Non-exclusive iPhones: Has Verizon waited too long?

I've never been a fan of exclusive deals between handset manufacturers and wireless carriers. I understand why they appeal to the Apples and the AT&Ts of the world in the first place, but it ticks me off that sweet deals like this always seem to leave consumers out in the cold. They limit choice and competition, which tends to keep prices artificially high for longer than they should, and they make it easier for carriers to maintain the kind of old, customer-unfriendly practices that have long stained the industry.

When a given gotta-have-it device is available only through one carrier, consumers are forced to make a Hobson's Choice in that they can choose by device, or by carrier, but not both. And if they dislike the exclusive carrier for any reason, they either hold their noses and sign, or learn to live with another carrier's second-rate hardware.

Either way, it's not exactly democracy in action, and it often results in less than optimal experiences for consumers. We all deserve better.

Change already happened

So it's with more than a little eagerness that I watch rumors of Verizon potentially adding the iPhone to its portfolio around the second half of 2010. While the cynic in me thinks the company's still smarting from its stupid-in-hindsight decision to spurn Apple a couple of years back -- a decision which resulted in AT&T becoming the exclusive launch carrier in the US -- the realist in me says Verizon has better things to do than lick old wounds.

First, disclosure: My fellow Canadians and I are no strangers to iPhone exclusivity. Rogers Wireless has been the sole carrier of the device since its debut here just over a year ago (please don't get me started on why we were iPhone-less until 2008). Canadian exclusivity is about to end as both Bell and Telus are scheduled to start selling iPhones here next month.

I hardly think we're alone, either. From where I sit, it's only a matter of time before exclusivity ends in every market Apple is in, as the company shifts toward a cross-carrier model more like Research in Motion's. Although different carriers obviously carry different BlackBerry models, you've still got a certain degree of choice no matter whose store you walk into, or who's sending you a bill every month.

As encouraged as I am to see Verizon potentially getting into the iPhone game, I'm left wondering if its timing is all that great. After all, the wireless market in the second half of 2010 will look radically different than the wireless market of today. Google's Android mobile operating system -- at one time largely a curiosity, due to its limited availability on none-too-impressive hardware -- is about to bust open big time thanks to high-profile hardware releases from a number of vendors, including Samsung, former Microsoft Windows Mobile stalwart HTC, and a possibly resurgent Motorola.

Within a year, Google's services-rich strategy could fundamentally alter the power balance in the wireless device/application market, and erode the iPhone-vs.-everyone else halo that Apple currently enjoys. That's because while Android's 10,000 titles can't match Apple's App Store dominance, its tightly integrated Web services give it enough room to make an end run around the iPhone, and seriously erode the optimistic sales and revenue figures being floated around a possible Verizon iPhone play. When you've got Web services, you don't always need "an app for that."

The latest rumors, based on a Broadpoint.AmTech report cited by AppleInsider, state that VZW could get away with putting up a $300 subsidy per unit for late 2010-model iPhones, if it (easily) sells 14 million of them the following year. While batting numbers like these around is risky business (risky if you like being right, which it seems fewer people do nowadays), you might still get at least a baseline understanding of why Verizon might think it could pull this off.

The time-eroding value of money

But would Verizon be able to make as much money off of iPhone subscribers as AT&T has managed? Can anyone be just as profitable selling a device in Year Four of its lifecycle, as simply one of potentially many carriers? After all, there's no guarantee that Apple isn't also going to offer its devices to other carriers by the second half of 2010, so maybe Verizon should push for a smaller subsidy to limit its exposure. Or perhaps Verizon should push Apple to source only the latest generation (4G?) iPhone instead of the 3G S, or whatever passes for current-generation at that time. And if Android takes root and closes the feature/app gap, should Verizon push for an even sweeter deal? Or simply walk away?

However it plays out, it's becoming increasingly clear that any delay is bad for everyone:

• Bad for Apple because it keeps an artificial upper limit on market share growth. Worse, because it pushes broader iPhone availability so far out that by then, it'll be competing against itself with the tablet..or whatever that next "One More Thing" turns out to be. Apple's overall product roadmap means iPhone's window as a profit-rich halo device could close before Verizon even gets in the game.
• Bad for Verizon because it needs to build out a robust offering of leading edge smartphones to maintain its shrinking market share advantage. Android-based devices will help, but iPhone would push Verizon over the top headline-wise. Assuming it happens sooner rather than later, of course.
• Bad for consumers because they shouldn't have to wait years for wider carrier availability, and the positive effect on rates and plans that competition of this sort inevitably brings.

None of this would matter if the iPhone were a middling piece of mobile hardware with a barely active application store and moribund developer community. If we all coveted other devices (and if the iPhone wasn't so culturally, if not numerically, dominant), we'd yawn at the prospect of any carrier, much less Verizon, adding a new device to its portfolio.

But the iPhone is none of those things, and consumers deserve to have the choice earlier in the product life cycle. That they may be forced to wait until the second half of next year is further evidence that carrier-exclusive deals make no sense in today's fast-changing mobile market. It's time for them to disappear for good.

Carmi Levy is a Canadian-based independent technology analyst and journalist still trying to live down his past life leading help desks and managing projects for large financial services organizations. He comments extensively in a wide range of media, and works closely with clients to help them leverage technology and social media tools and processes to drive their business.