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Why Apple’s iPhone is still not coming to Verizon

Daniel Eran Dilger

A number of pundits and other wags keep insisting that Apple desperately needs to sell the iPhone through Verizon, and will likely do so sometime really soon now, providing AT&T haters and Verizon family plan users with empty hope. They’re still wrong, here’s why.
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[Consider new information in a report that indicates Apple is building a hybrid CDMA/UMTS iPhone for 2010.]

I outlined a series of reasons why Verizon wasn’t going to get a CDMA iPhone just a few months ago (hint: CDMA is a non-starter). Verizon’s future LTE network (a major new upgrade of 3GPP UMTS, rather than Verizon’s current Qualcomm CDMA/EVDO technology) won’t help for the next year to two, because there won’t be enough LTE deployed to support a next-generation UMTS/LTE iPhone (which is certainly in the works but probably won’t arrive until 2011 at the earliest).

Verizon’s own initial LTE phones will be designed to fall back to CDMA in areas where LTE isn’t yet available. That means Apple’s non-CDMA LTE phones wouldn’t be acceptable on Verizon’s network for years until Verizon finishes its build out of LTE; Apple is not going to build a hybrid CDMA/LTE phone for Verizon for the same reasons it didn’t produce a CDMA phone for the company. Sometime around 2012 an LTE iPhone might become available for use on Verizon’s fleshed out LTE network, but that’s a long ways off… like Mac OS X 10.8 Lioness or iPhone 6.0 or Windows 7 SP 2.

This CDMA/GSM monumental technological deal breaker hasn’t stopped pundits from insisting that Apple desperately needs Verizon so that it can sell more iPhones. They seem to figure that if the iPhone were magically available for Verizon, Apple would only add new subscribers among Verizon’s members. Of course Apple would, but the other problem is that Apple would lose all its bargaining power with AT&T, not to mention all the airplay it gets as being the reason AT&T is growing and remaining competitive with Verizon, or the co-advertising and subsidies AT&T pays to keep Apple around.

The iPhone isn’t coming to Verizon

What would a Verizon iPhone do for Apple’s sales?

We can do a little thought experiment to see how much of a difference it would make for Apple to sell the iPhone on Verizon. Let’s pretend the iPhone is RIM’s BlackBerry, which already sells in versions for both Verizon and AT&T, as well as for Sprint and T-Mobile, too. In fact, the BlackBerry is pretty much available everywhere. How has this worked out?

RIM sold a whopping 8.3 million BlackBerrys in its most recent quarter ending in September, and the company says it now has a subscriber base of 32 million users. Impressive!

Weak Q3 Sales May Lead To Lower Blackberry Prices | AHN

How does this compare to Apple, which only sells its iPhone in the US on AT&T’s global-savvy GSM/UMTS network? Apple sold 7.4 million iPhones in the same quarter, and it claims an installed base of 50 million iPhone and iPod touch devices, of which about 30 million are iPhones. Hmm.

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Hold on a second I need to say that again

As Steve Jobs might say, “Yes, it’s true.” RIM sells BlackBerry through every major mobile carrier in the US. Apple has one carrier: AT&T, which represents roughly a third of American subscribers (78 million). Verizon claims 89 million, Sprint 49.3 million and T-Mobile 33.5 million. That’s about 250 million total American mobile subscribers represented by the top four carriers, and AT&T serves around 31% of them. Is it logical to think that if Apple developed unique versions of the iPhone to work on Verizon and Sprint that iPhone sales would triple? No, that’s not true.

Should Apple develop a unique CDMA or LTE/CDMA model to address Verizon’s 89 million subscriber base? Well look at the risks involved: while the iPhone might claim a significant percentage of Verizon’s minority of smartphone subscribers, any gains on that network would largely come at AT&T’s expense. Apple has a partnership with AT&T and a rivalry of sorts with Verizon, which has historically partnered with Microsoft. Why would Apple punish its partner to help out a company that initially rejected it, badmouthed it for years, and still adamantly refuses to give up its VCast junkware or support iTunes, even if Apple were open to creating an iPhone for Verizon?

Unlike other countries where Apple works with multiple subscribers, the US has a technology rift between GSM/UMTS and CDMA/EVDO. So adding Verizon as a provider wouldn’t simply be a matter of signing up a new provider but would also involve designing a new version of the iPhone, one that would introduce a complicated new set of missing features into its lineup. The other problem: Apple already has a way to get Verizon subscribers’ money: the iPod touch.

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The T-Mobile option

It might make some sense for Apple to attempt to expand the iPhone’s US market reach and increase carrier competition by creating a new iPhone capable of using T-Mobile’s slightly different 3G UMTS network (current versions of the iPhone are only compatible with T-Mobile’s slower 2G GSM towers). That would allow the company to expand (rather than cannibalize) its AT&T business, as T-Mobile is more of niche provider with cheaper plans targeting different kinds of customers. And the limited drift from AT&T to T-Mobile wouldn’t impact AT&T nearly as adversely as a wholesale iPhone migration to its larger arch rival Verizon.

T-Mobile is just as desperate for new customers (particularly since Microsoft/Danger destroyed its Sidekick business by allowing a month-long cloud services failure), so it’s likely to be willing to offer Apple the same concessions as AT&T did (and which Verizon refused and refuses). Additionally, the work involved in making the iPhone compatible with T-Mobile is much less complicated and wouldn’t result in two models, one that only works in the US (CDMA) and another that works here and worldwide (GSM/CDMA). A single new UMTS iPhone that works on both AT&T and T-Mobile would also work globally, but no quad band 850/1700/1900/2100 UMTS phones exist yet anywhere.

Since this new UMTS iPhone would still be a UMTS phone, it wouldn’t have to drop major features Apple has long associated with the iPhone: the ability to talk on the phone while browsing the web to search for seafood restaurants in the Marina, or the capacity to effortlessly add, hold or drop multiple parties in the same conference call. CDMA phones from Verizon can’t do(roid) either of those things; data services like the web are dead when you’re on a CDMA voice conversation.

Verizon can simply hide this feature lapse on its own phones (like the new Android Droid), but it would be rather overtly problematic for Apple to have to explain to users that some iPhone features didn’t work on a specific carrier’s network. Recall the mass hysteria that resulted from iPhone 3.0′s MMS and tethering features going unsupported by AT&T and other providers. People make excuses for Verizon and Android and Symbian and Windows Mobile, but they don’t make excuses for Apple; they file class action lawsuits.

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Opportunity costs

In addition to the overt problems with creating a special phone just for Verizon (having to design, test and maintain two SKUs worldwide; diverting all its goodwill with AT&T to a rival willing to offer much less; lost features and product confusion), there’s also another blockbuster reason for Apple to ignore Verizon. It’s called opportunity cost.

Why would Apple spend its finite resources and time developing a CDMA or even CDMA/LTE version of the iPhone to reach 89 million customers, the vast majority of whom are not even smartphone buyers and have the option already to switch to AT&T (which also helps advertise the allure of the iPhone and strengthens Apple’s bargaining position with AT&T), when it can instead work on deals like selling the iPhone to China Unicom’s 170 million customers?

Additionally, there are many secondary or tertiary providers around the world in countries where everyone sells GSM/UMTS phones that Apple can use to expand its competitive reach without developing a new handset and licensing and testing completely different technology. Many of these offer far greater “low hanging fruit” opportunities than a Verizon partnership in the US.

Remember too that all the work Apple would go through to develop a CDMA phone will become obsolete in just a couple years. Verizon certainly isn’t going to shut down its CDMA network, but by 2012 there will be no CDMA smartphones competing for the iPhone’s position. They’ll all be LTE phones. LTE will make CDMA look like 3G makes GPRS look today. Again, as the entire world moves toward LTE, Apple will eventually migrate to LTE and at some point be able to offer a phone that works across both AT&T and Verizon in the US. But that’s still many years away.

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Why the Verizon iPhone idea won’t go away

The reason why pundits are hot to trot for a Verizon iPhone are pretty simple. First, shill pundits need to keep raising the prospect to make it seem like Verizon’s existing customers should just stay put and wait it out, perhaps buying another phone while they wait. The market manipulation pundits use this rumor as a tool to suggest potential for Verizon or to cast shadows of uncertainty on Apple (as in, oh beleaguered Apple could be matching RIM’s fantastic sales if only it sold the iPhone like RIM sold its BlackBerrys… err).

But the main reason everyone else likes the prospect of a Verizon iPhone is based on the terrible experience they’ve had with AT&T, which they compare to Verizon’s stronger 3G bars in more locations. Verizon does have an older, more established EVDO 3G network compared to AT&T, which has only pieced together its national UMTS network quite recently. However, a Verizon iPhone would have the same impact on that network as the current iPhone has had on AT&T.

And if you look at how much of the world’s mobile traffic is associated with the iPhone (50%) compared to the iPhone’s actual market share in units sold (2.5%), it’s not hard to deduce that a Verizon iPhone with similar adoption rates to AT&T would obliterate Verizon’s network just as handily. The only way it wouldn’t is if Verizon maintained its user-hostile restrictions on data: extra fees for GPS services, extra fees on media downloads and ringtones, and forced sales of VCast junk instead of the ability to get mobile apps and content from iTunes. And if you couldn’t use the data network to do the things you wanted to do, it wouldn’t really help to just have it available in a technical sense. After all, if you’re stuck having to find a WiFi spot for data, you might as well buy an iPod touch instead.

Why do other companies have no problem selling GSM and CDMA phones?

Okay, so RIM isn’t selling significantly more BlackBerrys than the iPhone, despite having lots of models on all carriers and all technologies. But doesn’t this suggest that it’s not really that hard to develop multiple handsets and work with different carriers, and that Apple might be able to do even better than RIM if it were? After all, Motorola, Palm, LG, Samsung and even Nokia are all making CDMA handsets. Before the iPhone, pretty much all the desirable phones in the US market were offered on CDMA first, if not exclusively (with the Sidekick being a notable exception).

