Apple, Verizon in disagreement over CDMA iPhone pricing - report
As Apple and Verizon are rumored to be in negotiations for a summer 2010 CDMA iPhone launch, the nation's largest wireless carrier and the handset maker are believed to be at odds over pricing.
Context & Ripple Effects
Talk of Apple gear on Verizon has been circulating since Business Week's April 2009 report of new Apple and Verizon Wireless products, so today's news that the two are negotiating a summer 2010 CDMA iPhone is the second round of that speculation rather than a fresh start.
What is new in the reporting is the friction point: the two sides are said to be stuck on pricing, not technology or timing. That matters because Apple arrives at the table from a position of unusual strength — the App Store passed three billion downloads this week, and unconfirmed reports have both a rumored Apple tablet using Verizon's 3G network and an analyst calling Verizon 'definitely' a tablet carrier.
First-order effects
- If the pricing standoff holds, Verizon enters another holiday cycle without the iPhone while AT&T retains its exclusive US position, and Verizon continues losing premium smartphone buyers to its rival's network.
- Apple faces no immediate cost either way: a failed negotiation leaves its existing carrier structure untouched, which is precisely why analysts see Apple holding the stronger hand on price.
Second-order effects
- Locked out of the iPhone, Verizon's clearest counter-move is doubling down on alternative smartphones — Android handsets and other devices it can stock and subsidize on its own terms — to plug the premium gap.
- A credible second US carrier negotiating with Apple puts downward pressure on the subsidies and revenue-share terms AT&T enjoys, since exclusivity is what makes AT&T's current arrangement valuable to Apple.
Third-order effects
- If the pattern of multi-carrier courtship holds — phone now, tablet connectivity reportedly next — the US market moves from one-carrier exclusivity deals toward device makers dictating terms across several networks at once.
- Carrier control of handset pricing and distribution weakens structurally as manufacturers like Apple gain multiple bidding networks; whether regulators or rivals force that shift faster than negotiation does is genuinely unresolved.
The trend: US wireless carriers are being forced to compete for the iPhone rather than merely host it, with Apple leveraging multi-device demand to erode single-carrier exclusivity.