The Verizon iPhone and You

Everyone’s buzzing about Verizon’s Tues press conference, which various sources confirmed over the weekend will most definitely involve the long-awaited introduction of Apple’s iPhone to Verizon’s CDMA 3G network. Up until now, the device—which has sold 70mln units worldwide—has been exclusive to AT&T in the states. That changes on Tues. The question for the cable industry is how this development changes the competitive dynamic for broadband and even linear TV, which must increasingly compete with mobile Internet video over-the-top options.

 

But let’s take a step back: This week’s announcement, while interesting, isn’t a near-term threat to cable. After all, the Verizon iPhone isn’t expected to be able to operate on Verizon’s brand new 4G network based on LTE technology. While Verizon could shock us all with an LTE iPhone, it’s unlikely. That makes sense considering that Verizon is really still rolling out LTE market by market, and Apple wants to make sure it’s up to snuff before launching a device on it. The last thing Steve Jobs needs is another raft of complaints about network reliability or dropped calls. And Verizon doesn’t want to face the ire that AT&T has endured over the last 3 years as customers complained. Many iPhone users stayed at AT&T because they love their iPhones and have nowhere else to go. This week gives iPhone lovers another option. And that should be good for competition and ultimately those consumers.

 

But with the iPhone still chained to 3G speeds, cable remains the broadband king when it comes to household use. Under the current situation, few broadband users are going to “cut the cord” to rely solely on their iPhone, iPad or other smartphone/tablet device when wireless broadband speeds are so much slower and less reliable than wired cable broadband. But LTE could change the game in 2011. The competitive sniping between Verizon and AT&T will only accelerate their existing plans to build faster and more reliable wireless networks using LTE technology. With more devices able to use those networks reliably, it’s inevitable that increasing numbers of users will find it duplicative and unnecessary to also pay for wired broadband at home. Sure, cable will be able to migrate some of its customers to Clearwire’s WiMAX network, but there’s no doubt that the massive marketing power and consumer familiarity with AT&T and Verizon means the inevitable launch of an LTE iPhone on both networks—probably before the end of 2011—will put cable operators on notice.

 

DOCSIS 3.0 speeds will help give people a reason to stay. But the sad truth for the cable industry is that LTE speeds—which basically match the average wired broadband speeds today—will more than satisfy many individual consumers and families. Depending on how the telcos structure LTE plans in the future, this could present a major threat to cable that really starts to gestate this week as the loss of AT&T’s iPhone exclusivity gives both sides more incentive than ever to spend, spend, spend on LTE. And as more people buy iPhones, iPads, Droid devices and other devices with LTE chips, the telcos will be forced to increase network capacity and reliability to accommodate all of those users. If there’s a bright side for cable, it’s that this will be an expensive proposition for AT&T and Verizon. And the more they focus on each other and the wireless market, perhaps the less they will focus on U-verse and FiOS. But don’t count on it.