Many telecom observers were stunned this week when Verizon announced it would open up its network to “wireless devices, software and applications not offered by the company.” This change in policy is good for consumers and worth closer examination, especially on the business side.
Verizon’s “walled garden” required consumers to use a Verizon-chosen phone in order to get Verizon’s service. Consumers disliked that restriction, and the company took notice. Indeed, the company’s press release makes the point that Verizon has often parted with the “big telecom” mentality in order to serve consumer-driven demand.
For instance, “the company parted with the industry last year when it introduced prorated early termination fees and in 2004 when it refused to participate in a wireless directory when customers said they didn’t want one. Verizon Wireless also broke with ‘wireless tradition’ when it supported local number portability, because customers wanted the freedom to take their number if they switched service providers.” Now Verizon is breaking with tradition to offer consumers greater device choice.
Android on the Horizon
Verizon also clearly sees large revenue opportunities in an open system. The success of the iPhone made it obvious that consumers are willing to buy their own phones at high prices instead of simply going with subsidized versions that the phone company offers. Right now, the iPhone can only be used on AT&T’s system, but if it could be used on any system, Verizon would certainly be better off. Of course, there is another business reason for Verizon to open up as fast as possible.
If it can get developers to start working on new devices for its system, it will be in a better position when Google’s Android open source mobile software project starts to take off. The market forces pushing open the wireless industry appear almost unstoppable, making one marvel that state utility commissions still hold hearings to question whether there is enough competition in the sector. That brings up the issue of politics, and wherever there is telecom, there are lobbyists.
Writers such as Om Malik believe the upcoming 700 MHz auctions influenced Verizon’s decision. It might be the case that, as Malik argues, “Verizon needs to make some public concessions” and that the “FCC and those on Capitol Hill are in a belligerent mood,” but those assertions stand beside a huge amount of market pressure for wireless firms to open up for better business.
How AT&T will react to these moves is really the question of the day. It’s a big and successful company, but poorly designed government rules forced it to become very good at lobbying. Time will tell if it will follow Verizon’s lead down an open road or try to compete with a mostly closed system combined with some fancy lobbying moves.
Whatever each telecom company does, it appears that the future is in open networks, the kind that are open voluntarily through market forces. No government body forced Verizon to open up its network. It did so because it is in a competitive industry, and it is a good strategic move. This should be another lesson for those who, unbelievably, still harp about how the telecommunications industry isn’t competitive.
Perhaps the reason why some individuals get confused about the state of competition in wireless is because the companies are so large. However, just because a company is big doesn’t mean it is bad or a monopolist. Google is a great example. It’s a big company that is driving competition on so many fronts that it’s hard to keep up. This activity is good news for everyone and may even help usher in a new “open mindset” amongst those who see big companies as synonymous with no competition.
Sonia Arrison, a TechNewsWorld columnist, is senior fellow in technology studies at the California-based Pacific Research Institute.