In a huge turnabout, Verizon is unbundling its service from a phone purchase. This makes total sense for Verizon, which has the best network; the pressure will force other competitors to follow suit, and on network strength, Verizon wins in most (not all) areas.
This is enormous news for the cell phone industry. I suspect we'll ultimately see little to no bundling, other than some sort of very basic freebie phone, which is all to the good. Consumers complaining that they won't get cheap phones aren't thinking things through; the phone company wouldn't give you the phone if they didn't expect to get it out of your hide in phone fees.
I suspect that this will put enormous pressure on Apple's sweetheart deal with Cingular, as customers begin thinking of a phone as something that doesn't necessarily come attached to a two-year contract.
Except the iPhone won't work on Verizon. Or Sprint. Just T-Mobile and AT&T. Verizon still uses the same cruddy CDMA technology.
While this is good news, phones are still at the mercy of their technology, if not their network.
I saw this weekend that Nextel stock was down 20% over the last 52 weeks while Verizon's was up a mirror image 20%. Well, yes, it may be 'hijack of thread;' but, heh, I'm cool with your explanation. I suppose it's got to do with the fiber Verizon is laying out though, as they haven't laid it out in their home, Irving*, I haven't noticed personally. My thought and your blogpost are consistent with a 'Verizon=Internet' model.
*Where is that caring American Lou Dobbs urging Congress to 'truth, justice, stupidity!'
As Josh points out, this won't make a bit of difference to who has a GSM phone.
And as Verizon has invested so much money in their network, which you say has the best network, they are very unlikely to switch to GSM. Just as unlikely as the GSM providers are to switch to CDMA.
The GSM Association claims that 82% of the global mobile market uses GSM, that is over 2 billion people across more than 212 countries.
I too thought this was 'no news'. As a frequent traveler to Europe I will never have anything but a GSM phone - which means T-mobile or AT&T in the states and the phones that work on their networks.
The decision could be viewed as Verizon attempting to catch up to the basic openness that is a fundamental characteristic of GSM\UMTS networks and that (in most cases) GSM users take for granted. I can switch my phone handset at will with no restriction and without asking my provider's permission between (for example) a Vodafone supplied Motorola SLVR, a HTC S710 and a Samsung Blackjack _and_ I can bring these with me as I travel to the UK, India and the US (and france\germany\hong kong\spain\israel... you get my drift). As a bonus if I see a nice shiny (new and unapproved almost certainly) handset in an airport on the way I can buy it, pop my SIM out of my current phone and into the new one and be back working with all my contacts and the same number as soon as it powers up. That is what the openness of the GSM standard has done for GSM consumers globally. Now you can argue that the relatively closed nature of the Verizon network is technically superior (probably true) and has better coverage (possibly true if you only mean "within the US") but the economic limitations of its maximum market size as a US only technology means that over the medium to long term the choice,capability and quality of the handsets and other clients used by Verizon customers will be poorer than those available to users of competing GSM\UMTS based networks even if they open it up completely.
VZ didn't become a ~90+Bn U$D company because they are stone stoopid...
Watch what GOOG does with this move in conjunction with VZ's FiOS..
"Analysts are touting LG's Voyager, which combines a large touch screen with a full keyboard in a clamshell design, as an iPhone killer. It goes on sale next week in the U.S. for $299.99, making it $100 cheaper than the iPhone, despite some extra features, like mobile TV.
The catch? The phone runs on CDMA. Though one of the two major wireless technologies in the U.S., the standard isn’t used widely abroad. (Exceptions are Israel and South Korea.) "You could take it to Europe, but it would basically be a very nice paperweight," says Avi Greengart, an analyst at Current Analysis.
For those willing to wait, there's always hope. Some models never slated for U.S. distribution are brought over after proving themselves overseas. Verizon (nyse: VZ - news - people ) recently picked up Samsung's Juke, a svelte, swiveling music phone, after a similar version, the SGH-x830, became a best seller abroad.
