Many people, myself included, are excited for the rumored launch of a Verizon iPhone to finally come true in “early 2011.” However, this hasn’t been publicly or officially confirmed by either Apple or Verizon. Why not? Well, Apple certainly likes to announce things very close to launch so it’s possible that the deal is done and just not yet announced. But Apple also is notorious for using well-placed “controlled” leaks in the press to:
- Gauge public sentiment/forecast demand
- Gain the upper hand in negotiations
It seems that press leaks have been coming from Verizon as well. Before the unofficial leaks prompted articles in places like the Wall St. Journal and Fortune Magazine, Verizon’s CEO, Ivan Seidenberg publicly “denied” that they would get the iPhone, taking a page from Apple in terms of negotiating by trying to test the public response to such a statement. Even as recently as today, Ivan Seidenberg was quoted in the Wall St. Journal as saying:
“If the iPhone comes to us, it’s because Apple thinks it’s time,” he said. “Our interests are beginning to come together more but they have to take steps to align their technology with ours.”
It does seem that Apple has begun to source CDMA chips for their iPhones. One would think that meant that a deal with Verizon is sealed, or if not, it would certainly erode their negotiating power. However, I presume that this particular negotiation is protracted and complicated as it involves two of the more stubborn companies with regards to their staunch positions, arrogance and market size. I would guess that they’re still haggling over:
- Retail pricing
- Subsidy to Apple
- Verizon content/branding on the phone
- Retail rights
- Customer service rights/responsibilities
- Share of monthly revenues
- Share of app revenues
Apple negotiated an unheard of deal with At&t, gaining every concession it wanted in terms of pricing, control, etc. and changing the dynamics with carriers forever (much needed in many ways). Apple is likely to want to replicate most of this deal with Verizon. However, Verizon is likely to reject many of these terms on the grounds that they won’t have exclusivity.
Since Verizon must know about Apple’s sourcing/manufacturing of CDMA-ready technology, the only way that Apple can maintain negotiating power is to have a BATNA (Best Alternative to a Negotiated Agreement). I posit that Apple’s BATNA is none other than Sprint. Sprint is the only other CDMA carrier in the US and is the carrier that has suffered the most in terms of lost subscribers to At&t for the iPhone and to Verizon for Android devices and others. Sprint would likely agree to a much better deal (for Apple) than Verizon, having a much smaller subscriber base and being, in general, in much more desperate shape.
So, if my scenario is to be believed, one would assume a boardroom standoff. I imagine a long, red-lined Apple/Verizon contract with a few key unresolved issues and a big game of chicken going on. Both sides are trying to use the media and subsequent consumer response in their negotiations to prove that they don’t need each other. I think the deal will likely get signed, but I also wouldn’t be shocked to have Steve Jobs tell Ivan Seidenberg where he can shove his Android phone and launch the iPhone on Sprint. As we observed with the last minute scuttling of Facebook integration with Apple Itune’s Ping social network, Steve is quite willing to play hardball on deals.
Thoughts? Eager to hear what people think in the comments.
Look for more about a potential Verizon iPhone in subsequent posts.
One footnote- CDMA is also used in Korea and in Japan (in addition to their GSM networks) so Apple’s CDMA production will serve those purposes as well.
Related Articles
- CEO Ivan Seidenberg pours cold water on all those Verizon iPhone rumors (tech.fortune.cnn.com)
- What if Verizon never gets an iPhone? (tech.fortune.cnn.com)
- Verizon CEO: Verizon iPhone Is Up To Apple, But They Like Our LTE (cultofmac.com)
- Verizon removes tweet hinting at iPhone arrival (edibleapple.com)
- Verizon says 4G network has drawn Apple’s interest (electronista.com)
Ron Feldman's Blog 
Nice post Ron! I do disagree a bit. Is choosing a flailing network like Sprint a legit BATNA? I’d say that is an implicit capitulation. Apple would not come out ahead. A move like that would erode the market preeminence that the iPhone has managed to maintain (purely marketing of course.) Android would advance further, and the inevitable negotiation with Verizon in another year or two would be more painful and at a distinct disadvantage. No, ultimately, apple will appear on the Verizon network shortly (a move that I don’t particularly laud, but I owned a Verizon *analog* wireless phone and still bear the scars…) and thus will the Apple hegemony be shattered. At least, by bits and pieces. Slowly. Agonizingly, in the minds of iPhone users.
As Safari and iTunes have grown bloated and virtually unusable, I’ve found myself comparing Apple to Microsoft and Real. Hopefully this brings one of my (formerly) favorite technology companies back to earth.
@Patrice – thanks, glad you liked it! To respond to your points:
– BATNA stands for “Best” alternative and I do believe that Sprint is that. Their network is actually quite good and they share towers/spectrum with Verizon in many places.
– No question Verizon is a Soviet ministry just like At&t but I do think they’re the lesser of two evils as their network actually works.
– Apple is definitely getting too much hubris, but they are still continuing to out-innovate everyone else, so we’ll see when they actually suffer from it.
Will all be interesting to watch.
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