Mobile Industry Shifting into Internet Gear

Verizon Wireless' open network proposal is the latest example of a rapidly changing market.

When the year began, it seemed a foregone conclusion that the nations leading wireless carriers would continue to operate in a business-as-usual mode, with closed networks that limit consumer choice over devices and applications.

Even the prospect of a public spectrum auction to sell the analog airwaves being vacated by television broadcasters as part of the digital TV transition seemed to hold little drama. Conventional wisdom held that carriers like AT&T and Verizon Wireless would gobble up the spectrum.

That was then, this is now. Verizon Wireless announcement Nov. 27 that it will open its network to third-party devices and applications by the end of 2008 is just the latest example of a fast hairpin turn in the direction of the U.S. mobile business.

First, the Federal Communications Commission, under pressure from Congress, consumer groups and technology companies like Google, decided to dedicate a prime slice of the January spectrum auction to open standards that would allow consumers to plug any legal device or application into the network. Google officials cheered and hinted that they would participate in the auction.

Verizon Wireless responded by filing a lawsuit to force the FCC to sell the spectrum to the highest bidder with no strings attached. While the company considered its legal options, Google also unveiled Nov. 5 a complete mobile phone stack—known as "Android"—under an open-source license as an alternative to proprietary platforms from Microsoft and Symbian.

Verizon Wireless ultimately dropped its lawsuit and joined the game.

"This is a shot across the bow at Google, who is pushing network neutrality big time," said analyst Jack Gold, with J. Gold Associates. "Verizon wants to say it is neutral with respect to devices and this proves it, and also to the FCC and Congress, who might be considering new rules. … So this is also about PR and positioning against Google, and by the way, against Apple as well, with its sealed-in-concrete closed ecosystem."

Verizon Wireless President and CEO Lowell McAdam said in a Nov. 27 teleconference that the company is not abandoning its closed retail model, which will still be available to customers, but rather is adding "an additional retail option for customers looking for a different wireless experience."

Early next year, Verizon Wireless plans to publish the technical standards for developers who wish to design products to connect to the companys network. According to company officials, any device or software that meets Verizon Wireless technical standards will be activated on the network.

"This is a transformation point in the 20-year history of mass-market wireless devices, one which we believe will set the table for the next level of innovation and growth," McAdam said.

In addition to pleasing regulators, Gold said Verizon Wireless move to an open network is based on the increasing number of wireless devices available to consumers that the company doesnt sell through its retail stores.

"There is no reason for them to turn away customers if they can sign them up," he said.

Thats a big if, Gold said, noting that Verizon Wireless network runs on the CDMA/EVDO standards while rivals depend on GSM/UMTS/HSDPA standards.


Click here to read more Verizon Wireless opening an open network.

"Its unlikely this will make much of a dent, as most of the rest of the world does not have an EVDO option, but Verizon has nothing to lose, and if it can sway some vendors to offer devices for its network, it comes out ahead," he said.

Gigi B. Sohn, president and co-founder of the public advocacy group Public Knowledge, praised the Verizon Wireless decision, but also had her own concerns about the proposal.

"The Verizon announcement … is very limited," she said in a statement. "If other carriers dont follow the same model, then consumers will still find their phones tied to a specific technology or wireless company. Until they do, an [Apple] iPhone will still be useless on any network but AT&Ts. In order for an open network to become a reality, all carriers will have to participate."

Sohn also pointed out that Verizon Wireless did not disclose the companys plans for pricing on its open network.

"We need to know whether the rates for Verizons service plans will vary for those with subsidized phones and for those customers with a phone bought elsewhere," she said.


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