Verizon Wireless - an Open and Shut Case?

Implications: Verizon Wireless has been under pressure to address open network access. Despite this recent announcement that Verizon will provide access to its network, Verizon’s true intentions vis-à-vis open acess are still up for debate.

Analysis: Several factors, including two air-interface standards (GSM, CDMA) and the dominance of post-paid customers, have come to shape the US mobile market, now dominated by the Big-Four: Verizon Wireless, AT&T, Sprint and T-Mobile USA. The prevailing business model is that the mobile operators subsidize mobile handsets in exchange for users committing to one or two-year contracts. The economics and subsidies among the three major participants - operators, handset manufacturers and consumers- are driven, among other factors, by cost, brand strength, handset desirability, operators’ need to increase data-revenue-enhancing services, and consumers’ desire to upgrade their device as well as their willingness to commit.

US mobile operators have been reticent to provide access to their networks, and therefore alter the dominant operator-manufacturer-consumer business model. Verizon’s recent announcement that they will open their network, which took some by surprise, is a departure from the mobile operator’s historic position, and can be viewed in a couple ways. Verizon has been quite outspoken about the FCC’s attempt to open wireless networks, especially in light of the upcoming 700 MHZ spectrum auction. Verizon pushed back significantly on Google and other’s requests that the soon-to-be auctioned spectrum be open to any device and application. Some would argue that this new stance reveals that Verizon feels that open networks are inevitable, and they would like to influence the movement. Others would contend that Verizon is simply trying to appease the FCC and sway public opinion with an initiative that may have little impact in practice as Verizon ultimately controls how quickly and easily devices get certified and make it onto their network.

While this move may not be as monumental as the FCC’s 1968 Carterfone decision that opened up the landline market to various devices we now take for granted (e.g., cordless phones, answering machines, modems, faxes, etc.), this is certainly an interesting development that keeps open access in the spotlight, and could eventually impact future mobile usage.