Well, consider that Apple has been in the smartphone business for just over 28 months. RIM and the others have been selling phones for at least a decade. Building business and technical relationships with carriers and chipset vendors takes time. AT&T was the only mobile operator to take Apple seriously, and was willing to do so because it was desperate for a signature phone, the same way Verizon, Sprint and T-Mobile all are desperate today in the wake of the iPhone.

If Verizon had welcomed Apple into the market, things might likely have been different. But look too at recent successes and failures. While the Palm Pre hasn’t set any records, it has entered the market and helped reverse Palm’s free fall. Palm, like Apple, introduced its phone with one carrier and one technology: Sprint and CDMA/EVDO in Palm’s case. This will allow Palm to sell the Pre to Verizon next year using the same phone, increasing its potential market reach from just under 50 million to almost 140 million subscribers.

The Pre can’t sell globally as a CDMA phone, so Palm had to develop a GSM/UMTS version for Europe and Asia, which is expected to reach consumers by the end of the year. In contrast, by the end of its first year the iPhone had extended its reach from AT&T’s 70+ million base to hundreds of millions of subscribers worldwide using the same global model. Despite having a glorious past as a smartphone leader, Palm was nearly starting out from zero due to dropping the ball on the Treo. That makes its experiences with the Pre comparable to Apple, which launched its iPhone from scratch two years earlier. Yet Apple is selling like mad while Palm is still struggling to complete two different models despite meager sales. Apple’s strategy seems to have worked better (I won’t even get into Palm’s invisible Pixi).

Now consider Microsoft’s Pink. Like Palm, Microsoft has a faded past that gives it an edge over Apple in terms of experience in the mobile industry. Yet Microsoft chose to deliver two different models on two different technologies at once, and ended up falling far behind in its launch plans. Now Pink is uncertain to launch at all, and will be far behind the iPhone 3GS even if it does manage to get anything delivered next year. This certainly lends support to the idea that Apple’s single vendor / global technology strategy was much better planned and orchestrated.

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The path less traveled

Another thing to consider is that Apple doesn’t follow the rest of the industry. It didn’t chase Acer, Dell and HP into the swamps of low profit, low powered netbooks, which buoyed PC volumes while creating unsustainable margins. Instead, it designed premium MacBooks and iMacs and sold record numbers of them, which helped sustain new sales growth records while the rest of the PC industry plateaued or actually shrank and as profits plummeted.

In mobile phones, Apple is also doing something that none of the top five are: exclusively selling smartphones. Nokia sells vast numbers of phones, but most of them are all cheap ‘feature phones’ that don’t do much, aren’t very profitable, and like PCs aren’t growing anymore. Nokia has multiple platforms: its own embedded OS, Symbian, and now Maemo Linux. LG and Samsung are also trying to cover all the bases, with Android, Windows Mobile, Symbian, and embedded software of their own.

Most other phone makers are all attempting to sell their phones on every platform and provider, anywhere they can. This is largely because they serve as pawns for the mobile providers, who often dictate what features they can sell and at what prices. That’s why smartphones and useful data networks were so slow to take off in the US: powerful mobile operators decreed what they thought consumers would buy, just like a Supreme Soviet.

Apple shook up the smartphone market with fresh competition and set off a wave of copycats. This was only possible because of Apple’s leverage with AT&T. Had it instead copied the Motorolas and Sony Ericssons of the world (which Apple formerly partnered with in trying to introduce iTunes-savvy phones) and introduced a half dozen cheap phones designed to hit every price point while negotiating with all of the mobile providers in the US, it would not have fared any better than those losers.

It would have to have made the same concessions to sell devices in Sprint’s and Verizon’s stores (including Radio Shack), including agreeing to sell VCast junkware and $3 ringtones, and would never have been able to introduce a universal App Store for its users. This iPhone phenomenon would never have happened.

Two and a half years later, Apple’s standout success with its single US provider and its global strategy via one mobile technology makes any mention of jumping ship to Verizon a very poorly thought out fantasy. Fortunately for the iPhone, the strategy not only worked (Apple’s couple of percentage points of market share were recently estimated to be gobbling up 32% of the entire industry’s profits in the first half of 2009, and that was before the blockbuster iPhone 3GS launch) but also scorched the earth behind it, preventing anyone else from really being able to copy it.

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Android is now trying to cover all the bases in the same old model of Windows Mobile, resulting in a fractured platform that consumers won’t even be able to readily identify. Palm is proving that carrier exclusivity alone isn’t a silver bullet. And RIM’s Storm is proving that cloning the iPhone’s form factor doesn’t result in wild success when the majority of its user base really just wants a basic PDA/texting phone.

Meanwhile, Apple has outrun a series of Android attempts, sucked the wind from the Pre’s sails, and is catching up to America’s most popular smartphone from Canada while only using one provider to achieve those sales in the US. It’s no surprise Verizon is interested in getting the iPhone, it’s just still a bit of a puzzle why pundits think this would do Apple any good.

59 comments

1 sprockkets { 10.30.09 at 9:41 pm }

Hmm… didn’t consider that point about how it doesn’t matter to go with Verizon because people will just come over for the iphone on Att.

We will have to see how many concessions “Droid” made on the network, as it seems that it won’t be hampered as much as past Verizon phones.

Also, Verizon’s support flat out sucks. I personally saw how badly they supported the worst POS WinMob phone out there, the Treo700w. No way Apple would let those idiots taint their reputation.

2 davebarnes { 10.30.09 at 9:45 pm }

WOW!
Lots of well-written text to say: Verizon is not GSM. Verizon is CDMA. NFW.

3 lowededwookie { 10.30.09 at 9:58 pm }

Ummm Apple doesn’t have to build any new phones if T-Mobile is 3G UMTS, it only needs to supply the same phones that the rest of the world gets.

The 3G and 3GS sold here in New Zealand are both 3G UMTS already.

4 jdb { 10.30.09 at 10:19 pm }

@lowededwookie

T-Mobile uses different radio frequencies for UMTS than the rest of the world (including AT&T). While it is probably possible to create an iPhone that works on T-Mobile’s 3G frequencies, creating an iPhone that works on AT&T and T-Mobile’s 3G frequencies is probably not possible yet. The radio chipset for a 4 band UMTS phone doesn’t exist right now as far as I know.

A change in frequencies for T-Mobile is probably no big deal for Apple to design but it would still need new FCC approval and would target T-Mobile’s much smaller market without being usable in the rest the world. It’s a non-starter. Apple is more likely to create a CDMA/EVDO phone than to target T-Mobile in the US.

5 jdb { 10.30.09 at 10:20 pm }

I mean of course, T-Mobile in the US. T-Mobile in Europe uses standard UMTS frequencies as far as I know.

6 stormj { 10.30.09 at 11:03 pm }

You may a lot of good points. No one would be clamoring for an alternative to AT&T if they would make their service more reliable and quit being miserly about things like tethering. People don’t want the CDMA technology or vcast, they want less dropped calls and no features. If they can get that on AT&T they won’t care.

That is the source of this.

7 jdb { 10.30.09 at 11:35 pm }

Daniel, I hope you are planning to talk about the several failings of the Droid on Verizon’s network.

1. You can’t do simultaneous voice and data. I know you mentioned this above but I think it deserves much more consideration. For me, a common multi-tasking activity on the iPhone is to use the Map app or Safari while on speaker phone. You can’t do this multi-tasking activity with Verizon (or Sprint).

2. The lack of simultaneous voice and data makes Google’s turn-by-turn GPS app less useful since you will be disconnected from the net when taking a voice call. I can see it now–”Sorry boss, I have to hang up to find out where to turn.” Not too impressive.

3. The big one–You can only install 256 MB of applications on the internal flash memory on the Droid. You can’ t install applications on the 16 GB memory card. This isn’t a technical limitation but an anti-piracy policy decision on the part of Google. This seems hypocritical and not very open to me.

Google developers are talking about a temporary solution where applications are split up between the executable in internal flash memory and all data such as text and images on the flash card. This sounds like a partial solution but makes installation/uninstalling applications much more problematic.

Google is talking about a longer term solution where you download all or part of the application from the net. This sounds even more problematic. There isn’t too much information about this yet.

“We have a partial solution at this time to some of the Android storage woes. Remote file storage is available for the Android which emulates local storage for predominantly multimedia. We offer that service at Android Storage. We are working on technology and an app which will actually allow apps to be stored completely remote and then be “temped” to the phone via a stream and operated under a master app. That will be coming before spring. This changes the playing field and allows devices to fully take advantage of ‘virtually’ unlimited app and storage memory with the improvements in 3G, 4G, and WIFI availability.” –Kevin Dill
http://www.mobilecrunch.com/2009/10/29/here-are-all-the-great-android-games-the-answer-is-simpler-than-we-think/#comment-455497

This sounds very similar to the WebOS solution. If you are on a slow connection, this sounds painful. It doesn’t sound that great for a moderately fast connection either.

4. There is no way to download movies or TV shows on a buy or rent scheme. This is probably solvable with an application but it shows how much of the iTunes infrastructure is lacking on the Droid platform (and other Android phones.)

5. It doesn’t appear that the Droid is a world phone. A world phone is archaic terminology only needed by phones that don’t support the GSM/UMTS/HSDPA world standard by default. This is pretty much only CDMA/EVDO phones in the US and some phones in Japan. For these special cases you can get a phone with dual radio transceivers–one for the primary communication CDMA/EVDO and a GSM/UMTS backup for international roaming. These solutions tend to be expensive and make for larger, less appealing phones.

6. The Droid phone seems to have some performance issues. These are probably software and will be fixed in a future software update. But it is odd that few reviews note the issues. Specifically there is noticeable lag on scrolling and dragging.

There are probably more issues but these are the major ones that I’ve read about. They don’t seem to be getting much play in the media even though they seem like fairly major problems. Seems ripe for one of your exposé pieces.

