Verizon Announces Intention To Open Its Network, Platform

Verizon LogoMark down this day. November 27th, 2007. What is so special about today? This may be the turning point in the tyrannical rule that the US wireless carriers have held over their customers. Verizon Wireless came out of left field this morning announcing that they will be releasing a set of technical standards for the development community in early 2008 with the intention of opening up their network to any and all devices on their network. Now, granted, Verizon is a CDMA network and these devices must be CDMA - it's the nature of the legacy technology - but as long as you have a CDMA device, it will work. Instead of my trying to explain Verizon's words, let me quote Verizon:

Verizon Wireless today announced that it will provide customers the option to use, on its nationwide wireless network, wireless devices, software and applications not offered by the company. Verizon Wireless plans to have this new choice available to customers throughout the country by the end of 2008.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.

Entirety of Verizon's press release.

It's not the kind of announcement you'd expect from Verizon Wireless. But the notoriously protective carrier known for crippling many of the devices running on its network, as well as suing the FCC over the open access stipulations attached to the 700 MHz auction, did a complete about face on Tuesday. In doing so, the U.S.'s second largest carrier now says it will allow anyone with a compatible phone to access its network. In theory, that means any CDMA phone will now work on Verizon's network. (In practice, those phones will still have to be vetted by Verizon's $20 million testing lab.) It also means that customers will be able to download and use the third-party applications of their choice on those devices, once Verizon publishes technical standards for the development community early next year. Tuesday's announcement is perhaps the strongest evidence to date that the mobile industry as a whole is undergoing some fundamental shifts in the way it approaches openness, both from a network and device perspective. Three weeks ago, Google announced its Open Handset Alliance (OHA), which is comprised of a group of handset makers, carriers and silicon manufacturers. OHA centers on a new open source mobile operating system for smartphones. That announcement undoubtedly played a major role in Verizon's new stance on openness, as the wireless provider remains one of only two U.S. carriers (AT&T being the other) that hasn't committed to the open source alliance. Also at play is the FCC's upcoming 700 MHz auction. Google has already announced it will bid on a swath of spectrum that will, by law, be open to all devices and applications. Wearing its brand new open network badge, Verizon could end up going head-to-head with the search giant during the bidding process in January. Let's not forget the competition the company currently faces, either. Verizon has arguably had a tough time competing with GSM carriers, which far outnumber their CDMA counterparts worldwide. Because GSM phones use SIM cards, it's relatively easy to use them on different (GSM) networks -- something you can't do with CDMA phones, which must be unlocked through the network. Estimates vary, but globally there are from 400 to 500 million CDMA phone users as opposed to 2.6 billion using GSM, which puts Verizon in a very small minority worldwide. Verizon may be trying to cultivate a more diverse CDMA ecosystem by sailing the open seas. Some analysts even say the company's decision may not have that much to do with traditional mobile phones at all. Instead, Tuesday's announcement could be a preemptive move to get ready for the company's 4G network and a new generation of mobile internet devices -- all of which will bring new services and, most importantly, new customers to Verizon.

I am, however, a Verizon Wireless customer. Why? Have you been to Virginia? Have you been outside of NYC, San Fran, LA, DC, Chicago, Atlanta, Las Vegas, Seattle, Baltimore, or Portland recently? Yeah, I thought so. AT&T & T-Mobile service SUCKS ASS outside of major metropolitan areas. Sure its fine if you live in the median on a major interstate but if you want to go anywhere off of an interstate or outside a major metropolitan area the coverage is HORRIBLE for GSM networks. CDMA networks like Sprint & Verizon reach much much better over distances. Furthermore, here in Washington DC, Verizon has coverage on the Metro underground (that's the subway for the uninformed among you). I say all of this because I want to make it clear that, while I'm skeptical, I want so badly for Verizon to be the "good guy" in all of this (also light a fire under Apple's ass so I can get a CDMA iPhone - more on that later).So, what is Verizon's motive in all of this? Why the sudden change of heart? It could be their fear a Google-led wireless revolution or it could be a realization that networks need to be open and customer's need choices.

