Verizon’s statement this week about handset exclusivity never mentioned AT&T, but to us the name was all over the announcement.
What Verizon actually said was that it was happy to limit any exclusivity arrangement with handset vendors to 6 months and after this period local and rural cellcos with less than 500,000 customers would be free to cut their own deals on the same devices.
What Verizon Wireless is really saying is that it has a more open business model than AT&T, and it has no plans to try to change it so that it holds a single leading vendor captive.
What AT&T has done with Apple in the US, and to a lesser extent Apple has tried to repeat elsewhere, is a long term tie up, between a single handset vendor and a single operator. But through this deal Apple here is lending its entire feature set to AT&T, it’s not just one model but an entire new smart phone concept. Yes others can copy it, but they have been less successful at that so far. Imagine the hue and cry among enterprise customers if the only place to get any kind of Blackberry, not just a Storm, but ANY kind of Blackberry, was through either just Verizon or just AT&T, and that’s the nature of a market leading vendor married to an operator.
In Europe 6 months is typically how long an exclusive lasts. In Japan the operators design the handsets themselves and then go out to tender for someone to supply them, so the exclusives are of a different nature.
So what Verizon is saying to the world is ‘Look at us, we don’t do these long term exclusive deals. So don’t make legislation that refers to us, take a longer and harder look at our rival AT&T.’
Now perhaps this is because Verizon Wireless turned Apple down and now realizes that it should have accepted the iPhone. Or perhaps it genuinely believes that this is a retro move heading away from its Open Network preaching. Whichever it is, it is designed to apply pressure directly on AT&T.
Either AT&T comes out and declares how long its Apple exclusive is intended to last or it risks legislators focusing solely on AT&T’s situation.
But there are also problems with Verizon’s position. What it seems to be saying is that it will keep exclusive terms with a handset maker for 6 months where a small (fairly insignificant) rival is concerned, but it reserves the right to operate like AT&T where its real rivals are concerned, such as AT&T, Sprint, T-Mobile and the major MVNOs and those cellcos which have more than 500,000 customers. In other words it wants to keep its options open where a great majority of the US market is concerned and give it up for around 5% of users who by their very definition (rural) are unlikely to have leading edge customers.
We reckon that government regulators ‘ be they financial or the FCC ‘ will be unimpressed with Verzon’s statements. In fact limiting ALL exclusives to 6 months, not just where rural cellcos are concerned, may well become a US benchmark for legislation following this.
Most new sales are captured during that time, and after that kind of period usually (we say usually because in Apple’s case it took a lot longer) there are devices on the market which can do everything that the exclusive device can do (although branding also plays a big issue).
What this MAY achieve is to take the names of the rural carriers from the list of companies complaining about the big three and their exclusives. Verizon offered the concession in a recent letter sent to Rick Boucher, chairman of the communications subcommittee on the House Energy and Commerce Committee.