8 uberVU - social comments { 10.30.09 at 11:36 pm }

Social comments and analytics for this post…

This post was mentioned on Twitter by DanielEran: New: Why Apple’s iPhone is still not coming to Verizon – http://tinyurl.com/ylj8n9j

9 jdb { 10.30.09 at 11:43 pm }

BTW, I have 31 apps on my iPhone that takes up almost 300 MB of storage. Compared to real iPhone app fanatics, I have practically nothing on my iPhone–less than 4 pages total.

10 John E { 10.30.09 at 11:54 pm }

while GSM/CDMA certainly was/is an issue, i don’t believe it was the deal-breaker as DED does. instead i believe Verizon would not, and still will not, give Apple complete control over the hardware and exclusive control of apps and media sales. verizon had said often it does not want to be just a “dumb pipe” like AT&T is for the iPhone, and i think they really mean it. but Apple will never give up control. never.

so unless and until Verizon backs down, no deal. and they aren’t that desperate yet.

11 bartfat { 10.31.09 at 12:20 am }

@stormj
That, and Apple I’m sure wouldn’t mind getting a couple more million customers from T-Mobile who no doubt have jailbreaked their iPhones and are giving the finger to AT&T, both for their service and prices. There ARE people who don’t need to download 500 MB of data on a phone a month… in fact, I’ve only downloaded about 200 MB since I bought my iPhone 2G and used it on T-Mobile. But maybe that’s because EDGE is slow enough that 500 MB would take an eternity.

@Daniel
Anyway, back on topic. Great article Daniel, once again you manage to come to your senses on the issue of carriers and who would support the iPhone. I’ve been saying it for a while now that the iPhone is more sensible on T-Mobile than on Verizon, I’m just not sure whether you were agreeing or not with me before now. Naturally, I think T-Mobile would be wise to offer the iPhone to budget consumers with a data cap and a lower monthly bill. THAT would do more than anything to increase the iPhone’s audience, because the problem with it is still the price. Not the phone’s subsidized “price”, but the monthly plan. 70 dollars is a huge sum of money to pay out… that’s like buying an iPhone every 3 and a half months on subsidized pricing. Clearly, I’m not in AT&T’s market for “all-you-can-eat” data customers that can justify the 70 a month plan, but I’m pretty sure most people don’t have that kind of cash floating around anymore, especially with the financial crash and all. That’s the thing.. is that T-Mobile can reach out to younger people (who also spend less in general, but tend to influence later buying trends) and fully embrace Skype with 3G along with lower monthly bills. Yes, there would be drawbacks, but the Apple and T-Mobile would’ve probably kept a couple million subscribers who would’ve otherwise jumped ship because of cost issues (for the iPhone) or a lack of appealing phones (T-Mobile). And this means that if the iPhone is official on T-Mobile, it will most definitely support myFaves and Hotspot@Home.. because Apple is a progressive company that would want to impress its users :)

Now, there are a few hurdles to releasing the iPhone on T-Mobile like Dan outlined, that there is a chipset issue on supporting the T-Mobile 3G frequencies. The current iPhone already supports 1, which is the 2100 Mhz band. The other is 1700 Mhz, which is completely unused by any other carrier in the world (although Canada is supposed to open that band up later for carriers). Unfortunately, AT&T has a monopoly on the 1900 Mhz and 850 Mhz bands, so T-Mobile can’t use those. But what Apple could do (assuming the quad-band 3G phone cannot be engineered) is release 2 types of phones, one for AT&T and one for T-Mobile. However, since all that’s different is the frequency between the models, it seems like it’s just …swap in another configuration and drivers for the OS in the phone. Apple’s done it before.. just look at China’s exclusive iPhone model without WiFi. The difference with creating a phone for Verizon or Sprint is that CDMA is an entirely different technology on an entirely different frequency that’s primarily used in the US. There’s little global gain by releasing a CDMA phone, which is what Daniel has said (again). But T-Mobile only uses a different frequency, not a different technology, so it is definitely feasible and much much simpler for Apple to make one than a CDMA phone.

12 Berend Schotanus { 10.31.09 at 2:56 am }

Well done, pretty convincing article!

Seen from my European background I have always opposed the idea of phone hardware being tied to one provider. Slowly I had to discover the American telecom market works not exactly the same. With hindsight I have to admit the iPhone AT&T deal really was a good step. Still, Apple must have been aware of the opportunities of the GSM platform early on and is now hugely benefiting from its flexibility.

I have used my iPhone in San Francisco on the T-Mobile network and, even though it was ‘only’ EDGE, it was a great experience. At home (also T-Mobile) data speed often suffer from heavy network lead especially at crowded spots like the central railway station or the touristic city centre. The slower EDGE speed on T-Mobile U.S. felt quite comparable to home 3G probably because no-one else has discovered the possibility yet and the network load is just moderate.
Please note that no jailbrake is required, just (SIM) unlocking, which was free after 1 year of subscription and was completely supported by Apple and my own provider. Now that more and more ‘old’ iPhones are reaching the end of their contract period and might be sold second hand there is a chance the T-Mobile option will become more popular anyway.

Nowadays when I stand in the payment line of my supermarket I look with appreciation at the big assortment of telecom products available (mostly refills for prepaid subscriptions from a wide range of providers, typically you will find them beside iTunes Store prepaid coupons). These are abstract, not easily understandable products, it didn’t come overnight but it has been possible to educate the customers so they understand what they are buying. A telecom market separated from hardware and separated from content has proved to be possible. Ultimately this is the only way to achieve net neutrality.

I still hope one day Apple will sell its whole product range with an empty SIM-tray.

13 Jon T { 10.31.09 at 6:12 am }

Verizon has historically partnered with Microsoft?

That clears up some confusion on my part as to why there is so much vitriol out there about this – it’s the ‘Softies again. Surprise surprise.

Thanks Daniel.

14 NormM { 10.31.09 at 7:43 am }

Daniel,

I think you’re overstating technical difficulties. Every iPhone is already able to work on the Edge network, which (like CDMA) doesn’t support simultaneous voice and data. Hardware development for a CDMA model mainly requires hiring some experienced CDMA guys and wouldn’t distract Apple much (according to this article “http://www.9to5mac.com/cdma-iphone-verizon-sprint” they hired a bunch of CDMA guys last year). In fact, I’d be surprised if Apple hasn’t got working CDMA prototypes in house, just in case they want them.

I also think that it would be in Apple’s interest to have a Verizon and a Sprint model just to preempt other providers. Their experience in France indicates that they’d significantly increase market share with more providers: the French also had the option to move to a different carrier, but availability on more carriers made a tremendous difference in market penetration.

As far as I can see, the real barriers with Verizon are non-technical, but I would agree that Apple shouldn’t give an inch on allowing Verizon to screw up the user experience.

15 Jon T { 10.31.09 at 8:04 am }

@NormM.
I don’t think your example of France is such a great one. There have been more sales in the UK than in France, where the former has been on the single carrier model.

16 Rob K. { 10.31.09 at 9:33 am }

Daniel,
Do you know how Telus & Bell in Canada are making the switch to iPhone?

They are both CDMA, but appear to be launching the iPhone in November. I am very cautious about the potential for 2 reasons. First, I wonder if they are doing “magic” that emulates GSM but under the covers is CDMA. Second, Telus (like Verizon) has historically been unwilling to open anything up (ringtones, apps, etc) outside of what they are willing to sell.

["Both Bell and Telus are making the switch to GSM in 2010 in the hopes of positioning themselves for 4G LTE... Both Bell and Telus plan to layer the upcoming HSPA networks over their CDMA networks, in the hope that the transition to GSM technology will be as painless as possible for their customers." This will make Canada fully UMTS-capable (and therefore iPhone friendly). Actually, the site is a little bit wrong, Bell and Telus are adding HSPA/UMTS to their CDMA networks, so there's no GSM/EDGE fallback. This is similar to what Verizon hopes to do, but a half step. Rather than jumping to LTE, they're adding UMTS 3G. "BlackBerry Cool"- Dan ]

17 MarkyMark { 10.31.09 at 2:27 pm }

Thanks for once again injecting a badly-needed dose of sanity into an insane world.

18 MipWrangler { 10.31.09 at 3:26 pm }

“Sometime around 2012 an LTE iPhone might become available for use on Verizon’s fleshed out LTE network, but that’s a long ways off… like Mac OS X 10.8 Lioness or iPhone 6.0 or Windows 7 SP 2.”

This is the money quote – excellent!

19 lowededwookie { 10.31.09 at 4:46 pm }

@jdb

Thanks for clarifying that. That kind of makes sense even if it does suck for everyone involved.

It would be so much easier if everyone just stuck to a standard in order to become more global.

20 countach { 10.31.09 at 6:52 pm }

I don’t see that Apple needs leverage with AT&T anymore. They needed it when they were a nothing player. Now they don’t.

Going to Verizon won’t triple sales, sure. The question though is how much does it cost to develop a modified iPhone for them? Not much I reckon, and if they could sell another million phones this way, that probably makes them a few hundred million. They can’t really ignore that money sitting on the table.

21 The Mad Hatter { 10.31.09 at 7:10 pm }

Rob K.,

Telus and Bell are switching to GSM. This is why they will be able to carry the IPhone.

This should be interesting, because Telus is a lot like Verizon. If a phone has Wifi and Telus sells it, the Wifi capability is turned off.

22 cy_starkman { 10.31.09 at 7:30 pm }

@jdb

Daniel has a great article already that focuses on the network issues for the Pre on sprint. few months back.

The iPhone already has the virtual app storage being considered for Android. The implementation is different, being akin to Nintendo’s virtual console. Any app purchased can be redownloaded at any time for free in the future. I’ve used for a couple of apps I rarely use, delete and then need it again. Virtually, you could own all 85k apps available and just download as needed.

@everyone

The frequency I believe is missing is 900mhz, Optus and Vodaphone in Australia use that in regional and remote to get wider coverage than the urban 2100mhz and i know the iPhone is not compatible. Thankfully Telstra runs 850mhz so you can use the iPhone “everywhere” but
only on one carrier.

