This is interesting stuff and the refashioning of a common practice for network operators to bundle a sale of a phone together with network connectivity. Now, consumers can decouple their cellular purchases and use whatever phones suit them.
The Wall Street Journal article discussing the Verizon announcement explained that "in the short term, the impact of the shift may be limited. Some analysts expect Verizon to charge customers using an outside phone more for its cell phone service. At the same time, because Verizon -- like other cell phone companies -- subsidizes the cost of phones, few consumers may want to spend the hundreds of dollars necessary to buy a phone independently of a carrier."
Good point. What's more: Verizon runs a CDMA network which differs significantly from the type of network employed in the AT&T Inc. (NYSE: T) network, the same network carrying Apple Inc. (NASDAQ: AAPL)'s iPhone. This would mean limited ability for consumers to bring an existing phone over to Verizon.
Reuters thinks this announcement is a win for Google Inc. (NASDAQ: GOOG), which also launched a mobile effort with a clutch of handset makers earlier this month. Google had lobbied for U.S. wireless operators to provide open access to their networks to precede a industry bid on wireless spectrum. Verizon is the first cave-in to the search giant's demands.
This could be a major boon for handset manufacturers. Until now, industry practice dictated that handset manufacturers like Nokia Corporation (ADR) (NYSE: NOK) and Motorola, Inc. (NYSE: MOT) sell through the carriers for distribution. With the advent of open networks, mobile phone manufacturers can begin to market directly to U.S. consumers instead of striking exclusive deals with the carriers, as is currently the practice.
"The ramifications go beyond cellphones," the Wall Street Journal reported. "Verizon's move means tech-savvy consumers could potentially connect a wide variety of electronic devices, such as notebook computers with wireless broadband, personal music devices, digital cameras, electronic book readers and portable gaming systems. John Stratton, chief marketing officer for Verizon, said he envisions even kitchen appliances being linked to the company's network one day."
Google unleashed the beast with its lobbying efforts and its Open Handset Alliance. Verizon is now following Google's lead. The future of mobile connectivity is going to get really interesting.
For a more cynical view and good analysis on what's really going on behind Verizon's announcement, check out Om Malik's piece here.
Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds a long-term position in GOOG as of 11/26/2007.