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Why We Don't Believe Rumors of an Apple/Verizon Love Child

steve-jobs-3g-iphoneApple (s aapl) and Verizon (s VZ) are in talks for the carrier to distribute an “iPhone-lite” device and a “media pad,” with one of the devices to be launched sometime this summer, BusinessWeek is reporting. As a Verizon subscriber, I wish I could believe this story, but we have several reasons to think it’s just a negotiating ploy aimed at getting more concessions from AT&T as it tries to hold onto its iPhone exclusive.

Lousy Timing Part I: Apple wouldn’t launch a competing product this summer as it could steal the show from its rumored next-generation iPhone on the AT&T (s T) network.

Lousy Timing Part II: If Apple wants to launch an iPhone with Verizon, it would rather do so with an LTE phone than a CDMA version, for the reasons Om outlined earlier. But Verizon’s LTE network won’t be ready by summertime.

Verizon and Wi-Fi VoIP Are Like Oil and Water: BusinessWeek describes one of the devices as a media tablet that uses Wi-Fi to make VoIP calls, but Verizon hasn’t pushed either VoIP or Wi-Fi on its phones.

Legal Issues: It’s hard to believe that Apple has found a loophole in its deal with AT&T that’s big enough to slip an iPhone-lite device through without getting some sort of smackdown from AT&T’s legal team.

Apple Doesn’t Strip Down: As our colleague over at TheAppleBlog points out, Apple doesn’t make stripped-down and cheap versions of its devices as BusinessWeek is claiming the phone would be. The Nano and Shuffle aren’t stripped-down iPods (and from a margin perspective, they aren’t cheap); they’re designed to offer different functionality.

Verizon Doesn’t Share: BusinessWeek noted this as well, but it bears repeating. Verizon isn’t as likely as AT&T to cave on issues like sharing data revenue with Apple. Nor is it likely to push iTunes for downloads rather than its own music store. Plus, while AT&T is gaining millions of new subscribers who want the iPhone, Verizon is still picking up new additions as well, so isn’t exactly hurting. And it has a better network than AT&T, which may mean that Apple is more willing to cave on some of Verizon’s non-negotiable points. Apple can’t be thrilled about the poor user experience some people have had on the AT&T network.

21 Responses to “Why We Don't Believe Rumors of an Apple/Verizon Love Child”

  1. very true. Its funny how all these rumors start with “people familiar with the matter”…i love this line..all it takes to start a rumor is…”people familiar with the matter”! :)

    I don’t know if the media pad makes a lot of sense, but nevertheless It’ll be very interesting to see what apple actually launches on June 8th…specially now that palm will try & steel the thunder on June 7th!

  2. why not release a tethering device that allows ipod touch and other apple products to attach to the ip world via verizon? a sort of ulta portable CDMA wifi router locked to apple products?

  3. Verizon started rolling out 3G in 2001 and even today major parts of the country still do not have it. It’s better than ATT, but there are major coverage gaps. Even if LTE rollout is quicker (hard to believe given capex constraints in this economy), LTE will still not have major metro coverage till 2012 at earliest…so Apple may be thinking ahead.

    Short term, I hope it extends with ATT but on terms friendlier to consumers…see

  4. Krishna Baidya

    good argument & counter ones as well.
    in my opinion:
    a CDMA version for china makes sense as it still offers a sub base greater than 27mil …. and if thaz in the road map then it may be pushed to other CDMA operators as well. however, i totally agree that this may be just enhancing apple’s bargaining power with AT&T.

  5. You and Om make excellent points and some of my colleagues share the same opinion. But, lets just play Devil’s advocate…

    Lousy Timing Part I:
    Potentially you could have it perfectly backwards. From a financial perspective, Apple would be way more excited about making the announcement that the iPhone is available to 80 million Verizon subscribers. How many more phones will Apple sell when they introduce a new thinner/faster/longer-battery-life iPhone to only AT&T customers? Just the same,at the end of the day, Apple’s fiduciary duty is to its shareholders.

    Lousy Timing Part II:
    Qualcomm is desperate to sell CDMA technology and Verizon’s subscribers are desperate to buy iPhones. LTE will be very slow to roll out in the US. Wait to make the LTE argument until we get the first trial LTE network in the US. Apple can sell every interested Verizon customer an iPhone with a CDMA radio now and again with an LTE radio a few years from now.

    Verizon and WiFi VoIP are Like Oil and Water:
    Apple iPhones will be easier to control than Android phones. There is likely a growing sense of urgency for Apple to get phones on other carrier’s networks.The other cell manufacturers are leveraging the exclusivity agreement between Apple and AT&T which is evident by the number of Android-based, iPhone-like phones in the pipeline. Apple does not want to fumble at this stage in the game.

