AT&T famously launched the first Apple iPhone in 2007, and the GSM-based device stayed exclusive to AT&T in the United States for five full years.
But, according to a new book by Verizon’s Ivan Seidenberg, the carrier’s management did meet with Apple’s Steve Jobs before Apple launched the first iPhone with AT&T, and the company’s management attempted to get Jobs and Apple to build a CDMA version of the gadget for Verizon.
Jobs’ response? “Nah, I don’t think so.”
That’s one of the many revelations in Seidenberg’s new book with contributor Scott McMurray, “Verizon Untethered: An Insider's Story of Innovation and Disruption,” available May 1. Seidenberg was CEO of Verizon from 2000 to 2011. (In fact, Seidenberg stepped down as the company’s CEO in the same year that Verizon and Apple announced that the smartphone vendor would build a CDMA version of the iPhone for Verizon.)
Verizon provided FierceWireless with an advance copy of the book alongside the authorization to reprint excerpts. The passage below comes from chapter 8, “scaling for mass customization,” detailing Verizon’s history from 2004 to 2009.
“THIS IS GOING TO CHANGE THE WORLD”
Seidenberg was attending the annual media conference sponsored by the investment banking firm Allen & Co. in July 2006 when he saw Walt Disney Chief Executive Bob Iger. He was looking intently at what appeared to be an oddly shaped cellphone in his hand. Seidenberg asked him about it as Iger put away the device as discreetly as possible. “This is going to change the world,” Iger said cryptically.
That was Verizon’s first, albeit partial, view of the Apple iPhone that would indeed change the world of telecommunications. Seidenberg checked in with the Verizon Wireless leadership when he returned from the conference. “We’ve been hearing about this. We don’t know,” was the response. They knew that Apple CEO Steve Jobs was on Disney’s board of directors. They assumed that meant Iger was looking at an Apple device. Tapping industry and Apple sources led them to the conclusion that Apple was readying a next-generation cellphone that clearly was intended to leapfrog the competition.
Two months later, Apple reached out to Verizon Wireless and requested a meeting. Jobs and several members of his iPhone team came to Basking Ridge and met with Seidenberg and the business and technical leadership of Verizon Wireless. Jobs and Seidenberg had gotten to know each other through appearing on telecommunications industry panels and were friendly, though there was no business relationship between the companies. “He came in and he started asking us all these questions about how we sort of did product development, and everything else,” Seidenberg recalled. He clearly felt existing cellphone features were unduly limiting. “He just got off on us about voicemail,” Seidenberg said. “I just remember the incident. And his issue was, ‘You know, when you make a call, you can only answer your voicemails in the order in which the voicemails came into your phone.
You can’t skip and go back to that one or this one.’” Seidenberg said. “He was sort of letting us know that he had designed something that was very different.”
These were interesting points but sideshows compared to the main issue that was on everyone’s mind. Was Jobs going to launch a version of his new product that would be compatible with Verizon Wireless’ CDMA-based network? Apple clearly viewed itself as an international technology powerhouse. Its iTunes music products flew off the shelves from Beijing to Buenos Aires. And despite Verizon Wireless’ tremendous success in the States with its CDMA standard, the international gold standard for cellular products remained Global System for Mobile communications, or GSM. The Verizon team was certain as a result that Apple would launch a GSM smartphone, as they would come to be called.
Would Jobs be willing to sell a version of the iPhone with a CDMA chipset as well? “Nah, I don’t think so” is how Seidenberg recalled Jobs’ response. Seidenberg said, “We kind of got the feeling when he left the room that we were not going to be selected to do that. And he was going to pick the GSM.” That meant they were going to release the iPhone through Verizon rival AT&T—which they did, exclusively for AT&T customers, in June 2007. The decision was of a piece with Jobs’ design mastery and therefore not really a surprise, even if it was a crushing disappointment, said Verizon Wireless CMO John Stratton. “Jobs had no intention of building multiple SKUs [shelf-keeping units, or iterations]. His great discipline was that he’ll do more with less than anybody on the planet. And he had no desire to fracture or fragment his manufacturing, his design, his development, his delivery, the engineering. So, GSM was the worldwide standard. It was the obvious choice.”
[Dennis] Strigl [Verizon's COO] had anticipated as much as well. His ready response was “we’ll school him,” Seidenberg recalled. Verizon Wireless was not about to sit around waiting for Apple to change its mind. It was going to find other suppliers and take them on. Months of strategizing followed as the Verizon team considered product offerings and partners who could help them offset the impact of AT&T’s exclusive rights to the iPhone.
The Verizon team realized that Disney’s Iger was right. It was hard to overstate the impact of Apple’s iPhone. Verizon realized it had to up its game, and fast. As Stratton said, “This device comes as if from another planet. Five minutes after I had an iPhone in my hand, it was very clear to me we couldn’t do this. We didn’t have the competency inside the business to produce the device that Apple had just put on the table. We recognized that the world was going to change.”