The multicarrier model has been excellent in Australia, now all have it the iPhone can be bought unlocked and outright on the AppleStore. It has also aided sales and made for competitive options including prepaid.

Australia though does benefit from being solely gsm/3g/umts/hspd(u)a as the goverment (in an odd moment of technical clarity) ordered the end of the last remaining CDMA network 2years ago.

23 The America I Grew Up With is Long Dead; What More Can I Say? « Out Of My Mind { 11.01.09 at 3:00 am }

[...] Why no Verizon iPhone? ‘Cause if you think ATT sucks, a Verizon iPhone would actually be worse. [...]

24 broadbean { 11.01.09 at 6:20 am }

900MHz support would be awesome in the next iPhone iteration.

25 Dorotea { 11.01.09 at 7:58 am }

I hope multiple carriers in U.S. mean lower costs. I actually want a cheap phone plan (prepaid?) with data plan (monthly).

26 Mac Marc { 11.01.09 at 8:32 am }

Isn’t Apple manufacturing a new WiFi-less iPhone SKU just for China Unicom’s WCDMA network? If so, that doesn’t square with your argument that Apple wants one model worldwide.

At launch, it made sense to have only one iPhone model, but that line of thinking doesn’t hold anymore. Now, Apple has the financial strength, market penetration, technical resources, and general success that make a CDMA iPhone a possibility in the U.S.

Realistically, CDMA is going to stick around in the U.S. for another 4 years—as a fall-back from LTE at least.

I agree with the comments above that the main reason why Verizon doesn’t have the iPhone is that it won’t concede on business strategy issues like Vcast, iTunes, pricing, etc.

27 nat { 11.01.09 at 10:13 am }

@ Mac Marc,

Is the China iPhone truly Wi-Fi-less, or is the Wi-Fi antenna simply disabled? I would guess the latter.

If it’s the former, I highly doubt Apple would redesign the iPhone. They would simply disconnect or leave out the antenna, which would have the side-effect of lower production costs. Contrast that with switching out the iPhone’s existing GSM/UMTS hardware with CDMA/EVDO, which at the very least would require an internal redesign.

28 cy_starkman { 11.01.09 at 12:32 pm }

@MacMarc

When SteveJ came on stage and showed off the iMac for the first time there was a collective gasp. It had no floppy drive!

Like CDMA it’s days were numbered. Now 10years later it is possible to still buy one, even have it fitted as an option on a new MS-OEM PC.

FW, a standard developed and championed by Apple. It is technically superior (for it’s primary function) than USB2. you can still buy devices for it. FW400 gone, 800 on shaky ground.

Point is Apple doesn’t support outgoing tech. CDMA is finished. Globally it was finished by 2000-01. In AU it ended in 2007 after the GSM3G network had the same coverage in regional and remote areas, in cities it was long gone, 02 at the latest.

Ur own estimate gives CDMA 4years for Verizon, that’s 2 plan cycles and 4 product cycles. I -feel-the iPhone will have a major revision every 4th year, ie 2010, this will key into the 2yr plan cycle. Apple could get ROI within 4yrs if only change was CDMA, just in time to chuck it.

As others have said, if you are in the USA and -want- an iPhone by 2010 you have had 2 plan endings to have switched. If you haven’t it might be due to coverage issues, might be, just as likely you might simply not be a client.

The whole debate is myopic. The needs of one carrier in one country where your product is available anyway except in pockets of bad coverage.

Then at the end of the day I ask you, given the annual product cycle. Would you want the June 2010 21mbit (cell download) capable iPhone maybe with in screen front facing camera; or the iPhone 3G from 08 (cell download speed) with the limitations of the 07 edge (no data & voice) iPhone on verizon. I’ve purposely left out changes such as HD that both would be the same regardless of baseband.

How would I market this as “great” to you over a 2yr contract lasting to 2012. By which time you will be unhappily looking at friends with 42mbit capable 3g/umts/hsdpa iPhones streaming HD on cellular that are compatible with the more insane LTE that still has spotty performance as it rolls out.

Surely you would prefer. A 2010 video capable iPod Touch with double the memory at half the price (to the iPhone), no contract and ever increasing wifi access would more interesting; with a cheap feature phone on verizon because AT&T has poor coverage in your area.

Then in 2012 you -might- go the LTE iPhone available on all carriers (USA). Possibly though you will switch from verizon to AT&T; because by 2012 AT&T has a comprehensive 21mbit capable “old” 3g network that the LTE iPhone is backwardly compatible with and so gives great coverage in areas with low LTE penetration. Ol’ verizon though will seem slow, fragmented and spotty.

Thankfully, you simply do a restore from your 2010 iPod Touch onto your new 2012 AT&T LTE iPhone and are good to go and globally compatible right back to a GSM/EDGE network (heh for a fee of course) from the 90′s

Fear not American network martyrs, salvation awaits! ; )

29 jdb { 11.01.09 at 3:47 pm }

@cy_starkman

The iPhone supports 900 MHz for GSM/Edge not for UMTS/HSDPA according to their tech specs page.

30 jdb { 11.01.09 at 3:58 pm }

@lowededwookie
“It would be so much easier if everyone just stuck to a standard in order to become more global.”

I think T-Mobile lost out on the frequency spectrum auction in the US. The 1700 MHz range is actually part of the UMTS spectrum specs but it isn’t used by anyone else in the world. There was going to be a new carrier in Canada called WIND that was also going to start using the 1700 MHz UMTS range but they got blocked on a technicality by some lobbyists influencing the Canadian government.
http://www.dslreports.com/shownews/CRTC-Blocks-Canadas-WIND-Wireless-Network-105241

31 gus2000 { 11.01.09 at 8:42 pm }

AT&T is the worst cellular provider. Except for all the rest.

32 macpeter { 11.02.09 at 1:50 am }

I asked me why is Apple developing their own iphone chips and came to the conclusion, only the integration from application processor and baseband processor will bring a real advantage in performance, costs and board area.
But what can Apple make different from Qualcomm with Snapdragon?
Most of the actual baseband processors a highly hardware optimised for a special telecommunication standard and run only UMTS or CDMA and can´t be upgraded to HSPA+ or LTE.
But what if Apple use Tensilicias technology for a universal baseband CPU which can run all present and near future standards up to a certain speed only by software updates?
This would be a Apple like solution and solve all problems for Apple, because at the moment nobody knows, how fast which new technology will come in which network. Apples strategy to cover the whole market with only one device must be based on a extremly flexible solution, otherwise they risk to bet on the wrong horse and be out of business very fast.
So I guess the next iPhone will be 4G ready and also be able to connect to CDMA networks because in the long term Apple need Verizon to further grow in US marketshares and Verizon need Apple to keep his high end clients.

33 Michael { 11.02.09 at 9:19 pm }

@NormM:
“Every iPhone is already able to work on the Edge network, which (like CDMA) doesn’t support simultaneous voice and data.”

If that’s true, how was I able to use my browser and talk to someone at the same time on my original iPhone, which was only EDGE?

34 NormM { 11.03.09 at 9:32 am }

@JonT says, “I don’t think your example of France is such a great one. There have been more sales in the UK than in France, where the former has been on the single carrier model.”

In the nine months since Orange lost exclusivity in France, the iPhone has gone from a 15% share of the smartphone market there to a 40% share.

@Michael says, “If that’s true, how was I able to use my browser and talk to someone at the same time on my original iPhone, which was only EDGE?”

The original iPhone also supported WiFi. The only way to browse and talk at the same time was to use WiFi for the data connection.

35 No Soup for You! { 11.03.09 at 11:05 pm }

[...] thinking that maybe Apple would release an iPhone for Verizon in 2010. That was until I read this excellent article detailing how successful Apple has been with their single-vendor [...]

36 roz { 11.04.09 at 5:48 pm }

@daniel

Not everyone can switch to ATT for the iPhone. In some cases ATT coverage may be weak at home or work. For others, work or family plans require Verizon. So the notion that every Verizon iPhone customer hurts ATT is not really true any longer. More likely, anyone who could have switched to ATT for the iPhone has done so already. So, a Verizon iPhone is not going to hurt ATT much at all at this point.

[While it may be true that there are Verizon customers who want an iPhone and can't/won't move to AT&T, a Verizon iPhone would decimate AT&T's growth and spur massive defection, simply because Verizon offers much better 3G coverage in many areas. The idea is that by the time AT&T catches up, LTE will be here and there'll be no reason to target CDMA phones, create a unique handset just for one provider in one country. For those who might want an iPhone on Verizon, there's the iPod touch. - Dan]

I know a lot of people who are on Verizon but admire the iPhone. Many companies and organizations simply require Verizon. The iPhone on ATT may be nice but for these wireless customers it is simply not a option, no matter what you say. My friend works for a UC and according to her the contract with the state State of California requires Verizon. She has her choice of Blackberries and soon the Droid but not the iPhone. So for her to get an iPhone she needs to find a new job? That is a hell of a switching cost. A lot of businesses are the same way. 90M customers in the largest, richest smartphone market is nothing to sneeze at.

[The US is not the largest nor richest smartphone market. Verizon doesn't offer Apple very much at all. An iPhone exclusive to AT&T actually helps Apple build leverage, get attention, and compete against CDMA offerings. Pretty much a no-brainer. - Dan]

The question is why wouldn’t Apple want to sell to these customers? Is an incentive from ATT really worth leaving all these enterprise and individual customers out in the cold? That is really the question. We don’t have the numbers but it is hard to imagine that is the case. That is really the analysis we would need to see. Dealing the with the rest of your arguments:

[Apple would be happy to sell its tech to Verizon users, which is why it sells them the iPod touch. I outlined various reasons why a CDMA iPhone makes no sense.]