Superfans always find a way around the rules, anyway. Despite varying frequencies and standards for phones and networks around the world, the number of phones that can cross borders is growing."
http://www.forbes.com/2007/11/15/video-phones-europe-technology-personaltech-cx_ew_1115coolphone.html?boxes=popstories
"Verizon Wireless’ move Tuesday to open its mobile network to any and all cell phones marks a victory in Google’s campaign to knock down the carriers’ wireless walls.
Along with AT&T (T), Verizon (VZ) had declined to join Google’s Open Handset Alliance to develop a mobile platform called Android that would work on all phones and networks. Verizon still hasn’t signed up, but in practical terms it’s taken a big step toward accepting Google’s vision.
“We think this is a great step forward,” said Google CEO Eric Schmidt in a statement. “As the Internet has demonstrated, open models create better services for consumers and stronger businesses for providers. We are excited to work with Verizon and other industry leaders to achieve this vision.”"
http://techland.blogs.fortune.cnn.com/2007/11/28/verizon-switch-is-a-win-for-google/?source=yahoo_quote
I see this as a very positive step, but unwinding the cross-subsudies will not be trivial. In the past, control of which phone applications to permit was the main way to ration bandwidth. Going forward, Verizon may need to explicitly price it (since video uses vastly more bandwidth than email and could congest the network if it's freely available at no marginal cost). That could create significant transition costs since few consumers know how much bandwidth they use.
I suspect that the number of US cell-phone users who travel abroad with sufficient frequency to make their service-provider decision on that basis is quite small. Same for the number of users who buy multiple phones and want to switch among them frequently. If it were otherwise, Verizon wouldn't be so dominant in the US. And certainly, this announcement will affect GSM users within the United States, the next time their contract expires.
I'm guess that if this has a big impact, it'll be more about non-phone wireless devices rather than traditional phones (think about the Amazon Kindle -- even though I understand that uses Sprint's rather than Verizon's network).
Some quick points, mostly about CDMA vs GSM:
1. CDMA isn't actually "cruddy technology", as Josh puts it. The CDMA air interface is a large technical improvement over the TDMA interface that GSM used, which is why GSM-3G uses CDMA as its air interface, and is why the upgrade from 2G to 3G was/is so costly and delayed. Excellent technical details about CDMA can be found here and here.
2. That said, SIM cards are pretty cool, and hopefully Verizon and Sprint will start adopting these CDMA equivalents.
3. Steven states that 82% of the global market uses GSM, but I bet at least 82% of the US market doesn't care what the global market uses. I'm hardly a hick, having grown up in cities and suburbs, and having lived in NYC for 5 years, but more than 50% of the people I know have never left the country, and of those who have, less than 20% of them do so frequently enough to make cell phone decisions based on needing service in other countries. Despite being saddled with a "non-global" technology, Verizon and Sprint are still doing just fine.
4. Michael W calls this "no news" because of his GSM phone and AT&T service, but as all the news stories are saying, this move will likely push other providers (like AT&T) into adopting similar models. So yes, it will be relevant to iPhone users, eventually. I have lovely visions of buying a 3rd generation iPhone someday, with a good (not 2G GSM) air interface, and using it on whatever cell plan I want with whichever carrier I want. This move by Verizon does more to advance that vision than anything Apple and AT&T are doing.
The whole "hide the price of your phone in inflated service charges with a 2 year lock-in" is a crappy model for consumers, reducing competition and choice, but was going to stick around until a couple of big providers abandoned it. This could, hopefully, be the beginning of that move. But let's not get too far ahead of ourselves. They're saying next year, and the details are still vague. Still, there's hope.
Telnar
"That could create significant transition costs since few consumers know how much bandwidth they use." But they will very soon. A "bring your own option phone" with VZW will require the new Nationwide calling plans, which bill data at $1.99 per MB. The cost is a way of rationing bandwith.