Om Malik of GigaOM opines that: wants developers to write applications to their platform. Seems like they took a page out of the Google playbook. Given Verizon’s track record of tight control of its network, including the user interface, this is a huge announcement akin to Mikhail Gorbachev responding to President Ronald Reagan’s call to bring down the walls.

One minimum technical standard: the phones (or devices) have to be based on CDMA standards, not the more popular GSM standards. Further thoughts on this later, after the press conference. One thing is clear: Verizon and other incumbents are very, very worried about the siren call of “open networks” and are reacting. My inner sync also thinks that this could be a PR move that will help Verizon win the 700 MHz auction. Verizon can always point to the “openness”as a way to counter Google.

Verizon and other phone companies’ best friend, FCC Chairman Kevin Martin, issued this statement, which kinda increases my level of skepticism, and belief that this is an “appeasement” announcement.

I was pleased to hear the announcement by Verizon Wireless…As I noted when we adopted open network rules for our upcoming spectrum auction, wireless customers should be able to use the wireless device of their choice and download whatever software they want onto it…

As I said at the time, I had hoped that our auction rules would ultimately encourage all of the wireless industry to adopt a more open and consumer-friendly industry approach.

Why is Verizon is doing this?

  1. I think it’s because they don’t want to make open network concessions on the upcoming 700 MHz auctions, but be able to say, “Look, we’re already open.” Verizon needs to make some public concessions —there is a lot of competitive pressure coming from Google (GOOG), meanwhile the FCC and those on Capitol Hill are in a belligerent mood.

  2. Bye-bye subsidies: now you buy your own phone and deal with the headaches. Company executives were pretty clear that they expect the distributor/direct purchase model to become popular. This is good for Nokia, at the very least. They can now make CDMA devices and not have to beg and kneel in front of the Verizon masters.

What it means for wireless customers:

  1. A phone with WiFi doesn’t need approval from Verizon, apart from making sure it works with Verizon’s network.

  2. As the company executives explained on the call, you can make any device — as long as it’s CDMA network-based, Verizon has no problem with you selling it.

  3. Chinese handset makers can now bring $25 phones to the U.S.

  4. Theoretically, Apple can do a CDMA-based iPhone and sell it in its own stores.

Why I am still skeptical (but will change my mind if change does happen)?

  1. Press call didn’t clarify how much network access will cost. They currently charge $60 for plain vanilla wireless broadband access. From a network perspective, this could be expensive.

  2. They didn’t clarify the business models here. I think this needs to be explained better.

  3. No clarity on what the real bandwidth limitations are and what kind of quality of service Verizon will impose on the network. Will they raise similar arguments to the ones they have been making with regards to network neutrality?

  4. More devices means more network usage, which means degradation of quality. Will Verizon keep investing ginormous amount of money to keep the moniker, “America’s most reliable network”?

Why my inner cynic says: Don’t believe the hype (but disregard if you think I am, by nature, a pessimist).

  1. 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.

  2. 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!

  3. 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…”

  4. Do we really believe that Verizon is going to be happy being Pipes-R-Us?

I think Malik raises some fair points there. There are two particular ones I want to extrapolate on: iPhone & WiFi.

One thought I have is Verizon is running scared from the 800-pound gorilla that AT&T has in its camp. The iPhone is selling well and many iPhone customers will continue to be iPhone customers for years to come. Every iPhone customer AT&T gets will remain with that carrier for years to come. Verizon MAJORLY screwed up in the fall of 2006 when they backed out of talks with Apple to carry the iPhone & they are now realizing this. Either this move is a way to hope that someone can come up with a viable iPhone competitor OR by hoping that Apple will, on their own, come out with a CDMA capable version of the iPhone & viola! it works on Verizon out of the box due to the vastly reduced means of getting a device working on their network.

Now on the subject of WiFi...Skype, the free VoIP service, has a mobile client. Now picture this....a very nice phone made by a small tech startup for less than 100$ that runs Skype. Now this phone is designed to work on Verizon's new open network. See where I'm going? Grab an unlimited data plan + new Skype voip phone = unlimited calls day or night, 5 days a week. No keeping track of minute s. Its all data!

Let me say once again that, today's announcement is not the type of announcement you would expect out of Verizon but, if this is true will be a monumental change for the wireless industry and a boon for consumers.