You say that CDMA/EVDO is a non-starter – the opposite is true. It is exactly the device that Apple should make to cover the time until LTE is ready. So what if LTE is available in 2012? That is the same time we had the Edge device, was that a wasted effort? Of course it wasn’t. It got them in the market until 3G was ready. Same situation here. So what if a CDMA iPhone is outdated in 2 years? This is the case with every iPhone Apple has made. Two years later the phone is intended to look old and crusty so we all fork over more money for the next version. This is business as usual.

[Apple made an EDGE iPhone because it wanted a GSM phone it could sell to AT&T and globally in its first year. What does that have to do with making a dead-end CDMA phone in 2010, when Apple already has the iPhone in all major markets worldwide, and has the iPod touch to sell to Verizon users?]

Supporting CDMA is not like asking to stick with ADB when USB is an option. It’s a totally different issue because I can buy a new printer or mouse if I need to in order to adapt to a new port. If I am tied by work to Verizon – there is simply nothing I can do, I need a CDMA device. It’s a lot more like how Macs keep the ethernet port when wireless is widely available and everyone could implement it. Why do we still have it? Because some companies require it. Same situation here. Its not like Apple will have to support CDMA forever. Just for the next 2-3 years. Then everyone will merge to the new standard. Sounds great.

[You can make a case for why Verizon employees would like to have an iPhone, but you're forgetting that Verizon offers a relatively small segment of the global market. You're also ignoring all the downsides, expenses and opportunity costs involved with making a CDMA iPhone. And the you're ignoring the iPod touch. And the fact that relatively few of Verizon's 90 million users would buy a smartphone, let alone pick the iPhone, particularly given the fact that Verizon gives away BlackBerry and LG phones "2 for $50".]

Other device makers don’t come out with CDMA phones because they are following the herd or because they are stupid. They do it because it is a very profitable way to expand the audience of an existing product. Apple is new to the phone business but no one questions its ability to form relationships with suppliers. Apple could easily deliver a CDMA device.

[No they do it because their business model is to create hundreds of phone models and push them out on every provider hoping some will become popular, just like PC makers. Apple makes a few models that it thinks are as close to perfect as possible, and then sells them as effectively as it can.]

The opportunity cost is minimal. Apple simply takes a small team to retrofit an existing device with a new radio, change some packaging and bingo you have doubled your audience for the a device. It’s not a distraction. It does not interfere with plans for GSM phones. It’s just a simple follow up device, and Apple does not have to deliver it at the same time as new devices. Verizon devices usually trail the market.

[Sorry but that's so simplistic I can't even reply to it apart from pointing out that it does not "double the audience" by any stretch of the imagination. Look at the RIM numbers again. There is not an infinite audience for smartphones. ]

Look at the numbers if you doubt this. 90 million users on VZN. Let’s say Apple sells iPhone to 2% of them. 1.8M devices. $400 * 1.8M = $720M. Apple gets about $1M rev per employee. Hard to think Apple would need 720 people to deliver a CDMA iPhone. More like 20 at most. And Apple might sell to many more than 1 in 50 Verizon customers.

[I see you've never been involved in product development. There's a lot more involved than just producing a CDMA phone, which would not be that hard or expensive. Apple's genius is not about knowing what to do, it's knowing what not to do. Like a PDA. Or a PC tablet. ]

Sure you can’t make same margin as you get with an exclusive with ATT but first, ATT’s network is maxed out and that will be more and more of an issue going forward – especially for switchers. Second, you’ve also got to account for all the negative spending going on by other carriers to promote iPhone killers. Subsidize development and partner in advertisement. That is a cost to this deal too. Finally, Apple can still make a deal with ATT for priority access to new iPhones, so there is still an upside possible from special deals for ATT.

[Leveraging Verizons (or as I said, T-Mobile's) bandwidth certainly is the best argument. But for Apple to give away its entire relationship with AT&T to court a near enemy in Verizon is kind of silly to put it mildly. ]

There is little merit to the argument that having versions with different features confuses the market or leading to lawsuits. This was the case with the Edge device and it is currently the case without the 3G vs 3GS. Not all features are available on all devices (Voice control, video, etc.) I think many people would simply be happy to have the option of using an iPhone on Verizon. They hope for that, pundits and others ask for that because it just seems like common sense for Apple to want to reach the largest audience possible for their ground breaking phone. Any lawsuit is avoided by disclosing the specs and limitations of the device. End of story.

No question that Apple did the right thing entering the market with ATT as exclusive partner but after the product is succeeding in the market it is better to broaden the availability to all carriers, especially if you are competing with devices that are going to be available on every carrier. All these hostile ads about the iPhone and Droid, all of that is because VZN can’t sell the iPhone. Sure they are partly responsible for that situation but it’s still in both companies interest to be past that. And if Apple can switch Mac to Intel, any cloaked and diminishing relationship Verizon had with MSFT should not be an issue for the iPhone.

[That's like saying Apple could stop Microsoft from targeting the Mac in its ads by selling Windows PCs. Are you serious? ]

Your points about RIM are interesting but still if Apple does well against Blackberry on one carrier, wouldn’t Apple do better if iPhone were on all carriers? To me these numbers suggest that Apple could potentially be much bigger than BB already if they didn’t artificially limit the market that can access the iPhone.

[RIM's growth comes from selling really cheap phones everywhere and then selling businesses expensive push email software and services. Apple sells premium hardware subsidized by the carrier. So no, their strategies are not the same, and neither are the things they need to do to make them work. ]

From my perspective much of this article is spinning a distorted tale about why Apple does not do something obvious and self-evident. If it makes you feel better to think that Apple is justified to place an artificial and unnecessary limit on its market, great. It’s still wrong.

[I don't write fantasy stuff about what companies "ought" to do to please me. I'd like the idea of an iPhone that actually works in SF. What I write about is what Apple is doing and why. And if you look at Apple's success, it's not because the company is making lots of foolish mistakes or overlooking opportunities. It's because it's ignoring nice-sounding advice from people who don't really know how to make anything happen, like those who work for IDG and CNET. ]

37 Bell, Telus provide new iPhone competition in Canada — RoughlyDrafted Magazine { 11.04.09 at 6:48 pm }

[...] GSM/UMTS existing providers as well as CDMA providers now making the shift to LTE, such as Verizon in the US. Support [...]

38 roz { 11.05.09 at 1:07 am }

@Daniel
[While it may be true that there are Verizon customers who want an iPhone and can't/won't move to AT&T, a Verizon iPhone would decimate AT&T's growth and spur massive defection, simply because Verizon offers much better 3G coverage in many areas.]
Whose problem is ATTs growth? Not mine and not Apple’s. Are you really arguing that iPhone users should be held captive with poor service? If ATT is not up to the job, let the customers go. If some of those customer migrate to other carriers ATT will be able to meet service expectations of the ones who remain. Everyone is happy. And if Verizon can’t handle the load either then people will see that the carriers need to invest all around and its not the device. Let the carriers compete in their core business, providing good solid service, not on hyping crap handsets.

[Your argument is running around in circles. You say a CDMA iPhone will have no impact on AT&T, then when I point out it will, you say "well it should, because AT&T has a crap network that can't support it." When I say Verizon would have the same kinds of problems, you say "well then people would see that and not buy the CDMA iPhone." So why run through this whole scenario at all, and just concede that the Verizon users who really wanted the iPhone would have moved to AT&T to buy it, and those that haven't aren't likely to switch in significant numbers just because some pundit assumes that a set percentage of Verizon's entire user base will buy an iPhone as soon as it becomes available on CDMA?]

[The US is not the largest nor richest smartphone market. Verizon doesn't offer Apple very much at all. An iPhone exclusive to AT&T actually helps Apple build leverage, get attention, and compete against CDMA offerings. Pretty much a no-brainer. - Dan]

OK fine, crap Symbian is bigger in Europe. I meant that the US is the biggest and richest market for Apple. The US is Apple’s largest market by far.

[The US is Apple and RIM's largest market right now. Apple already sells more stuff outside the US, and is building more stores int'l than domestically. Clearly, the opportunity lies outside the US. So what I was saying is that Apple has much better opportunities in developing advanced UMTS phones for global markets than it has in trying to court iPhone-haters in half the US, who can already buy an iPhone if they really want one, or can stick with Verizon and get an iPod touch. It's nearly a fully tapped out market. ]

It is also RIM’s largest market, and I don’t see the numbers but I would bet it is also Android’s largest market too, at least in terms of current sales. It is where the next gen competition is happening. North America is nearly 50% of Apple’s current sales. ATT is only 29% of the total US market. The other 3 carriers are significant and worth the trouble if it means Apple can compete fully in this race to establish the winning smartphone platform. Do other markets such as China and Europe matter too? Of course they do, but supplying a CDMA device in the US does not interfere with tackling those markets. On the contrary undermining the competition in the US could give Apple more leverage in other markets (cough, iPod, cough). Making a CDMA device is only as much of a distraction as Apple lets it be. If SJobs said the word it would be done in very little time. Apple could end exclusivity in a matter of months and that would cool off the momentum for Droids and Pres. Frankly hotter, noisier competition with in the US with the added problems of trouble with a single source carrier sounds like more of a distraction than just opening up to all carriers and letting them have at it.

[You could make similar arguments for a "mini tower Mac" or a netbook Mac or a Tablet PC Mac. The problem isn't technical, its the opportunity cost of not doing something else that makes more sense. Also, a CDMA flop could blight the iPhone. So yes, there's lots of downsides apart from the giddy prospect for 3x sales that you fantasize.]

An iPhone ATT exclusive was helpful for a time. Now the attention Apple is getting for its partnership is not positive. See Pogue’s latest: “It runs on Verizon’s superior cellphone network, so it won’t drop your calls in New York City and San Francisco (as AT&T often does on the iPhone).” Is that the attention you are talking about? ATT’s poor network and failure to deliver features is increasingly a liability. Apples has no need or interest in competing with CDMA. Apple should be carrier and protocol agnostic. iPhone is a platform – Apple should not care about the radio or provider anymore than a Mac should care about who your ISP is. Until LTE is in place that mean a few more SKU in a few markets – big deal. It is part of the cost of doing business.

