VERIZON WIRELESS’ DECLARATION LAST WEEK that “any application, any device” will run on its network next year was clearly an overstatement, though executives acknowledged later that its
CDMA network allows only CDMA-based devices.
The juxtaposition of overstatement and subsequent qualification in a way reflected many analysts’ take-that the carrier’s announcement was about positioning. But comments ran the gamut from much-ado-about-nothing to “paradigm shift.”
Quick take
Robert Ferguson, analyst at ThinkEquity Partners, LLC, was a tad caustic.
“We did not hear anything . except that Verizon’s network should start to function like GSM networks (do). (This is) testimony to Verizon’s PR machine that this is somehow a big deal for the industry.”
Ferguson was referring to the ability of GSM users to swap out SIM cards for roaming.
Other analysts placed importance on the fact that Verizon Wireless has made an overt policy of certifying handsets outside its portfolio-at least, those that meet Verizon Wireless’ “minimum technical standards”-unlike GSM carriers. But they too pointed to Verizon Wireless’ vague timeline.
“Verizon has to balance its desire for market share with its desire for control, which has produced favorable profit margins,” said Albert Lin, director of capital markets at American Technology Research. “More details on how this plays out won’t come until after the spectrum auction and Verizon can see the new competitive landscape.”
In the short term, the announcement “doesn’t change the way people buy their phones,” said Avi Greengart, analyst with Current Analysis. “Verizon will continue to sell devices that are locked down, subsidized and feature its own user interface.”
Hope for rural carriers
Conversely, Jerry Wilke, executive director of the Rural Telecommunications Group, said the Verizon Wireless initiative could benefit rural carriers in two ways. It could provide access to a number of the handsets typically locked to major national carriers, perhaps by curbing “exclusives” that block widespread availability of certain devices. And that, in turn, could allow rural carriers to take advantage of big-box retail availability that cuts down the cost of maintaining inventory.
“I feel (the) news will bring about a paradigm shift,” Wilke wrote in an e-mail to RCR Wireless News.
Though Verizon Wireless executives said that some CDMA-based devices offered by Sprint Nextel Corp.-the other, top-tier CDMA carrier in the United States-would qualify to run on Verizon Wireless’ network, in addition to handsets offered in some overseas markets, analysts appeared uncertain that this was the case.
Following Sprint Nextel
But Verizon Wireless Chief Marketing Officer John Stratton said the new policy went beyond handsets-signifying that as the carrier shifted from 3G to next-generation technology, which it said last week would be based on Long Term Evolution, it would provide service to new consumer electronic devices akin to Sprint Nextel’s WiMAX business model.
“It’s up to the imagination of the marketplace,” Stratton said in a prepared statement. “Possibilities include game handhelds (and) imaging devices.”
Verizon Wireless said it would open a $20 million testing facility where any device could be certified at a “reasonable fee” at the creator’s expense. “Typically, Verizon can’t support a device unless it’s confident it will sell at a certain volume,” said Verizon Wireless’ CTO Dick Lynch, “but with this program, it doesn’t matter if the device maker sells five devices or 500,000.”
Vendors on board
In reality, however, handset vendors that decide to go outside that predominant, carrier retail channel must charge comparatively high prices to cover manufacturing and marketing costs. Verizon Wireless’ new policy, therefore, may well transfer the risk of device production and marketing squarely on the shoulders of the vendor alone, much as things stand in the alternative retail channels. Nokia, in an e-mailed statement, said that Verizon Wireless’ move was welcome.
“We applaud all initiatives that create more choice for the consumer,” said spokeswoman Laurie Armstrong. “The market is maturing and the opportunity for complementary channels is also being recognized. Openness remains fundamental to all of this.”
Ultimately, all CDMA vendors may benefit from creating devices that are not constricted by carrier customization demands, Greengart said. That is, if consumers are so adamant about device choice that they’re willing to pay more for unsubsidized handsets.
“It’s not clear how much demand there is for unsubsidized phones,” said analyst Tero Kuittinen at Avian Securities L.L.C. “The big questions are what will devices (outside Verizon Wireless’ portfolio) cost and what is the demand for them?”
“With one in five iPhones getting hacked, it’s clear that the locking/unlocking issue is resonating with the public,” said Rob Enderle of The Enderle Group. However, he noted moves toward open access in CDMA might well spur similar moves in the GSM market, which might carry greater impact for American consumers due to the greater array of device choice in that market.
