A crack in the door

Nokia Corp. CEO Olli-Pekka Kallasvuo recently lamented that in the United States, he must meet the strict demands of four customers.
And, according to a Wall Street Journal article, Motorola Inc. CEO Ed Zander said in a closed meeting, “I love my job, I hate my customers”-referring to the four, top-tier network operators in the United States that control handset pricing in this market.
Meantime, three of those big four-AT&T Mobility, Verizon Wireless and Sprint Nextel Corp.-reported first-quarter financials; AT&T and Verizon customer additions were strong, and the takeaway from Sprint’s financials was that the carrier didn’t perform as badly as expected. Thus, in the tug-of-war between U.S. carriers and handset makers, it appears that carriers are still pulling a little tighter on the rope. Customers are continuing to sign up at the nationwide carriers, churn is decreasing and advanced services are seeing uptake. Carriers will continue to call the shots in the second quarter.
But AT&T is opening the door a crack next month when it plans to start selling Apple Inc.’s iPhone. AT&T acquiesced to Apple on pricing and distribution in exchange for the exclusive right to sell the device (for awhile anyway).
The companies most interested in how the iPhone competes in the market may not be other carriers-like Verizon, which passed on the phone-but Nokia and Motorola (see frustrated CEO section above).
Indeed, Nokia and Motorola each produced wildly successful phones that ultimately helped AT&T (in one form or another) grow. Nokia produced the handset that contributed to the success of AT&T’s Digital One Rate plan in 1997, and Cingular Wireless was the exclusive carrier for the Razr during its debut.
Neither handset maker can be happy that Apple-with an unproven product-gets the privilege of dictating pricing and distribution, while Nokia and Motorola still have not been afforded that pleasure.
Chances are that the world’s No. 1 and No. 2 handset manufacturers have another “it” phone in them. And if they produce it, they may well remember that AT&T ceded some control to Apple when it thought that Apple had a killer phone.