[Apple doesn't hate CDMA, it just doesn't have any reason to chase it, as I laid out. Particularly now that it's a dead end thing.]

[Apple made an EDGE iPhone because it wanted a GSM phone it could sell to AT&T and globally in its first year. What does that have to do with making a dead-end CDMA phone in 2010, when Apple already has the iPhone in all major markets worldwide, and has the iPod touch to sell to Verizon users?]
It has everything to do with your claim that because a protocol will be outdated soon it is a non-starter. EDGE had a limited lifespan when Apple introduced the EDGE based phone. CDMA will still be a useful protocol for a few more years, every handset that Verizon is currently selling is CDMA based. All those customers will require service until LTE is done. Why not let customers decide if they want to invest in CDMA? If 90M people are using it, maybe there is a reason for that? Maybe it works really well? It's not really Apple's fight. If the special CDMA iPhone costs more to develop – charge extra for it.

[Verizon's 90 million customers are also running Java ME or WiMo phones. Should Apple also chase those things? An iPhone that runs Java ME applets, or an iPhone based on WiMo? Or how about one with BlackBerry keys? or PalmOS compatibility? Your argument can be used to insist on lots of ridiculous things. Which makes it a weak argument.]

[You can make a case for why Verizon employees would like to have an iPhone, but you're forgetting that Verizon offers a relatively small segment of the global market. You're also ignoring all the downsides, expenses and opportunity costs involved with making a CDMA iPhone. And the you're ignoring the iPod touch. And the fact that relatively few of Verizon's 90 million users would buy a smartphone, let alone pick the iPhone, particularly given the fact that Verizon gives away BlackBerry and LG phones "2 for $50".]
I am ignoring the iPod Touch because it is not relevant. It is a fine device but not a phone. If a customer decides he wants a smartphone or his work wants to buy him one the iPod Touch is not an option.

[No it's not a phone. It's the value of the iPhone without the phone. Which makes it perfect for people who want the iPhone but are tied to a CDMA carrier or BES or pay as you go, or for any other reason. And its wildly popular in that role. ]

One report says 20% of new US handset sales are smartphones. If customers are getting dissatisfied with ATT to the point of defection, rightly or wrongly, they are lost to Apple. That is not ideal – you have to agree with that. It's not just Verizon on the table -its all three excluded US carriers.

[Please cite reports when you mention them. Also, cite the popular smartphones people are flocking to. So far, there are lots of "2 for $50" blackberrys and tremendous churn around disappointing phones like the Storm, Pre and Droid.]

[No they do it because their business model is to create hundreds of phone models and push them out on every provider hoping some will become popular, just like PC makers. Apple makes a few models that it thinks are as close to perfect as possible, and then sells them as effectively as it can.]
I agree. To me selling something as effectively as you can is offering it in a way that 100% of the market can consider it – not just 29%. Yes, sell that perfect model to a wider audience.
[Sorry but that's so simplistic I can't even reply to it apart from pointing out that it does not "double the audience" by any stretch of the imagination. Look at the RIM numbers again. There is not an infinite audience for smartphones. ]
I don't think it is simplistic at all. Porting the iPhone to CDMA is not starting from scratch. It is a small investment only directed at the increment needed to adapt affected areas of the device to CDMA/EVDO. This is limited to radio and related aspects. It's not nothing but its not as big as you make it. Palm did it for the low selling Pre, and Blackberry does it for many of the models they make.
[I see you've never been involved in product development. There's a lot more involved than just producing a CDMA phone, which would not be that hard or expensive. Apple's genius is not about knowing what to do, it's knowing what not to do. Like a PDA. Or a PC tablet. ]
Your assumption about me is wrong. Apple has a lot of genius, no doubt. They also make bad choices from time to time. This is not really a new offering or any kind of leap.
[Leveraging Verizons (or as I said, T-Mobile's) bandwidth certainly is the best argument. But for Apple to give away its entire relationship with AT&T to court a near enemy in Verizon is kind of silly to put it mildly. ]
Don't get mired in absolutes. They don't have to give away the *entire* relationship. They just need to normalize it so that its open like every other device maker has. They have a preferred carrier which gets priority and others that get devices a bit later. No big deal.
[That's like saying Apple could stop Microsoft from targeting the Mac in its ads by selling Windows PCs. Are you serious? ]
It's not a good analogy. The iPhone as a product can stand distinct from ATT and does in the rest of the world. Apple does not care if I use DSL or cable. It's more like that. If Apple were exclusive to DSL and cable companies started hammering on the Mac, I would say, Apple should open up to cable providers – they have no dog in that fight.
[I don't write fantasy stuff about what companies "ought" to do to please me. I'd like the idea of an iPhone that actually works in SF. What I write about is what Apple is doing and why. And if you look at Apple's success, it's not because the company is making lots of foolish mistakes or overlooking opportunities. It's because it's ignoring nice-sounding advice from people who don't really know how to make anything happen, like those who work for IDG and CNET. ]
Apple is a great company, no doubt. I don't fault you for going after the pundits in general. I just think that while Apple is brilliant, sometimes it seems to get hung up on things. There is an ideology that trumps strategy.
I hate what is going on now. I hate the extent to which ATT gets wrongly vilified for not keeping up with demand. I hate that Verizon can hype devices that are not as good and has a promise of selling a lot of them because people have no choice. And I hate that my visual voicemail is 10 hours late, I can't send an SMS or make a call from home, etc etc.

[Don't ever think you need to convince me that AT&T has problems. I feel you on that. - Dan]

39 roz { 11.05.09 at 1:13 am }

@Daniel
[While it may be true that there are Verizon customers who want an iPhone and can't/won't move to AT&T, a Verizon iPhone would decimate AT&T's growth and spur massive defection, simply because Verizon offers much better 3G coverage in many areas.]
Whose problem is ATTs growth? Not mine and not Apple’s. Are you really arguing that iPhone users should be held captive with poor service? If ATT is not up to the job, let the customers go. If some of those customer migrate to other carriers ATT will be able to meet service expectations of the ones who remain. Everyone is happy. And if Verizon can’t handle the load either then people will see that the carriers need to invest all around and its not the device. Let the carriers compete in their core business, providing good solid service, not on hyping crap handsets.

40 roz { 11.05.09 at 1:13 am }

@Daniel, you write:
[The US is not the largest nor richest smartphone market. Verizon doesn't offer Apple very much at all. An iPhone exclusive to AT&T actually helps Apple build leverage, get attention, and compete against CDMA offerings. Pretty much a no-brainer. - Dan]
OK fine, crap Symbian is bigger in Europe. I meant that the US is the biggest and richest market for Apple. The US is Apple’s largest market by far. It is also RIM’s largest market, and I don’t see the numbers but I would bet it is also Android’s largest market too, at least in terms of current sales. It is where the next gen competition is happening. North America is nearly 50% of Apple’s current sales. ATT is only 29% of the total US market. The other 3 carriers are significant and worth the trouble if it means Apple can compete fully in this race to establish the winning smartphone platform. Do other markets such as China and Europe matter too? Of course they do, but supplying a CDMA device in the US does not interfere with tackling those markets. On the contrary undermining the competition in the US could give Apple more leverage in other markets (cough, iPod, cough). Making a CDMA device is only as much of a distraction as Apple lets it be. If SJobs said the word it would be done in very little time. Apple could end exclusivity in a matter of months and that would cool off the momentum for Droids and Pres. Frankly hotter, noisier competition with in the US with the added problems of trouble with a single source carrier sounds like more of a distraction than just opening up to all carriers and letting them have at it.
An iPhone ATT exclusive was helpful for a time. Now the attention Apple is getting for its partnership is not positive. See Pogue’s latest: “It runs on Verizon’s superior cellphone network, so it won’t drop your calls in New York City and San Francisco (as AT&T often does on the iPhone).” Is that the attention you are talking about? ATT’s poor network and failure to deliver features is increasingly a liability. Apples has no need or interest in competing with CDMA. Apple should be carrier and protocol agnostic. iPhone is a platform – Apple should not care about the radio or provider anymore than a Mac should care about who your ISP is. Until LTE is in place that mean a few more SKU in a few markets – big deal. It is part of the cost of doing business.

41 roz { 11.05.09 at 1:16 am }

[For some reason, you ended up with the same comment in different versions that got caught by my comment spam filter, so I tried to salvage the unique parts of each one here.]

@Daniel, you write:
[Apple would be happy to sell its tech to Verizon users, which is why it sells them the iPod touch. I outlined various reasons why a CDMA iPhone makes no sense.]

I refuted your arguments, but for clarity, in a nutshell you say: 1) CDMA is going away; 2) Deal with VZN means Apple loses all bargaining power with ATT; 3) Apple does well without other US carriers; 4) There is an opportunity cost to developing CDMA; 5) It might be hard for Apple to make a CDMA; 6) Apple is doing it’s own thing

..

3) Apple does well without other US carriers <<< True but it might do better by offering the device to more carriers. Consumers want the iPhone. Apple's price premium is not going to be diluted. If anything it will put more pricing pressure on other device makers if they no longer have a captive audience at the other carriers. If you were selling an Android, Palm or RIM phone would you want iPhone on Verizon, Sprint and TMobile? No you would not and the reason is that no one would be *forced* to consider you anymore. With real direct competition iPhone could potentially reach smartphone market-share not equal to but more comparable to the iPod. That can't happen if Apple is locked to one carrier.

[It might also do worse with multiple carriers in the US! Unlike Aust and Canada, the US is still GSM vs CDMA. That's the core problem. Having a CDMA iPhone means that users can't just buy one and shop it anywhere. They'd have to stick with the mobile provider matching the tech it came with. There wouldn't be one set of cohesive features (voicemail, conferencing calling, and "calling during data" are all different across the tech barrier and across carriers.)

I see your desire and the advantages of being able to sell the iPhone everywhere. But you are ignoring so much reality that it allows you to insist that there is no downside. Blind faith is always a roadblock to rational thinking. ]

4) There is an opportunity cost to developing CDMA << Its minimal. Very few aspects of the device need to change. The first gene iPhone put the radio on a separate card. The 3g and 3GS did not but these functions are pretty well segregated in the device.

