November 30th, 2007
How open will Verizon get?
Verizon’s move to implement the next phase of the GSM standard is its second nod toward open standards in less than a week.
Its first move, publishing network specifications to allow more phones onto the network, was met by skepticism in some quarters. (Well, this quarter.)
The new move will, by 2011, make Verizon’s network very similar to that of Vodafone, the European GSM operator which holds 45% of Verizon Wireless. Some 2.5 billion accounts use GSM networks.
Some will argue this makes Verizon Wireless an “open network,” but that’s just not so. The company still insists on the right to pre-approve all hardware going on its network. The new version of GSM, dubbed LTE, is still proprietary, and Verizon is snubbing the open WiMax standard.
These moves are, as I indicated earlier, all designed to offset the loss of revenue and buzz caused by Apple’s success with the iPhone, which is exclusive to AT&T. AT&T Wireless is also moving toward LTE, meaning in a few years iPhones could conceivably run on both networks, without major modification.
In the overall competition between the two wireless firms, Verizon last spring had about 56.8 million subscribers, AT&T 56.3 million. It’s likely the iPhone has reversed those standings.
The decision by U.S. carriers to snub WiMax also leaves Intel in a tough situation. It can either drop the technology or push for more open spectrum — the latter move would require a nasty political fight.
Spectrum sales, which have been the norm since the 1990s, make government and proprietary network owners like Verizon Wireless allies against the competition of open spectrum, despite the obvious economic advantages seen in the use of WiFi.
Competition from open spectrum reduces the value of exclusive deals like those to be signed after the coming 700 MHz spectrum auction, in which Google announced today it will be a player.
The availability of open spectrum reduces the amount of money government gets from selling the spectrum to an operator for their exclusive use.
The political impact of Verizon’s moves will be to reduce the demand for open spectrum, and assure a high-enough price at the coming auction that the winner will have to extract high fees from users for accessing the resulting service.
Even if Google wins it has to charge big bucks for access to get its money out. Both Verizon and AT&T, meanwhile, can economically justify higher bids based on a shared monopoly. Open competition would drive prices down.
On Wednesday I wrote Verizon was making itself as open as the iPhone. Now it’s as open as Microsoft.
Dana Blankenhorn has been a business journalist for 30 years, a tech freelancer since 1983. You can follow Dana on Twitter. See his full profile and disclosure of his industry affiliations.
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