Verizon Rejected iPhone Deal

SnowDog74 writes "According to an article in USA Today, Verizon Wireless rejected an Apple deal over the iPhone. The article says that Verizon wasn't happy with the strict terms Apple demanded — a Verizon Wireless VP is quoted saying that Apple wanted a cut of monthly revenues and control of the customer relationship. What's perhaps equally interesting, however, is the implication from sources that say Cingular's exclusive 5-year deal with Apple applies within the United States only. If this is true, it undermines some of the criticism Apple has been receiving for their business strategy surrounding the iPhone, given the size of the cell-phone market outside the US."

Service & retailers: the other side of the coi

[sporkme]

Granted, the revenue stream from added features seems to be the principal deal-breaker, but TFA also highlights that Verizon would be cut out of certain customer service decisions. However you feel about the company, they do pride themselves on their customer satisfaction numbers. As a retailer, I found their policies to err on the side of customer benefit.

Apple's terms would have cut out major retailers when it comes to the handset, making it more difficult to retain those retail partners. It also would have taken warranty policy from the carrier to the manufacturer - and the iPhone would be the only handset with this arrangement. I think customers would have hated it, but maybe Apple planned to be more fair. How are they on iPod warranty?

Verizon has been treading lightly with retailers since their split with Radio Shack (over R$ revenue). The separation hurt both companies right off the bat, and the implications of the separation are still developing. If Wal-Mart and Best Buy were cut out of the iPhone deal, they might have such a sour taste that they skip off to Cingular instead.

If Cingular's terms do not exclude third-party retailers, Verizon will suffer anyway.

Verizon's big mistake

[Ankou]

Ya think this is one of those times like when the guy who didn't sign the Beatles for a record deal? At anyrate, I find it funny that there are statements like free 18 months [thestreet.com] switching from Verizon to Cinguar with the iPhone. I have no idea if this is true or not, but it would be quite a slap in the face. Maby this will be a wakeup call to the cell phone companies that they are completly clueless about the market they control.

Re:Verizon's big mistake

[Veinor]

The Consumerist has reported that the free 18 months is false [consumerist.com] (original story [barrons.com])

not a match for Verizon

[r00t]

Verizon wants to disable EVERYTHING on the phone that isn't pay-per-use. If you were thinking the iPhone was restrictive, think again.

Re:Apple iPhone

[icebike]

"You will note too that Apple chose GSM, the European and worldwide standard, as opposed to CDMA, a primarily NA one, for the phone. Does that tell you anything?"

Yes, it tells us that GSM penetration in the US and Canada is almost at 50% of the area covered by CDMA.

Its really pointless the keep harping on this CDMA/GSM rag. GMS is fine for itty-bitty countries where you can't get out of sight of the nearest town. It takes vastly more towers than CDMA. In Canada, and the US those towers are being built at a record pace. But the job is orders of magnitude larger than putting up 50 towers that cover entire countries as in the EU.

Good

[tehaxer]

Verizon's the best carrier in the US, and they rejected a stupid phone that came with a bunch of rules that would have been bad for them and their customers. I have no doubt that apple fanpeople will eat up the phone, but I don't think the hype is enough to carry a non-fanperson all the way through buying a 500$ phone that is about the same size as the new Samsung (and probably other companies') PDA phones, yet doesn't have real pda functionality, integration with things that matter (mine is 2 years old and handles exchange, secure imap and smtp, has picsel, a great browser which samsung quietly distributes, and which apple I'm sure would devote an entire SHOW to since they have such limited resources that creating such a thing would feel like a big deal to them), a keyboard, 3g networking, 3rd party programs, sd slot? (Not sure...). It's not a good fit for a Verizon or Sprint, since they're serious carriers. Cingular is perfect for the iPhone. T-Mobile, too.

I mean, telling everyone a product you're releasing into a market that has generally been considered the highest of high tech for the last 5 years, then actually using 'High Technology' as the 4th bullet point on the front of the box and all your advertising is pretty stupid. I think the Verizon decision makers probably played out a sales scenerio in their heads between one of their reps and someone like me (I'd imagine a fairly typical Verizon customer), realized it made them look like idiots ("But but, it's HIGH techNOLOGY!!") and decided they'd let the kiddie carriers deal with the kiddie customers.

eff ell aim!

CDMA phones are unfriendly to free software

[tepples]

Its really pointless the keep harping on this CDMA/GSM rag.

The problem I've seen with phones that use Qualcomm's IS-95 [wikipedia.org] system (often called CDMA after its physical layer) is that phones for IS-95 often support only Qualcomm's BREW environment [wikipedia.org], which uses digital signature requirements to shut out developers of shareware, freeware, and free software from porting their software to common IS-95 phones. As I understand it, phones that support GSM are more likely to support Java ME MIDP [wikipedia.org], which generally allows anybody to compile and run a midlet.

Re:Apple iPhone

[Anonymous Coward]

Due to timing restrictions GSM can't go further than 35km, even if you have good signal strength. CDMA (well, IS-95) is only restricted by the signal strength.

In Australia GSM was installed in all the cities, but in rural areas a CDMA (IS-95) network was installed for the extra range. Of course, since Australia isn't in the stone ages CDMA is now being replaced with a HSDPA 3G network. America, having a universally shitty mobile phone setup will have CDMA forever.

Re:Five years?