[Opportunity cost is not the expense of doing something, it's the lost advantage of not doing something else that makes more sense. I know there is no technical or cost barrier for Apple to develop a CDMA iPhone. I'm saying there are much more productive things for the company to do than to offer a dead end phone that complicates its marketing and shakes up a very successful global business model just to sell the iPhone to a group of people who mostly don't want it on a network that wants to inflict it with lots of VCast junkware. Apple does (lately) what makes the most sense, not just everything that can be argued for.]

5) It might be hard for Apple to make a CDMA << Apple has such market traction on a very narrow set of offerings. No reason why Apple cannot handle delivery of a wider range of devices to support more carriers. Apple sources and builds 4 families of iPods with 9 different versions. Once you add the colors there are 33 sku for iPods just for the US market. Apple can handle the logistics of a few more iPhone versions for additional US carriers. We all know the iPhone is a much bigger maker opportunity than the iPod at this point.

[Offering different colors of iPods doesn't force Apple to deal with different mobile providers or to negotiate new contracts involving support, bundled software, technical incompatibility, feature fragmentation, and so on. ]

6) Apple is doing it's own thing << I am not suggesting a line of cheapo non-smartphones. I am suggesting Apple expands its current offerings to more carriers. It's not really much of a change if you can get over not seeing ATT big blue logo so much.

[There is no AT&T logo on the iPhone. There is however, a Verizon logo on every Verizon phone. And VCast, and prohibitions on this and that, and $10 fees for navigation, and no App Store, and no iTunes Store, and so on to the point that this argument becomes redonkulous.

Perhaps I should revert to hyperbole: Verizon is the devil. There you have it, the iPhone can't be on Verizon because it's the devil. - Dan ]

42 roz { 11.05.09 at 1:21 am }

@ Dan,

[Apple would be happy to sell its tech to Verizon users, which is why it sells them the iPod touch. I outlined various reasons why a CDMA iPhone makes no sense.]

I refuted your arguments, but for clarity, in a nutshell you say: 1) CDMA is going away; 2) Deal with VZN means Apple loses all bargaining power with ATT; 3) Apple does well without other US carriers; 4) There is an opportunity cost to developing CDMA; 5) It might be hard for Apple to make a CDMA; 6) Apple is doing it’s own thing

1) CDMA is going away in a few years. << It doesn't matter. CDMA is still relevant for half of the US market for handsets and more than half of the market for data. All of these customers will be using CDMA for the next few years. They will need devices and will want to consider the iPhone. They can use a CDMA iPhone for the time being and upgrade to LTE when it is ready. They don't need to be locked out of iPhone goodness.

[The problem here is that you are arguing what "ought" to happen. This isn't a moral issue, it's a business issue. You keep saying that this should happen for these Verizon users. Why should Apple, Inc. care? It already offers Verizon users options: move to AT&T or buy an iPod touch. Offering additional options would cost time and money that would not be recouped as fast as other things Apple could be doing, such as expanding globally where there's a lot more potential. Verizon users think they are far more important than they actually are.]

2) A deal with VZN means Apple loses all bargaining power with ATT << ATT can't support the iPhone alone so this precious leverage is losing value. Apple can offer the iPhone to offer carriers yet still offer time-limited exclusives on the next version of the iPhone. That is standard practice and still gives Apple some leverage, some time limited access to higher margins without locking out 71% of the market for perpetuity.

[This is not a lockout of 71% of the market. There is a finite limit to the number of people in the US it can sell the iPhone to. Right now, it makes lots of sense to stick with one global model and offer a non-phone alternative. Nobody else offers a phone that is so great that it sells without the phone hardware! Most smartphones are worthless without mobile service. Apple's core value isn't in selling a phone set, but rather in pairing phone features with its advanced iPod touch platform.

I know lots of Verizon users who have an iPod touch plus either a cheap phone or a BlackBerry. There is a big market for BlackBerry phones in IT which won't/can't immediately shift to the iPhone. Outside of that, there really isn't any major smartphone population on Verizon for Apple to sell the iPhone to anyway. Just iPhone-haters who would try the Storm or Droid because they don't want the iPhone. So why would Apple try to sell to those people instead? Clearly that's a no-win option that Apple has clearly decided not to offer. - Dan ]

43 roz { 11.05.09 at 1:48 am }

[Apple made an EDGE iPhone because it wanted a GSM phone it could sell to AT&T and globally in its first year. What does that have to do with making a dead-end CDMA phone in 2010, when Apple already has the iPhone in all major markets worldwide, and has the iPod touch to sell to Verizon users?]
It has everything to do with your claim that because a protocol will be outdated soon it is a non-starter. EDGE had a limited lifespan when Apple introduced the EDGE based phone. CDMA will still be a useful protocol for a few more years, every handset that Verizon is currently selling is CDMA based. All those customers will require service until LTE is done. Why not let customers decide if they want to invest in CDMA? If 90M people are using it, maybe there is a reason for that? Maybe it works really well? It’s not Apple’s fight. If the special CDMA iPhone costs more to develop – charge extra for it.

44 roz { 11.05.09 at 1:57 am }

[You can make a case for why Verizon employees would like to have an iPhone, but you're forgetting that Verizon offers a relatively small segment of the global market. You're also ignoring all the downsides, expenses and opportunity costs involved with making a CDMA iPhone. And the you're ignoring the iPod touch. And the fact that relatively few of Verizon's 90 million users would buy a smartphone, let alone pick the iPhone, particularly given the fact that Verizon gives away BlackBerry and LG phones "2 for $50".]

Not just Verizon employees – all the employees of companies who use Verizon.

I am ignoring the iPod Touch because it is not relevant. It is a fine device but not a phone. If a customer decides he wants a smartphone or his work wants to buy him one, the iPod Touch is not an option.

One report says 20% of new US handset sales are smartphones. If customers are getting dissatisfied with ATT to the point of defection, rightly or wrongly, they are lost to Apple. That is not ideal – you have to agree with that.

It’s not just Verizon on the table -its all three excluded US carriers. Carriers who today forced to promote competitors to iPhone, when they could be selling iPhones. The deals on the BB are just part of this distress. The promotion of the Pre and the Droid is another aspect of it.

45 roz { 11.05.09 at 2:00 am }

[No they do it because their business model is to create hundreds of phone models and push them out on every provider hoping some will become popular, just like PC makers. Apple makes a few models that it thinks are as close to perfect as possible, and then sells them as effectively as it can.]

I agree. To me selling something as effectively as you can is offering it in a way that 100% of the market can consider it – not just 29%. Yes, sell that perfect model to a wider audience.

[Sorry but that's so simplistic I can't even reply to it apart from pointing out that it does not "double the audience" by any stretch of the imagination. Look at the RIM numbers again. There is not an infinite audience for smartphones. ]

I don’t think it is simplistic at all. Porting the iPhone to CDMA is not starting from scratch. It is a small investment only directed at the increment needed to adapt affected areas of the device to CDMA/EVDO. This is limited to radio and related aspects. It’s not nothing but its not as big as you make it. Palm did it for the low selling Pre, and Blackberry does it for many of the models they make.

Verizon is roughly equal in size to ATT. Opening to VZN would double the US audience. That is not the same as saying it would double the sales but if you add Sprint and TMobile you are talking an addressable market of US customers 3X larger than ATT. It’s significant.

46 roz { 11.05.09 at 2:10 am }

[I see you've never been involved in product development. There's a lot more involved than just producing a CDMA phone, which would not be that hard or expensive. Apple's genius is not about knowing what to do, it's knowing what not to do. Like a PDA. Or a PC tablet. ]

Actually I am speaking from some experience but attacking me is not really the point. I’m not suggesting any new family of products in any case.

[Leveraging Verizons (or as I said, T-Mobile's) bandwidth certainly is the best argument. But for Apple to give away its entire relationship with AT&T to court a near enemy in Verizon is kind of silly to put it mildly. ]

You are applying a false absolute. They don’t have to give away the *entire* relationship. They just need to normalize it so that its open like every other device maker has. They have a preferred carrier which gets priority and others that get devices a bit later. No big deal.

[That's like saying Apple could stop Microsoft from targeting the Mac in its ads by selling Windows PCs. Are you serious? ]

It’s not a good analogy. The iPhone as a product can stand distinct from ATT and does in the rest of the world. Apple does not care if I use DSL or cable. It’s more like that. If Apple were exclusive to DSL and cable companies started hammering on the Mac, I would say, Apple should open up to cable providers – they have no dog in that fight.

[I don't write fantasy stuff about what companies "ought" to do to please me. I'd like the idea of an iPhone that actually works in SF. What I write about is what Apple is doing and why. And if you look at Apple's success, it's not because the company is making lots of foolish mistakes or overlooking opportunities. It's because it's ignoring nice-sounding advice from people who don't really know how to make anything happen, like those who work for IDG and CNET. ]

Apple is a great company, no doubt, and I am reading your stuff so clearly I see merit in it. I don’t fault you for going after the pundits in general. I just think that while Apple is brilliant, sometimes it seems to get hung up on things. There is an ideology that trumps strategy. It’s a better company when this is avoided.

I hate what is going on now. I hate the extent to which the iPhone gets wrongly vilified for ATT not keeping up with demand, a demand that seemingly is impossible to meet. I hate that Verizon can hype devices that are not as good and has a promise of selling a lot of them because people have no choice. And I hate that my visual voicemail is 10 hours late, I can’t send an SMS or make a call from home.

