Verizon Rejected iPhone Deal due to Apple's Terms

[MacRumors]

USA Today reports that Verizon Wireless rejected Apple's offer to carry the iPhone exclusively due to Apple's terms.

According to the article, Apple wanted "a percentage of the monthly cellphone fees, say over how and where iPhones could be sold and control of the relationship with iPhone customers."

This included limited distribution to Apple Stores and Verizon stores only, leaving Wal-Mart, Best Buy and other Verizon distributors out of the loop. Apple also reportedly insisted on "sole discretion over whether to replace or repair the phone" with regard to customer service.

Cingular reps refused to provide the details of their agreement, but according to the report, the exclusive deal is a five year contract. This is contrary to previous reports that the Cingular's exclusive contract was only through 2008.

Apple's entry of the cell phone market was predicted to shake up the existing dynamics. Indeed, Apple appears to have made unique demands of cell phone carriers.

[iMacZealot]

I wouldn't think VZW would like iTunes conflicting with VCast and all.

[SheriffParker]

5 years with Cingular (AT&T)?

Guess I'll be switching as soon as my contract runs out!

[DMann]

Well, seems Verizon lost out on this one. Cingular might pick up lots
of new customers as a result. Besides, once phones are unlocked
and hit the eBay marketplace, they'll be used on other networks.

[iMacZealot]

My Verizon phone broke 16 months into the contract in November, and I was debating whether or not to stay with Verizon, get the Sidekick I always wanted, or wait for the iPhone. I ended up getting the SK, but I really don't regret it. I have a phone that works for me. Plus, AT&T gets bad reception here.

[sunchildx]

smart move on cingular. with voip catching up, things are definitely in the blender. plus, with iphones being handed around with verizon distributors, i'm pretty sure things would get "lost" or "discounted" which would piss apple off.

[coday182]

don't try to save yourself lol

[Jovian9]

Yet another reason why I do not like Verizon and cannot wait until my contract is up

[iMacZealot]

Plus T-Mobile's launching a NATIONWIDE HSDPA network sometime this year (perhaps this quarter!)

[Rodimus Prime]

hmm sounds like Verizon stated that if apple wanted to sell there iPhone it would have to play by Verizon rules.

I have to say some of those list of demands by apple are pretty far out there. Big one being apple being the one who decided if phone warrants replacement. Verizon not going to play that game because that means they take the blame when they tell a customer "we sorry we can not help you. you have to talk to apple."
Limiting the distribution from Verizon other outlets again something I think was a little over board.

Demanding a % out of the contract is a little over board.

For the most part it looks like apple demanding to much and Verizon stated it was not willing to bend to apple rules.

Apple needed Verizon more than Verizon needed apple. Hell apple needs the cellular companies more than they need apple and yet apple demands to be the one in control.. typical apple. I wonder if after being told off by Verizon they change there demands quite a bit.

[NoCleverSNForMe]

Wow.

Two things:

1) I don't believe this is true, because I don't think Apple would have started with a non-GSM phone. Apple's a global company, and they would have started their first edition of the iPhone with the global standard, GSM. Cingular and T-Mobile use the GSM standard and Sprint and Verizon Wireless use the CDMA standard (only in the USA and some smaller Asian countries).

2) If it is true, Verizon missed out on a huge opportunity because Apple's offer didn't conform to the industry norm. Tip of the hat to Cingular for breaking the unwritten rules of the cell phone industry.

[dashiel]

Originally Posted by Rodimus Prime

Apple needed Verizon more than Verizon needed apple. Hell apple needs the cellular companies more than they need apple and yet apple demands to be the one in control.. typical apple. I wonder if after being told off by Verizon they change there demands quite a bit.

i don't think apple needed verizon more than verizon needed apple. cingular has a bigger network and so more potential customers. if the iphone does indeed become ipod big verizon will be kicking themselves.

