Cable Operators

Verizon Nabs the iPhone

1/17/2011 12:01 AM Eastern

New York — After more than three
years, Verizon Wireless has finally
pried the iPhone out of AT&T’s grip.
But Apple was still calling the shots
in terms of what content is available
through its highly coveted smart
phone.

Verizon Wireless will not offer any
exclusive video programming or other
content through the iPhone 4, which
will become available Feb. 10. And initially,
the phone will run only on the 3G
network, not the faster 4G Long Term
Evolution network Verizon Wireless has
been hyping over the last two months.

That left the nation’s No. 1 wireless
carrier to emphasize the reliability and
performance of its 3G CDMA network
at the official launch last week. Th e iPhone on Verizon is
“something consumers have been hungry for, for years,”
president and chief operating officer Lowell McAdam said
at the launch event, held at the Time Warner Center here.

SAME HANDSETS

Verizon Wireless will sell two iPhone 4 models: one with
16 GB of storage for $200 and a 32-GB version for $300,
each with a new two-year customer agreement — the
same as AT&T. Th e carrier did not announce pricing for
the iPhone data plans, saying that will be made available
in the next few weeks.

While Verizon Wireless iPhone 4 customers will be able
to download more than 300,000 apps from Apple’s iTunes
App Store, none of the content will be exclusive, Verizon
Wireless spokeswoman Brenda Boyd Raney said.

“Apple controls the user experience on its products, not
its network and distribution partners,” Current Analysis analyst
Avi Greengart said. “But Apple has proved that its approach
works, and if Verizon Wireless wants an iPhone, it
gets what Apple decides is an iPhone, not a collaborative
effort.”

As for why there isn’t an LTE-enabled iPhone, Apple chief
operating officer Tim Cook said the first generation of LTE
chipsets would have forced some “design compromises” in
the iPhone. Moreover, he said, “Verizon customers have told
us they want the iPhone now … The most popular question
has been, ‘When will the iPhone be able to run on the Verizon
network?’ ”

Dan Mead, CEO of Verizon Wireless, asserted that the
carrier’s 3G network is “the best in the country” — a claim
hotly disputed by AT&T, which is expected to crank up the
marketing volume in the months ahead to counter the loss
of its iPhone exclusivity.

AT&T has been the sole provider of the iPhone since the
initial June 2007 launch, but has earned a reputation as delivering
spotty 3G service. In a statement
last week, AT&T said, “For iPhone
users who want the fastest speeds, the
ability to talk and use apps at the same
time, and unsurpassed global coverage,
the only choice is AT&T.”

One feature exclusive to Verizon
Wireless is that its version of the iPhone
4 will include a new “personal hotspot”
capability, letting customers use the
iPhone to connect up to five Wi-Fi enabled
devices. But again, the company
didn’t divulge pricing information.

Verizon Wireless is expected to offer
an unlimited-data plan with the
iPhone, The Wall Street Journal reported
last week. By contrast AT&T moved to
usage-based pricing plans for all smartphones
in June 2010.

The apparent decision by Verizon
Wireless to not cap data usage “speaks to the difficulty of
achieving price stability in the U.S. wireless market,” Sanford
Bernstein senior analyst Craig Moffett wrote in a note
last week. He added that last year he compared AT&T “to
Will Ferrell in Old School, streaking all alone into UBP [usage-
based pricing] with the assumption that the rest of
the fraternity of wireless carriers would follow. They still
haven’t.”

NON-EXCLUSIVE DEAL

Cook said the multiyear agreement between Apple and
Verizon Wireless for the CDMA iPhone 4 model is “not
exclusive,” but that may mean that Apple will supply the
device to international carriers as well. Analysts expect
Verizon Wireless and AT&T to be the two exclusive providers
of the iPhone in the U.S. through the end of 2011,
shutting out competitors including Sprint, T-Mobile and
Cox Communications.

Wall Street analysts forecast that Verizon Wireless —
which has 93 million customers — could sign up 10 million
or more iPhone subscribers this year. Up to 6.5 million
could be subscribers defecting from AT&T, according to
Piper Jaff ray analyst Gene Munster.

At the same time, Verizon is expected to pay $3 billion to
$5 billion to subsidize iPhone sales in 2011, which will erode
its profit margins, according to analysts.

CALLING UP IPHONE

Availability: Feb. 10; qualified Verizon Wireless customers can preorder online Feb. 3

Hardware pricing: $200 (16 GB) and $300 (32 GB) with two-year contract

Service pricing: Not announced, but reportedly will include unlimited usage plan

Content: More than 300,000 apps through Apple’s iTunes App Store

SOURCE: Verizon, Multichannel News research

September