    Legal Issues:
    Nobody knows the details…

    Apple Doesn’t Strip Down:
    True, but Businessweek’s assumption is baseless. Nobody knows the details of the exclusivity agreement and how Apple will avoid lawsuits with AT&T. It isn’t appropriate to assume anything about form factor since we don’t know the details of the exclusivity agreement. However, they could surely surprise us.

    Verizon Doesn’t Share:
    The times have changed. The demand for WiFi enabled phones has skyrocketed. While Verizon will hold onto its closed network as long as it can to protect profitability, at some point it will start losing subscribers as people tire of Verizon’s selection. This will surely happen in the transition by AT&T and Verizon to LTE. It is much safer for Verizon to test business models with a very profitable/controllable Apple iPhone than the Android-based models.

  6. i wish everyone would stop making dumb arguments regarding verizon crippling software. Blackberry has an app store on verizon wireless you can actually download Blackberry’s app store from verizon’s app store. face facts Verizon wireless is a superior network then ATT and now that it aquired ALLTELL apple wants in and i cant say that i blame them. none of the blackberry’s are crippled they have there OS intacted and so would Apple’s OS

  7. Isn’t there a rumored CDMA version of iPhone that apple will release for use in china? It may not be development of a new device but a small change of hardware and software for compatibility with Verizon.

  8. Yuvamani

    good points. For the sake of an argument let me offer some counter point …

    > Verizon Doesn’t Share
    Verizon does not really have options here … Verizons app store or whatever they call it is nothing compared to the success of the apple app store. At best Verizon can ask for a small revenue share … Apple has shown that it can make this a success . Verizon has not. Why loose a hot device which causes switching pain to you on a loosing business proposition like controlling the store

    > Apple Doesn’t Strip Down
    The iPhone 3g is half the price of the original iPhone :) The macmini is a stripped down mac. Apple is prudent to strip down when its necessary and the market needs a cheaper phone. Apple is not known to sacrifice on usability though …

    > Legal Issues:
    It is unknown on the exact nature of Apples exclusive agreement with ATnT so it is hard to comment here .. Steve Jobs is awfully good at being an a**hole when he needs to :)

    > Verizon and Wi-Fi VoIP Are Like Oil and Water :
    Yes – since the voip revenues are controlled by somebody else. With voip as it is .. verizon loses revenues and others gain .. But if voip generates revenues then Verizon will jump in.. That said I doubt that Apple and Verizon would wanna do a voip device …

    > Lousy Timing :
    Why cannot the next gen iPhone launch on the two biggest carriers in the US at the same time. That would be one heck of a “one more thing” Also iPhone faces some pretty hard competition. Android is getting traction in Tmobile land and Palm Pre has some pretty serious lust factor … The iPhone 3.0 os is evolutionary rather than revolutionary. Its time to increase distribution on the iPhone …

    • Jerry Fleckhiemer

      The author is solid on his interpretation. May of you may lack the business acumen to interpret Apple’s position and Verizon’s position.

      > Verizon Doesn’t Share
      The author is correct and there is no reason for Verizon with its 80M subs to start now for the sake of one phone. That is the reason the shot it down the first time. Remember Verizon had first dibs on the iPhone. Verizon has more options than you can imagine. Have you checked their Q1 numbers? And, who cares about an app store… definitely not AT&T since they get their money up front thru a contract, remember. If people use any carriers medium they get a cut, whether its texts or any content. This is a very common practice with makes your point moot.

      > Apple Doesn’t Stip Down
      The price changed because of subsidies, period. iPhone 3G is a far more advanced device the 2G variety. AT&T started subsidizing the device like they do all the others per a 2 year contract.

      > Legal Issues
      Have you ever thought why it took so long for Apple to enter the phone market? AT&T are bigger a—holes. If this iPhone-Lite happens there will be many lawsuits, remember Cisco sued Apple and AT&T or the name of the phone.

      > Verizon and Wi-Fi VoIP Are Like Oil and Water
      Verizon was the first carrier to implement data caps… 5Gb, which could be a small amount if you add a netbook and VoIP to the mix. It doesn’t make sense to go against “normal business practices” to control bandwidth. Wait for the new FCC chair and check out the front row seat of the “Net Neutrality” opponent’s bench.

      > Lousy Timing
      Margins are the answer to your question about why they will not launch two different iPhones. Confusion in the market place because the Verizon version would be a VoIP flavor that will require a change in user experience.

      My thoughts: VoIP has not been completely adopted by telecom any where in this world as of today. The hardcore does not trust it because reliability and quality of service can not be guaranteed in an IP environment; these are facts about IP as it stands today. Some, IT folk, may argue that IP has come a long way but it is not a dedicated channel that can be statically allocated, managed, and provisioned. IP is a “Best Effort” service and protocol, period. That has not and will not change because it goes against the very nature of the history and progression of IP. The only way to supplement these conflicting ideas is bandwidth and with EPON, GPON, and BPON fiber technologies, they are being addressed in the telecom world, but you will pay for it because it is brand spanking new.