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Is Verizon Really Opening its Wireless Network? And What Will That Mean for Enterprise Customers?
By Hank Levine & Jim Blaszak Verizon Wireless's late November announcement that it will open its network to third party devices and applications in 2008, closely followed by Google's announcement that it would bid in the next FCC wireless spectrum auction, could be very good news for enterprise customers.
By Hank Levine & Jim Blaszak Verizon Wireless's late November announcement that it will open its network to third party devices and applications in 2008, closely followed by Google's announcement that it would bid in the next FCC wireless spectrum auction, could be very good news for enterprise customers.The reason is that wireless customers, applications developers and handset manufacturers will no longer have to live with the wireless carriers' "walled gardens." So far only Verizon Wireless has announced that it will open its network, but if Verizon follows through, and Google or someone like it wins significant spectrum in the upcoming 700 MHz auction, the other carriers will follow--they'll have to.
Razing the wireless walls will allow third parties to develop applications and devices that respond to needs that the current wireless carriers would characterize as niche demands -- opportunities not big enough for the carriers. But niche demands can quickly grow and stimulate use of the underlying service, creating a win-win-win for (1) consumers (small and large), (2) third party developers and device manufacturers, and (3) the carriers themselves.
We can't predict the applications and devices that will emerge, or which ones will catch fire. Generally speaking, enterprise customers will be able to manage wireless devices as they manage corporate desktops and laptops today by buying wireless devices and software directly from manufacturers and IT companies. To cite one example, companies will be able to specify and control the applications and functionalities embedded in the wireless devices they procure or pay for, controlling usage and ensuring that when an employee leaves (or loses his device) the corporate information on the device is not exposed.
Here's another example. Fixed mobile convergence, or FMC, has been delayed by carrier reluctance to deploy platforms/technologies (it will reduce cell phone usage). But once the network is divorced from applications and equipment, the desire of equipment manufacturers for sales, and of enterprise customers for the efficiencies and savings that will attend true FMC, will accelerate its development and deployment.
There are plenty of other examples, but the bottom line is that over the next five years, enterprise users will be able to shape their wireless environments the way they have shaped their desktops over the last decade.
We doubt that Verizon will initially provide significant rate reductions for customers who provide their own equipment. But if and when other wireless carriers adopt the open model, the underlying economics (wireless networks have low variable costs) and competitive forces will produce service price differentials for customers who supply their own devices, true "bundled minutes" and "pay as you go" plans, and other useful variations.
None of which is to suggest that we're not also worried. Our first worry is that Verizon's device certification process will be needlessly protracted, cumbersome and expensive. Given that Verizon will specify and control the certification process, we expect less than a streamlined operation. We'll wait and see how the process works.
Some thought that Verizon's announcement was designed to repress the value of the "C Block" in the upcoming (January 2008) 700 MHz auction. But Google's announcement that it would participate in the auction, and the interesting dynamic that will attend the auction's "anonymous bidder" feature, make this outcome highly unlikely. If Google is truly committed to an open wireless network, as we think it is, it may not settle for Verizon's general commitment. On the other hand, Google ultimately may conclude that the price of spectrum is too high. Although we don't know how the 700 MHz auction will play out, a Google win would virtually guarantee open wireless networks. Until the auction plays out, we'll continue to worry.
Even if Google isn't a winner in the 700 MHz auction, Verizon will probably open its network. It has realized that it will be better off in the long run because innovation will stimulate wireless usage, ultimately increasing its revenues. Wireless is a pretty mature business with slowing growth rates, and Verizon may have concluded that it would benefit from the help that third party innovation can bring to growing its core business. It may also be making a play to capture the market despite an inferior platform -- AT&T's GSM, not Verizon's CDMA, is the way the world is going, to the point where even Verizon recently announced that its next generation network will be based on next generation GSM, not CDMA.
By this time next year, if not sooner, we'll all have a better fix on how committed Verizon Wireless is to making its walled garden an open, fertile field for innovation. Stay tuned.