Who Really Benefits from iPhone on Verizon Rumors?

Daring Fireball posted a tremendous article about how Verizon, AT&T, and Apple benefit if the rumors about an iPhone Lite and iPad media tablet on Verizon are true-ish (Gruber also looks at Apple's iPod strategy mapped to the iPhone -- go read it now, I'll wait).

What struck me, however, was how Verizon, AT&T, and Apple benefit from the rumors themselves rather than the actual devices and/or their eventual carriers, if any.

  • Apple is, according to a separate rumor, negotiating with AT&T to increase the length of their iPhone exclusivity agreement. AT&T's last earning report showed just how important the iPhone was to their revenues, especially their new customer acquisition and premium service charges. This puts them at a distinct disadvantage with Apple, who could theoretically -- if inconveniently -- re-engineer the iPhone to work on any of the big 4 US carriers (CDMA for Verizon or Sprint, different GSM bands for T-Mobile). Rumors that Verizon is already talking to Apple, then, pushes AT&T over edge of disadvantage cliff. Obviously this is of great benefit to Apple.

  • Verizon had what could only be termed a lackluster launch of their so-called iPhone killer, the BlackBerry Storm. With AT&T likely getting yet another mainstream hero phone this year in the form of the 3rd generation iPhone. Sprint, the other CDMA carrier, is getting the less mainstream, but still geek-anticipated Palm Pre as their hot summer hero phone. Where does that leave Verizon? The BlackBerry Tour ("Niagara") and various HTC Touch series Windows Phones which will -- eventually -- be upgradable to the profoundly incremental Windows Mobile 6.5. Great gear, perhaps, but not hero phones on the same level as the iPhone or even Palm Pre (or last year's Android G1 launch on T-Mobile). Rumors that Verizon may (soon) get an iPhone of sorts, or iPad, however, give the perception of a hero phone coming to the network. This is a huge benefit to Verizon, and might even keep some users from switching to AT&T (or Sprint) this summer to get a real device.

  • Inversely, AT&T benefits not one bit from these rumors. They hurt AT&T's negotiations with Apple and they may cost them some users who would have defected from Verizon.

We discussed this briefly last Wednesday on the iPhone Live! podcast, and no doubt others have made the same observation this week after reading the series of rumors (yes, even the one about the iPhone Lite actually being the Microsoft iPhone-Killer Pink). However, looking past the devices, it does seem like the rumors in and of themselves carry a hefty benefit for both Apple and Verizon.

Until the 4G Long Term Evolution (LTE) networks roll out in a couple years, that might be the closest we really get to seeing Apple and Verizon together.

Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, Review, The TV Show, Vector, ZEN & TECH, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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There are 23 comments. Add yours.

frog says:

I'm glad Apple ignored CDMA. It's a dying technology, and I don't think we'd see the success we've seen with the iPhone if they'd gone down that road!

Toad says:

@ frog: Apple should be bending over backwards for verizon no matter if they have CDMA or LTE because they have the largest customer base in America.

LolipopJones says:

81million vs 76 million.... China Mobile has 100million.... and they are CDMA yet Apple hasn't made them an iPhone. Apple making a GSM based phone means they can make a phone for America (via ATT) and the rest of the world (Excluding china who's CDMA is not compatible with VzW's).
IF VzW gets the iPhone it will be a giant piece of junk. WHy do you think all of the Window's mobile devices carried by VzW are junk? VzAppZone crippled the Omnia.... VzW is the worst carrier for Smartphones...AND I AM A TECH FOR VZW. They put that bloatware onto their smartphones and pretty much crush it. Hell Vcast with Rhapsody app for the Storm further murders that phone.
Here is something to consider Vodophone's Storm works.. VzW's Storm does not....
VzW will never get the iPhone and if they did they would find some way to fuck it up. We are talking about a carrier that spends over 250million a year on replacing phones of its existing customer base....

LonerATO says:

@ Frog: You do realize that CDMA is still going to be the fallback for Verizon even when they come out with LTE. CDMA will more than likely not be deployed in anymore countries and you could say the same for GSM as many third world countries are moving straight to 4G

LonerATO says:

@ LolipopJones: You also forgot to mention KDDI and pretty much all of South Korea as CDMA countries. China is moving to TD-SCDMA so they wont have to pay anyone royalties.

frog says:

Toad: it's ATT and the rest of the world - vs Verizon. Verizons, slight, advantage in subscribers over ATT is irrelevant on a global scale.

duke says:

the only reason vzw got that boost in customers over AT&T. was after the release of fios. they prefered a combined bill.

iDutch says:

@frog No it is not irrelevant on a global scale. 81 million is still 81 million chances of selling an iPhone. Verizon has nophone to compete with the iphone and untill then it is a great market for Apple. Apple does not really care about those companies fighting each other. So leaving cdma/lte stuff aside, the reason why Apple hasn't made a deal with verizon - and China if you will - is because that is not clear to them how to enter it or they aren't getting to the agremeents they want with those carriers.

ArcadeKart says:

Here is the fact about 3 China major Telco

  1. China Mobile: 471M subscriber by march 09, 3G standard: TD-SCDMA, a home brewed protocol nobody else uses.
  2. China Unicom: 138M subscriber by march 09, 3G standard: WCDMA - HSDPA, compatible with iPhone 3G.
  3. China Telecom: 33M subscriber by march 09, 3G standard: CDMA2000 - EVDO, compatible with Verizon but with SIM card.

