Verizon’s “Berlin Wall Moment”

In what was regarded as a surprise move, Verizon announced Tuesday it would give consumers more choice in what phones they can use on its network, perhaps hastening the day when Americans can buy the mobile device they want, then choose a carrier instead of having it chosen for them.

In its press release, Verizon said the “new choice” would not be available until the end of 2008, and described the process between now and then:

In early 2008, the company will publish the technical standards the development community will need to design products to interface with the Verizon Wireless network. Any device that meets the minimum technical standard will be activated on the network. Devices will be tested and approved in a $20 million state-of-the-art testing lab which received an additional investment this year to gear up for the anticipated new demand. Any application the customer chooses will be allowed on these devices.

The news has got everyone thinking about two companies not mentioned in the press release, Apple and Google. Apple, because the iPhone is such a sexy product but its appeal is weighed down by the required two-year AT&T/Cingular contract that comes with it; and Google because of its recent announcement of plans to create an open platform for a Linux phone that can run Google applications.

The commentary on Verizon’s move comes in two flavors: Laudatory, and intrigued conjecture. If anyone really doesn’t like it, they’re keeping it to themselves. Here are lots of samples:

“We’re seeing a sea change here. If you go back a year ago, there was absolutely no sign anyone was interested in pushing opening wireless networks,” said Harold Feld, senior vice president of the Media Access Project, a nonprofit telecommunications law firm. “This is like a Berlin Wall moment, where the pressure is too much for these guys.” (SF Chronicle)

Atlantic Monthly blogger Megan McArdle, a libertarian-leaning economist, agrees:

This makes total sense for Verizon, which has the best network; the pressure will force other competitors to follow suit, and on network strength, Verizon wins in most (not all) areas.

This is enormous news for the cell phone industry. I suspect we’ll ultimately see little to no bundling, other than some sort of very basic freebie phone, which is all to the good. Consumers complaining that they won’t get cheap phones aren’t thinking things through; the phone company wouldn’t give you the phone if they didn’t expect to get it out of your hide in phone fees.

I suspect that this will put enormous pressure on Apple’s sweetheart deal with Cingular, as customers begin thinking of a phone as something that doesn’t necessarily come attached to a two-year contract.

From the Washington Post, comments from regulatory bigfeet:

FCC Chairman Kevin J. Martin and Rep. Edward J. Markey, chairman of the House subcommittee in charge of telecommunications issues, praised the announcement as a victory for consumers. But some consumer groups, including Public Knowledge and Media Access Project, say it may be too limited to bring real change. Through its testing process, Verizon will still ultimately decide which phones and applications can work on its network, they say, and customers could end up paying more to use outside products. “When more details are out, we’ll discover what all the ‘gotchas’ are,” said Amol Sarva, chief executive of Txtbl, a start-up that hopes to provide mobile e-mail service to cellphone users.

Reuters leads with a suggestion that Google pushed the right buttons to make Verizon act:

Verizon Wireless said on Tuesday it will open its network to any phone or software application by the end of 2008, becoming the first major U.S. mobile service to cave in to demands by Google Inc.

Google had pushed for U.S. wireless operators to open up access to their networks by successfully lobbying the U.S. government to make that a requirement for companies wanting to bid in an upcoming auction of wireless airwaves.

Techcrunch also sees Google as the new driver for mobile telecom, and throws another big name into the mix — Microsoft:

When Google was trying to gear up support for its open-source mobile operating system Android, Verizon was one of the companies Google was rumored to be talking with, but did not end up being part of the Open Handset Alliance (which included T-Mobile and Sprint Nextel). Verizon may still join the Open Handset Alliance in its own sweet time, but this move suggests that it would rather compete by trying to attract mobile developers to its own network. Verizon is not embracing an open-source approach (which is probably why Microsoft is all gung-ho about the announcement), but it will give mobile developers access to its vast network and 64 million subscribers. You didn’t think Verizon was just going to let Google waltz right in and take its customers for a spin, did you? But if Verizon doesn’t make it easy for developers and unaffiliated device manufacturers to get onto its network, it could end up tripping over its own feet.

Here’s what Microsoft had to say in its press release:

“Microsoft is very excited to see Verizon Wireless make such a bold move to satisfy the demands of wireless consumers. As people’s mobile needs become more sophisticated and varied, they will require smarter and more adaptable mobile devices. We are proud to support any open access that puts more power in people’s hands to connect them to the information they want when and where they want it.”

Wall Street Journal blogger Ben Worthen reflects on the early days of the web, and sees a parallel:

Traditionally, wireless carriers have exerted tight control over what devices and software people could use on their networks. This approach is known as a “walled garden,” because there’s a whole world of interesting but hard-to-control stuff out there that the company is protecting its customers from. AOL and others used the same approach in the early days of the Internet. Rather than having people go off and find news or chat rooms on the big bad scary Web, these companies came up with their own sanitized versions of these services.

It didn’t work: No single company could keep pace with all the innovation that was taking place on the entire Internet. Now, Verizon is admitting that the model won’t work for mobile devices, either.

Gigaom’s Om Malik consults his “inner cynic” and finds these caveats:

  • It doesn’t seem very open to me, because it’s all about devices based on CDMA technologies, which really props up Qualcomm’s CDMA monopoly. More devices put more dollars (and I mean serious dollars) into Qualcomm’s (QCOM) pocket. The rest of the world is going down the post-GSM path and opting for other open standards, so betting on a CDMA- and post-CDMA-based platform is fraught with risk.
  • How many platforms can developers really develop for? Come on, people! Announcing a platform is easy, getting real developers to come on board — not so much. Verizon is thinking in API terms!
  • Verizon can go back on its word, citing security concerns. And then you’re basically left there to whistle, “Sittin’ on the dock of the bay…”
  • Do we really believe that Verizon is going to be happy being Pipes-R-Us?
  • Well, nothing a big company in a highly regulated industry does can be taken on face value, right? By the way, Verizon’s stock was up yesterday, but only 23 cents.

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