Does Verizon Wireless need an iconic device?

Analysts are probably breathing a sigh of relief after Verizon posted a solid performance in its wireless business. But it was inevitable: The iPhone 3G did have an impact on the company's churn rate, albeit a small one.

Churn increased from 1.27 percent in 3Q 2007 to 1.33 percent in 3Q 2008. On a conference call with analysts, COO Denny Strigl acknowledged that the iPhone 3 caused "some" churn for the operator in the quarter, but he said he wasn't concerned about the full year churn numbers.

The churn rate was bound to increase given the fact that AT&T reported last week that 40 percent of iPhone 3G activations during the third quarter were new to AT&T. Just wait until we see third-quarter results from the rest of the industry's operators.

For so long, Verizon Wireless has successfully sold customers on its quality and coverage message and continues to garner the industry's lowest churn rate because of it (AT&T's churn rate came in at 1.7 percent even with the iPhone). But it is clear that a big reason a customer opts for one operator over another is because of the device--especially that iconic device. Will T-Mobile's G1 Android device be the next one?

Strigl noted that Verizon Wireless has a broad-based portfolio of devices and said "the company isn't wedded to any one iconic device." Is that by choice? Verizon's score of an iconic device would be a home-run proposition for the operator but we probably won't see one in the CDMA world unless the operator puts a lot of its own resources toward it.

CDMA is beginning to fall off the radar screen as Verizon and other major CDMA operators such as Bell Mobility, Telus and KDDI plan a jump to LTE and operators around the world flip to HSDPA. While EV-DO is going to be around for some time, HSDPA offers a wider customer base around the world. It makes more sense for Apple to develop devices for LTE and WiMAX rather than EV-DO. Kyocera is going to build an Android device for CDMA operators, but its highly doubtful other major handset vendors will.

My guess is that we'll see Verizon pursue some iconic devices in the LTE world, and it will certainly have the clout to do it. Until then, the operator will probably hold its own against AT&T--it just won't pull significantly ahead like it has been accustomed to in the past. Then again, analysts worry that the iPhone will be a one-trick pony for AT&T, and it won't have anything else up its sleeve once the fizz runs out. --Lynnette