47 thesnarkmeister { 11.05.09 at 10:44 am }

You are correct to observe that Apple is following a tried and true approach in developing only premium products with its iPhone. Unfortunately, that approach does not hold true for Apple’s service offerings, starting with eWorld, to MobileMe, to its exclusive relationship with the worst cellular provider in the business. I would be ecstatic to own an iPhone. I would have purchased one on opening day. But here it is almost half a decade later and I am still using a $30 Net10 throw away instead. Why? I get better service from their customer service , without a contract and pay-as-you-go rates, than I have ever gotten from AT&T. Given reports from sources ranging from Consumer Reports to the dozens of their customers that I have spoken to in their own stores, that lack of satisfaction hold true across the spectrum. I might be willing to buy an iPhone outright, if I didn’t have to be roped into a contract with AT&T and if I could simply buy the voice and data minutes I need, as I need them. But I’m not going to willingly become one of the legions of miserable AT&T customers just because I can easily afford the best phone available from my favorite company. It may have been a good strategic decision for Apple, but it isn’t for this Apple customer, and that fact isn’t likely to change unless Apple’s relationship with AT&T changes.

[I would agree that lots of people are in your same boat. They are likely the same people who also wanted Apple to build a mini tower and then a netbook. They made clear cases for their demands, but in retrospect, cannibalizing one's sales to chase after low-end, low-profit business is not sustainable. If it were, then we'd see similar innovation coming from MVNOs and "2 for $50" phone makers.

I don't know how relevant 1994's eWorld is to the iPhone, but MobileMe is a great product that has millions of paid subscribers. There are things that could be improved, but its a pretty pioneering service and offers a lot of things you can't get anywhere. It also competes against a lot of free/adware things. Not easy to do, which is why nobody else can do it.

The AT&T experience isn't great (actually its customer service is pretty good, the 3G coverage in certain cities --like mine-- is what is the problem), but the core problem is that the US doesn't have great GSM/UMTS coverage, and that what good 3G coverage exists is tied into what is now old legacy. So it's kind of a bad situation all around, but Apple took what was there and turned it into a tremendous success. Again, not easy to do, which is why nobody else did it. - Dan ]

48 roz { 11.05.09 at 2:08 pm }

[Your argument is running around in circles. You say a CDMA iPhone will have no impact on AT&T, then when I point out it will, you say "well it should, because AT&T has a crap network that can't support it."]

Well, yeah not every new CDMA iPhone user would, as you said, a loss to ATT. Some of those people are locked to Verizon or Sprint due to coverage issues or an employer plan and would not have been able to switch to iPhone otherwise.

At the same time, if ATT’s service is poor, people have every right to leave and if they are going to leave then I’d still want them to have an iPhone option on other carriers.

[When I say Verizon would have the same kinds of problems, you say "well then people would see that and not buy the CDMA iPhone."]

No, I said that people with an iPhone on Verizon might also face in time an over subscribed network, but at least it’s not the iPhone’s fault at that point, and iPhone is not losing market-share because of the perceived failure of one carrier.

[So why run through this whole scenario at all]

The difference is more units for Apple on many carriers. I am not sure the smart phone market is as finite as you do. The iPhone to me seems like a very accessible consumer device. i want the iPhone platform to win. I don’t like the idea of Android taking it for arbitrary reasons. For example that Apple simply did not want to deal with more carriers while google and the device makers were ready to do the work to support more than one radio and sign up every carrier out there.

49 roz { 11.05.09 at 4:26 pm }

[This is not a lockout of 71% of the market. There is a finite limit to the number of people in the US it can sell the iPhone to. ]

What is this based on? How do you know where we are in terms of reaching that limit. Yes, Verizon is giving away Storms – but that could also be cuz they suck.

50 roz { 11.05.09 at 4:34 pm }

[For some reason, you ended up with the same comment in different versions that got caught by my comment spam filter, so I tried to salvage the unique parts of each one here.]

Thanks I appreciate you trying to post this stuff. I thought it did not work after it did not show up after a few minutes. Not the easiest thing in the world to follow. Oh well.

51 The Mad Hatter { 11.05.09 at 5:19 pm }

It’s rather amusing that so many people think that the USA is the only market that matters or exists, when it is a relatively small backwards, market.

52 roz { 11.05.09 at 10:16 pm }

@madhatter
No one said it is the only one that matters. It is neither small nor backwards.

53 The Mad Hatter { 11.06.09 at 12:16 pm }

roz,

United States Population – 300,000,000
World Population – 6,740,000,000

In percentage terms the United States has 4.45% of the world population. Assuming the numbers above are correct for subscribers, Verizon’s total subscriber base is 1.32% of the world population. Where is the value in providing a CDMA phone, a phone that would have to be totally re-engineered from the current phone, to work on a network that is going off-line in 3-4 years? How would you recoup your R&D costs?

You wouldn’t. Not unless every single Verizon customer bought an IPhone. And just think – the damned thing wouldn’t work properly, because of the limitations of the CDMA technology. Oops.

And yes, the United States is pretty backward when it comes to mobile technology, compared to Asia or Europe. So is Canada. In both cases the governments listened to industry, which promised to innovate like crazy, if they were given monopolies, and as soon as they had the monopolies, they sat on their fat asses and did nothing.

At least until AT&T got desperate, and hooked up with Apple, on terms that Apple insisted on. Now AT&T has the top selling smart phone, and is picking up customers like crazy. Oh sure, they are having network problems, because they were lazy, and didn’t build out their network properly (like everyone else, they thought mobile internet access was a joke – which it was until Apple provided Mobile Safari). AT&T’s problem is one that everyone wishes they had, in this down economy. Too many customers, who like the product too much.

And all Verizon can do is hope that rumors of an impending CDMA IPhone will stem the tide of defections.

Vapor Warez. We has them.

54 roz { 11.06.09 at 12:52 pm }

@Mad

Those stats would be meaningful if wealth were evenly distributed.

CDMA is actually an excellent technology. No question call quality is better on it than GSM.

How much do you estimate it would cost in R & D to develop a CDMA iPhone? $2M, $5M, $10M, $50M?

55 The Mad Hatter { 11.06.09 at 2:15 pm }

CDMA is crap technology. I’ve used CDMA and GSM, and in my opinion GSM is way better. Apparently the local carriers, agree, all of them are rolling out GSM networks, CDMA is dead in Canada (oh, there’s still support, but all new phones will be GSM, and the CDMA networks are supposed to be shut down within a couple of years).

As to cost – I don’t know. But I know numbers. Assume a $1,000,000.00 cost base cost (R&D only) to make it work, then about the same to finalize the hardware, and of course the OS has to be partially re-written.

Assume that Apple can sell a million phones through Verizon. Total extra cost per phone is probably about 5-10 dollars (including the hardware). But that assumes that Apple can sell a million phones, which is about 1% of the Verizon user base. Would 1% of the Verizon user base buy an IPhone? What if only 0.5% buy an IPhone? Lower volumes of hardware means higher costs for the CDMA chips, and you have to amortize the R&D over fewer phones.

Oh, and of course the new IPhone is missing features that the AT&T IPhone has, because a CDMA network doesn’t have all of the functionality of a GSM network.

So you are going to count on all these Verizon customers to buy a crippled phone. Will they be willing to do that? Or will they just switch to AT&T?

And of course Apple is going to piss off a partner that they’ve done very well with. Is that a good move? Do you really want to have a reputation as a hardware maker who back stabs their carrier partner?

Well, yes. We know that you’d be happy to back stab AT&T. That’s a good way to ruin your reputation.

56 roz { 11.06.09 at 3:29 pm }

My experience with CDMA was only good. Better clearer technology than GSM in my opinion. 3G on the iPhone sounds good but GSM is very noisy. Also, CDMA does not cause the interference with other devices like GSM – that is a big advantage for a device you potentially connect to a stereo. My iPhone does not work with my car radio because of GSM buzz – that is a big disappointment and a problem no one ever talks about.

The only feature they can’t support on CDMA is simultaneous calling and data traffic. Big deal. My EDGA iPhone has never done that, and neither does any other phone on Verizon – so no one will miss it.

So you think it is $2M. Let’s say it’s $5M total cost.

Apple gets $400 per phone from the carrier. Assume they sell to .5% of Verizon customers.

90M * .5% * $400 = 180M

They are going to recover development costs even under worst case considerations. Can we put to rest the idea that purely in terms of the cost to develop the device it is not worth doing this?

They’d net a lot more if by chance it is a hit. No reason to think it wouldn’t be. Might be a lot of pent up demand for it actually. Not everyone on Verizon is a hater.

Apple has done well with ATT but I would not consider offering the iPhone to other carriers backstabbing – that is usually what happens after a period. Usually its a 6 month wait till a device is opened to the competition. In this case its been over 2 years.

And again, Apple can offer the 3GS to other carriers and yet still give ATT priority on the next version of the iPhone. If ATT has a 6 month exclusive sales window that will cover a big portion of upgraders. They will be fine.

57 roz { 11.06.09 at 3:42 pm }

http://www.computerworld.com/s/article/9140445/Droid_launch_draws_tech_savvy_crowd_to_Verizon_store_?taxonomyId=15&pageNumber=3

So much coverage like that – people wanted the iPhone but not the network. I cannot understand those who don’t see the issue here….

58 Report: Apple to launch Verizon iPhone in Q3 2010 — RoughlyDrafted Magazine { 11.06.09 at 3:43 pm }

[...] users can take to any major carrier, solving the network fractionalization problem. It also solves other issues that had served as roadblocks, including the issue of user confusion that would result from Apple [...]

59 The Mad Hatter { 11.08.09 at 6:06 am }

Actually, know, we cannot put the development cost reasons to bed. I strongly doubt that Apple is getting $400.00 per handset. If and when they do a CDMA phone (and it appears that they are now going to) it is likely that Verizon will be required to cover the R&D costs, to pay directly for them, since Verizon will be the only customer for it (outside of Iraq, where the conqueror installed the phone system, and Canada, where it is being retired, CDMA is too rare to make it worth supporting).

As to CDMA call quality – it’s not as good as GSM. My wife had a brain storm, and bought me a new phone. She needed one, she knew I needed one, and just did it, without talking to me. It’s a CDMA phone, and quite frankly the call quality is horrid.

It’s going back tomorrow.

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