[jZnat]

Competing standards on how to transmit and receive on the phone (GSM isn't the only one here), and mobile phone company subsidising of cell phone prices with contracts (otherwise the phones are a lot more expensive, and I don't even know where you can buy the normal, unlocked phones without a contract).

Re:Five years? Thought it was two.

[0100010001010011]

You have to sign a 2 year contract to get the phone from Cingular.

Cingular signed a 5 year contract with Apple.

I wonder what the 'early cancelation fee' is for that contract.

Re:Five years?

[jonwil]

Here in Australia with Telstra, you can buy phones on contract from Telstra and said phones are NOT locked to the Telstra network. Of course if you want to drop out of the contract before its up, there are early termination fees that you have to pay. You can also walk into the store and buy any phone they sell outright with no contract, no subsidy and no network lock and then use it with any carrier that is compatible (in australia or otherwise)

The only phones Telstra lock to their network are prepaid phones and I think they may even unlock those if you have spent enough money with them.

If Cingular did the same thing with the iPhone and sold it completely unlocked at whatever cost they had to sell it at to make a profit from the iPhone sale, all this would be a moot point.

Re:not a match for Verizon

[Paulrothrock]

Outside of some large urban centers, smaller carriers are really hit-or-miss. I had T-Mobile for a long time. When I lived in Scranton, PA I had no trouble using it. Full coverage even out in the hills at school.

But when I moved to Harrisburg, I had horrible service. I couldn't even use it at my parents house within line of sight of a cell tower less then a mile away. That's when I switched to Cingular. My wife and I have been extremely pleased with the coverage and haven't had any troubles with dropped calls.

But, then again, I'm just one of those folks who uses their phone to make phone calls. Need a ringtone? Make a MIDI file and upload it with Bluetooth.

Re:Service & retailers: the other side of the

[rizzo420]

i am a verizon customer and from what i've experienced customer satisfaction is a top priority. i received a phone in a store at the online price for new customers and without the mail-in rebate because i almost walked out. i've had mistakes made in their favor turn to my favor. and i've had no problems dealing with their sales people and technicians in their stores or over the phone.

i won't even go into how few dropped calls i've had or how great their service is in traditionally low service areas. cingular's "fewest dropped calls" bit is a joke. you can't have dropped calls if you can't get a call to go through in the first place. that's how they ended up with that number.

Re:Five years?

[400049]

Here in India (which by the way is fastest growing cellphone market in the world with more than 150 million phones) there is no lock-in in GSM segment. CDMA operators do lock-in in the sense that there are only two operators present in this segment and sim cards are not interchangeable, last time I checked. But the greater part of the market i.e. GSM has no lock-in. Buy a sim and use it any phone whihc is based on GSM technology.

not sure they care

[johnpaul191]

honestly, Verizon is often kind of behind the curve on the newest and coolest phones. i always assumed they were secure with massive business plans and didn't have to deal with that.
on the other side, maybe they didn't want anything to do with it. they are notorious for ruining cool potential features to ensure a revenue stream. they try to cripple cameraphones with that terrible pixplace thing, they trash bluetooth. i would think the iPhone is not screwed down enough for them, though it's possible the negotiations ever got that far.

Re:There won't be that many sold...

[Brandee07]

I thought that the iPhone isn't going to be subsidized, despite being tied up in a contract. Something about price comparisons with the forthcoming iPDA or whatnot.

Re:iPhone to NOT be sold in Cingular stores

[nuckin futs]

go watch the keynote on the iphone introduction. Fast forward to about an hour and 8 minutes into it.
Steve Jobs mentioned it will be available in Apple Stores AND Cingular Stores.

Re:CDMA phones are unfriendly to free software

[anothy]

you've identified three separate things which are entirely unrelated, and implied a correlation.
first, choice of network technology has nothing to do with application environment. Sprint, for example, is the second largest CDMA operator in the US, and does not sell a BREW phone (to the best of my knowledge; certainly the vast majority, at least, of their phones are Java-based phones). it is true that BREW is a sure sign of a CDMA phone, but the inverse is not true. even on Verizon's network, for example, see the Palm devices as a counter-example: no BREW even available.
second, choice of application environment has nothing to do with signing requirements. several operators who have java application environments on their phones require signing or other forms of controlled distribution and application loading for apps to run; see, for example, Nextel. also, nearly every vendor that allows unsigned apps to run on their devices (which is most of them) restricts unsigned apps' access to certain features, most commonly the PIM functions and things relating directly to the phone network, like sending SMS messages. to access those features, every network i've looked at (which is all the major US ones and a small handful of european ones) require signing.

Re:Mono, what? Poly or something?

[calbanese]

Actually, legal scholar, its not the Slashdot Court of Public Opinion. Its the Supreme Court and the Sherman Act.

"The offense of monopoly power under 2 of the Sherman Act has two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966).

Re:Five years?

[SaDan]

Eh? We have plenty of choices for phone service, including two different carrier technologies (GSM vs. CDMA).

Phones are cheap and plentiful. GSM phones with SIM cards tend to move around quite easily between different companies. CDMA phones do not have SIM cards, so they are usually locked to the CDMA carrier (but can usually be unlocked or just activated on another CDMA carrier).

I've personally only owned CDMA phones, and have never had problem buying a used phone off of eBay to use with Verizon. I've also used a couple different GSM based phones and services through work, and definitely prefer CDMA over GSM in every respect. Why people put up with GSM is beyond me.

I also don't really understand the big deal about the differences between cell phone service inside and outside the US... "world" phones are available through all major carriers if frequent traveling is an issue.