All these 3G networks are intensively under trial & only available in selected major cities. But in China once all settled the networks can roll out pretty fast.
iPhone as it is will go to China Unicom. TD-SCDMA is far behind other two standards maturity wise, and the baseband chip selection is quite limited, also I really doubt Apple will go out a limp to cater just one telco in the world. China Telecom's mobile user base is just not that attractive (in a chinese sense of scale)

Craig says:

overall I think the consumer benefits most from these rumors. I would hope that carriers are looking to offer incentives to keep customers from jumping ship.

PARLO says:

Verizon will not get an iphone lite. There will be no US iphone lite.

Dave says:

@Craig Not only will the carriers (ATT) be looking to offer incentives to keep customers, but hopefully to keep manufactures and their exclusivity deals.

JB says:

Some of you need to do your home work, LTE will bring an iphone to VZW, big red has sent execs to meet with Apple on an LTE (4G) device, this device will most likely not see the light of day until 2011 but I assure you it is in the works. It will be tri-mode with LTE, HSPA and EV-DO Rev. B, apple will gladly make one for a CDMA carrier, they went to them first, by the way it is not hard to swap a GSM radio for a CDMA chipset. Thx

LolipopJones says:

Actaully JB the last tech talk i was involved in Vodafone is pushing VzW to make their network compliant with Vodafone's. Meaning that any device that can be used on Vodafone can be used on VzW's.
The problem is you people seem to not understand is Selling a phone is not one way to make profit for a Manufacturer. Apple has made its name off of the Quality and the CONTROL of their products. ATT makes 13 dollars per activation of an iPhone while Apple makes 17 dollars, Apple makes 30% of the cost of an app, and then the iPhone pretty much sells iTunes.
The point is Apple makes all the profit on the phone. Its more profitable because each phone sold continues to add revenue. VzW on the other hand doesn't want the iPhone.. they want an iPhone killer. The last RM's meeting the statement was "Why would we have a phone that would generate us ZERO addition profit?".
We also have to look at does Apple want to make a CDMA/LTE gateway device? To the statement that "It's not hard to swap a GSM radio for CDMA chipset." that adds cost to the manufacturer. That means the manufacturer has to make two seperate model phones one for LTE/GSM carriers and one for LTE/CDMA which if i might add only one carrier in the world is CDMA/LTE.
Also for the point of VzW is the biggest blah blah blah. When Apple offered VzW the iPhone VzW had a much SMALLER customer base then ATT at the time. VzW did not become larger then ATT until the Alltel acquisition.

Will says:

Thanks Jones, I Was Gunna Mention The Alltel Acquisition Myself.
Verizon Sucks In St. Louis. I Only Know Two People On Verizon and They Constantly Have Dropped Calls.
Last, AT&T Will Have A 4G Network Soon Too, so Who Cares If Verizon Does A Little Earlier. Apple Didnt Mind Using The Edge Network Way After It Was Obselete.

LolipopJones says:

Also no LTE phone on Verizon will be a true LTE phone. They are going to be Gateway devices where it roams LTE and EVDO.
ATT wants to progress HSDPA so that the speeds will be more comparable to LTE. VZW does not intend to upgrade Evdo at ALL! SO this means where LTE is not available you will be on a slow ass outdate 3g network vs where LTE is not available for ATT they will be on ATT's 3G which they plan to progress to HSDPA+ which should get up to speeds of 48mbs....
Verizon's transition to LTE is not going to be as easy or as smooth as they think. HSDPA+ is going to murder EVDO 3g even worse then it does now. The question will be how many people will be in VzW's LTE blanket and vs how many will be in their 3g coverage area. ATT is going to invest 5 billion into their network while VzW is going to invest 6 billion to build their network. LTE IS NOT COMPATIBLE with CDMA unlike GSM so this is going to be a very interesting Debacle.

iphoneer says:

I just bought an iPhone and switched from Verizon to ATT.....I love the Skype app and the JigSee game. I hate ATT.

fassy says:

I wonder what the Verizon-Microsoft planned yet-another-iphone-killer device does for the iphone/verizon rumors...
http://online.wsj.com/article/SB124093915558664239.html

LonerATO says:

@ LolipopJones: real speeds for HSPA+ is going to be 14mbs not 48 as AT&T doesn't have the spectrum for such speeds. The real kicker here is that AT&T will not be making their whole network 3.5g as it will cost way too much and there is no point to it in smaller towns or rural areas. Verizon on the other hand will always have EVDO in all of their markets due to the tech just being a change out of a few pieces of tech. In the end it wont matter who gets the iphone as I will just take my service to them and oh AT&T's 2.5/3g service sucks as i get GPRS in certain areas.

Grant says:

All I get in my town is Verizon and U.S Cellular...I use verizon and travel alot and it works great. I also have a friend who is a truck driver and using the i-phone but can never use it unless he is in a big city.

dowork says:

If Apple has any brains whatsoever they have the power to become the standard device for all wireless carriers the world is there to take what are u waiting for Apple???

JT Long says:

Heres an Idea.....We all hold the power to Verizon and to the iphone. How about dropping both of them temporarily. When your contract expires with AT&T, go with a non AT&T pre paid phone. When you contract ends with Verizon, go with a non Verizon pre paid phone. If we all quit putting money in their pockets they will come together and give us what we all want. Within 6 months I bet we would see a Verizon iphone.