Experimental feature

Listen to this article

Experimental feature

Count me a cynic, but I’m still having trouble accepting that Verizon Wireless has really changed its spots (this was the surprise news last week that it will "open up" its network to any device or internet application, within reason.) The latest development: CEO Lowell McAdam, having got the taste for this new religion, now says he’s even going to build mobile devices using Google’s Android technology (see this interview with Business Week.)

Common sense suggests that Verizon Wireless is not simply going to throw it’s business model out with the bathwater. For now, that model involves luring customers to company stores with cheap subsidised handsets, selling them large volumes of airtime at flat rates, and packaging this with company-backed entertainment services like V Cast. Why, then, would it let "open" handsets and any old application (think Skype) onto its network?

The key here is the terms. When I spoke to McAdam about this last week, he said he was going to apply a pay-by-the-packet charge to allow these non-Verizon devices to connect. This comes at just the moment the wireless industry is moving en masse to flat-rate pricing, having realised (as the fixed-line internet guys did years ago) that this is the only way to get consumers to stop worrying about costs and start surfing in earnest.

In the Business Week piece mentioned above, where McAdam gets warm and fuzzy about Android, it’s also noteworthy that he doesn’t say that these devices will be open to any application. That’s Google’s hope, but living in the real world, it has accepted that some companies may want to use its software to build "locked-down" handsets. On top of these considerations, Verizon Wireless has also said it needs to vet outside hardware for security and network stability reasons.

OK, so maybe this is starting to sound a little cynical. Let’s assume that McAdam should be taken more at his word and Verizon Wireless will not go out of its way to thwart the openness it has so publicly espoused, and may actually even do some things to promote it. Even then, it still isn’t facing a mass change in customer behaviour. Given the choice of a cheap flat-rate phone or an expensive new gadget that will rack up bigger bills the more they use it, which do you think most Verizon customers will choose?

But if greater "openness" does bring a new wave of innovation in handsets, and if Verizon Wireless’s customers do eventually see value in these things, then it will be well-positioned to ride the wave of changing consumer demands. What’s more, it would have achieved this without having to go the route of rival AT&T, which surrendered an arm and leg to Steve Jobs (in the form of a revenue-sharing agreement) to win the iPhone contract. So full marks to McAdam for positioning Verizon Wireless for what comes next – only, don’t imagine he is about to give up the old way of doing things without a fight.

Copyright The Financial Times Limited 2017. All rights reserved.

Follow the topics mentioned in this article

Follow the authors of this article