sascha segan

SASCHA SEGAN

iPhones for Everyone!

The biggest flaw in Apple’s near-perfect iPhone has always been the network it’s on. So as rumors have arisen once more (based on an old story from September) of Apple developing an iPhone for Verizon Wireless, the most reliable cell-phone network in the U.S., the Internet has been going absolutely nuts. Of course Apple wants to develop an iPhone for Verizon. At this point, Apple wants to develop an iPhone for everyone. There’s just one problem: the hideous, mysterious, Faustian contract Apple signed with AT&T. And that one is a showstopper. Apple’s exclusivity contract with AT&T was an attempt to rewrite the eco-

nomics of the cell-phone business. This arrangement wasn’t about visual voice mail or even, really, about branding. It was about money and control. In exchange for a bond of blood, AT&T would kick some of its monthly subscription fees to Apple and let Apple control retail distribution. This was radical. This was unique. This was a failure. The iPhone sold well here, but the United States is a fraction of the global mobile market, and international carriers weren’t too comfortable with Apple cutting into their monthlies. It turned out that mobile-phone carriers around the world are much more comfortable kicking in one-time subsidies than kicking back monthly fees. So for the international market, Apple went to a much more normal system of accounting (normal for the cellphone industry, that is), and as a result, the iPhone has reached spectacular sales numbers around the world. Along the way, Apple has also learned that tying itself to one wireless carrier damages, rather than reinforces, its brand. This is because the quality of its product becomes too tightly coupled to the quality of that carrier. Notice that in many of Apple’s “later” countries, the iPhone is available on multiple carriers. Apple’s acting CEO Tim Cook has clearly stated that the company is not married to a one- carrier strategy. Apple has also gotten more flexible in regard to pricing and distribution, two major stumbling blocks when Apple first tried to get Verizon interested in the firstgeneration iPhone, at least if you believe

USA Today. Heck, these days the iPhone is available even at Wal-Marts across the country. Apple of 2009, as opposed to Apple of 2006, is much more willing to work and partner with mobile-phone carriers and third-party retailers. Mobile-phone carriers have learned a couple of things in the past few years as well. Everyone’s dabbled with visual voice mail. Phones like the T-Mobile G1 and the Palm Pre have made U.S. carriers more comfortable with phone manufacturers’ taking a starring role in product rollouts and software updates, though Apple takes that kind of control to a new level. Two years have also proved that the iPhone is a unique phenomenon that everybody wants in on. So Apple will put iPhones on everyone’s network, but in the U.S. it will want to put them on Verizon’s first. Verizon is now the largest carrier in the country. Also, Sprint has what Apple would consider an unhealthy relationship with Palm, and T-Mobile has that Google Android thing going on. If the iPhone were to go to Verizon before 2010, Apple would have to build a version for Verizon’s CDMA network. That would have been a great chore back in 2007. Apple isn’t actually that big a company; developing two cell phones from scratch would have been a big deal for it. But Apple is going on its third phone by now, and it has a few years of experience. The company could pull it off at this point. Developing a new phone for Verizon will take a year or so (especially considering the tasks of getting it through the FCC and Verizon’s own hellish network-testing process). But Apple plans ahead: It’ll have that phone ready when its AT&T contract is up. Verizon will likely demand a threemonth CDMA exclusivity agreement, to which Apple will consent. Sprint and T-Mobile will follow after a few months. If the AT&T contract lasts past 2010, a Verizon launch gets even easier. The iPhone could be one of the first devices on Verizon’s new LTE network, which will use a fourth-generation technology that Verizon will share with AT&T, T-Mobile, and dozens of international carriers. An LTE iPhone would eventually be an almost universal device. Apple’s AT&T contract is still shrouded in mystery. All we know about the terms is that the contract is a “multiyear.” Under the most liberal interpretation, that means Apple could be out from under AT&T’s thumb by July. But USA Today reported in separate stories that the contract runs through the end of 2010 or even 2012, which puts the Verizon launch firmly in the LTE zone. I’m pretty sure that whenever that clock goes ding, a whole lot more people will be able to buy iPhones.

Developing a new iPhone for Verizon will take a year or so. But Apple plans ahead: It’ll have that phone ready when its AT&T contract is up.

STAY PHONE-SMART Keep up with the latest on smartphones by reading Sascha’s column at go.pcmag.com/segan.