iPhone on Verizon's network would require CDMA technology. It's not a major technological hurdle, but it's one that so far, Apple hasn't tackled.

Assuming the iPhone does come to Verizon's network this year, consumers should be happy. Verizon has millions of subscribers around the United States who have been waiting for the iPhone. And AT&T customers who might not like the company's network will be happy to know that they can go elsewhere to enjoy the same iPhone experience.

But I wonder if Verizon Wireless will be all that happy about it. Sure, the company might have been working hard to bring the iPhone to its network for quite awhile, but with Apple, it gets more than a phone. As AT&T has learned, Apple's clout can have a powerful (and sometimes negative) effect on carriers. And it can use the iPhone as a weapon to get what it wants.

Verizon might want to think twice about the iPhone. Here's why:

1. Apple commands loyalty

Steve Jobs isn't a slouch when it comes to strategy. He knows how to form the right partnerships that will see his company's products enjoy preferred treatment over the competition. Verizon shouldn't expect him to change his tune when the iPhone comes to Verizon's network. As we have quickly learned from its partnership with AT&T, Apple wants the iPhone to steal the show. AT&T might offer other devices, but it's the iPhone that needs to enjoy the most prominence of all the phones on AT&T's store shelves. What makes anyone think that Apple won't require the same treatment from Verizon?

2. Android isn't so bad

Verizon has helped bring Android devices to the mainstream. Through its partnerships with Google and Android vendors, the company has offered fine alternatives to the iPhone. Granted, they don't sell nearly as well as Apple's smartphone, but they do provide users with an alternative that might keep those subscribers with Verizon. Once the iPhone comes along, all that will change. Verizon's relationship with the Android platform and its control over those smaller vendors will be nothing compared with the relationship it will need to maintain with Apple. Android will seem like a treat compared with an Apple partnership.

3. App Store issues

AT&T has used its partnership with Apple on numerous occasions to block apps from entering Apple's App Store. The company contends that those requests were based on its desire to safeguard its business. In the meantime, the company has caught significant flak for not allowing Apple to add those applications to the store. Verizon Wireless might not want to deal with that. The carrier will undoubtedly ask Apple to reject certain apps. And when that happens, a similar backlash will almost certainly ensue.

4. AT&T still has it

Let's not forget that in the scenario being predicted by the latest reports, Apple would still offer its iPhone on AT&T's network even though the smartphone would come to Verizon's store shelves. Verizon might not like that part of the deal. In recent months, the two biggest carriers in the United States have been gunning for each other over coverage and availability of 3G connectivity. The companies really hate each other. Verizon might be happy to have the iPhone at first, but it almost certainly would rather have it exclusively.

Market Share, Installed Base


5. Market share concerns

The more market share Apple gains, the worse it will be for Verizon (and AT&T for that matter). The only reason Apple might be planning to bring the iPhone to Verizon's network is to increase its market share in the space and hold off any attempts by Google to cut into Apple's share with Android. But is that really good for Verizon? The more iPhones Apple sells, the more money Verizon makes. But it also gives Apple even more leverage. After all, if Apple sells millions of iPhones, Verizon simply couldn't afford to strain its relationship with Apple. The last thing the company needs is to get a new iPhone months after AT&T simply because Apple isn't happy with it. More Apple market share means more Apple power, which can only mean less power for Verizon.

6. Apple's other endeavors

Outside of the mobile market, Apple has done its part to dominate several markets. Along the way, it has made some enemies with companies that it has partnered with. Nowhere is that more evident than in the music space. After partnering with record labels and playing by their rules for awhile, Apple turned the tables once the iPod gained critical mass. The company realized that the record labels needed Apple and its iPod, and it capitalized on that situation. If it can achieve similar results with the iPhone, it might only be a matter of time before Apple turns its relationship with Verizon into a nightmare for the carrier.

7. AT&T's installed base

Although the iPhone will help Verizon, the company needs to be aware that there is a huge installed base on AT&T that might not want to switch to its service. Plus, the market is watered down a bit, since many of the folks who wanted an iPhone already have it. That doesn't mean that Verizon won't see strong iPhone sales-it definitely will-but it does mean that the benefit of being the second iPhone provider isn't nearly as great as being the first provider.

8. iPad conundrum

Lest we forget, the 3G version of the iPad uses AT&T's 3G network to help users connect to the Web away from WiFi. If Verizon decides to ink a deal with Apple, the company needs to work hard to also offer 3G connectivity to iPad customers. Although the iPad won't affect iPhone sales in any way, it does mean that Apple is cozying up to AT&T just a little too much. The last thing Verizon needs is a strong bond between Apple and AT&T. That's just not good for business.

9. The different standard

Due to the iPhone's notoriety, it's held to a different standard than most phones and it's put under a microscope far more often than any other mobile phone on the market. Verizon will need to be careful in how it handles issues that will surely arise with the iPhone. A single misstep, and the company will be forced to deal with the backlash. AT&T hasn't done a very good job of handling iPhone issues. And based on its own track record, it's doubtful that Verizon will be able to do much better. In most cases, carriers simply do what they want with policy changes, and few people notice. But when the iPhone is involved, it becomes a major story. That kind of attention isn't always a good thing.

10. Opportunities beyond Apple

Apple's iPhone is undoubtedly a great phone to offer. It enjoys the kind of attention from consumers that no other phone ever has. But it's not the end-all either. Verizon has been extremely successful without selling the iPhone. And its partnerships with other vendors have proved profitable. In other words, Verizon has found significant opportunities beyond the iPhone. and it might want to explore those more.

The iPhone is a fine device. But it carries with it significant baggage that Verizon might soon find is a costly and uncomfortable burden.


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