Verizon Wireless, the second largest US wireless carrier by subscribers, announced on Tuesday that next year it will would allow customers to connect to its network any device or application.
In essence, the new model will sit alongside Verizon Wireless's existing "full service" model, which will continue to be the model used by the vast majority of its customers. It will allow customers to purchase devices from any source and, as long as the devices have met basic connectivity and network safety requirements in Verizon's labs, connect them to the network.
Verizon hasn't yet decided exactly what the pricing models will be for these customers, but is leaning towards a usage-based model. Verizon anticipates laying a lot of the groundwork in the first half of 2008 and launching the model to customers in the second half of the year.
The announcement is something of a surprise, coming as it does from a company that opposed Google's attempts to have open access provisions attached to the forthcoming 700MHz spectrum auctions. Verizon's senior leadership team denied on a Tuesday call that this move has anything to do with Google or the spectrum auction, but presumably struggled to keep a straight face while doing so.
The clamor for open access has been getting steadily louder since Google's noisy entry into the 700MHz spectrum debate and dozens of articles and blog posts have been written decrying the closed nature of the US wireless industry. It is therefore hard to read this announcement as anything other than a response to this activity, although Verizon prefers to describe it as a response to demand from its customers (perhaps some of those journalists and bloggers are Verizon Wireless subscribers).
How many subscribers will actually adopt the new model‾ Several barriers exist. First, these customers must be willing to pay full retail price for their devices which few, aside from the 1.5 million US iPhone customers, have yet been willing to do.
Second, despite the open network approach, only CDMA devices will work on Verizon's network, at least for now, while many of the devices customers might want to attach to a US network are GSM-based. Given the reluctance of Nokia and others to develop CDMA devices even for sale through carriers' retail channels, it seems unlikely there will be a large speculative increase in development now.
Third, the safety net of Verizon's customer support will be removed for these customers, who will be left to their device vendors' customer service departments if anything goes wrong.
Fourth, many customers will already be on two-year contracts with early termination penalties, further raising the price of jumping ship. All of these factors seem likely to constrain the number of subscribers who actually opt for the open model, which may limit its effectiveness as a force for change in the industry unless other carriers (notably, AT&T) follow suit.
So what will Verizon get out of all of this‾ Well, firstly, it snatches away the "closed network" stick which Google and consumer rights advocates have been beating it with, which may be reason enough.
Secondly, it may trigger additional development resources to move into both CDMA-enabled devices and wireless applications, both of which could potentially be brought into Verizon's mainstream, full service portfolio if successful enough.
Thirdly, it allows Verizon to test the waters for a number of possible future initiatives, such as reducing handset subsidies, opening up its walled garden portal more, and moving to more purely usage-based pricing models. Demand for a middle ground between the "full service" and Wild West, where customers could enjoy the full service approach but still have freedom to deploy the applications of their choice, is bound to grow as a result of this model.
Many questions are yet to be answered, though - among them, exactly what the pricing models will be, which partners will sign up to support the program (Microsoft is the only notable example so far), how stringent and expensive the certification process will be and what volumes of devices Verizon's labs can handle at any given time, and whether all of this may trigger Google to withdraw from the 700MHz auction process. Verizon will hold a conference with device manufacturers, application developers and retailers in the first quarter to answer some of these questions, and that will also provide clarity about exactly how much difference this initiative will really make.
Jan Dawson, VP US Enterprise Practice