[bearbo]

Originally Posted by Rodimus Prime

Apple needed Verizon more than Verizon needed apple. Hell apple needs the cellular companies more than they need apple and yet apple demands to be the one in control.. typical apple. I wonder if after being told off by Verizon they change there demands quite a bit.

i dont think so... there are plenty wireless carrier, but only one apple... and apple electronic is right now the symbol of coolness aside from other factors, so i bet if a wireless carrier can sign exclusive deal, they get much benefit too.

given steve jobs (and the narrative of his meeting shown in one of the thread flowing around) i doubt they (or steve) 'd change THEIR(god, people, spell it right!) demand.

[Chundles]

Gee I'm glad they did this - there's so little CDMA coverage here, everyone's basically on GSM until 3G-HSDPA or UTMS really takes off. We've had 3G here for about 8 years or so but it's only now that Telstra are rolling out their 850MHz HSDPA network (they're replacing the last pockets of CDMA with the new network as well as using it for highspeed wireless internet - up to 14mbps) that it's really starting to become a popular solution.

Going with regular CDMA would've limited iPhone customers here to a few people in the rural areas where CDMA still has coverage but before they need to use satellite phones (ie about 20 people...) so they'd have very few customers indeed. Every provider here is GSM with the phase out of the never-popular-nor-widespread CDMA network

GSM/EDGE will do for the moment but if they really want to make inroads they'll need a 3G capable version at least before they enter the Asian market if not the European one as well.

[Andrew F]

If this story is true, I don't blame Verizon for passing up on the iPhone. There is no reason that Verizon should be held hostage for a product like that. Personally, I will have a really hard time justifying the money for an iPhone. They are really expensive. But that seems to be Apple's thing. Wanting a percentage of the cell phone service is totally absurd. Apple wouldn't be doing anything to assist the service, contributing to the service, or anything else. They would just be stealing money from the other company. Of course, I only feel this way it this is all true. And I don't think Cingular will pick up a bunch of new customers because of the iPhone unless they will be discounting the service greatly. The phone is very pricy and when you can get good phones for next to or for nothing with other contracts, I don't think the iPhone is going to be a must have thing.

[NoCleverSNForMe]

Originally Posted by Rodimus Prime

Apple needed Verizon more than Verizon needed apple. Hell apple needs the cellular companies more than they need apple and yet apple demands to be the one in control.. typical apple.

I think you need to take a class on logic.

Pretend you're Cingular for a second. No, seriously. Pretend you're Cingular. You have some 50 different cell phones for your customers to choose from. You have 51 million customers, Verizon is gradually increasing right behind you at 45 million.

Now, enter Apple. They call you up, telling you that they have a hot new phone that you know is going to sell like hotcakes, and they're offering it to you exclusively. It'll bring new customers to you and it'll make your current customers happy that they have Cingular.

Apple asks for __% of the revenue and to not have the phone available through resellers.

Since you're pretending to be Cingular here...think from their perspective: What do you have to lose?

If you subscribe to that deal, what's going to happen? Are Cingular customers going to cancel their contracts and go to Verizon because you have the iPhone? No! Of course not! What's the worst that happens? Apple takes some of your money? Okay, big deal. Now look at the POSITIVE. You will get new customers, you will get the spotlight in the media, you will make your current customers happy by having more hot phones available...all for what? Sharing your revenue with this one manufacturer? If it's going to bring you more customers and happier customers, then it's going to pay off on its own...because happier customers refer their friends, who become happy customers themselves.

Now, if you don't subscribe to that deal and let it slip away to T-Mobile (for example), what happens? T-Mobile will start grabbing all the attention. Some of your customers will be intrigued and move over to T-Mobile. You will no longer be discussed as the company that has all the cool phones.

You have nothing to lose by adding this phone to your lineup. Nothing. Sure, some resellers will be pissed, but they'll get over it. They already have some 50 phones to stock from your lineup. You have nothing to lose and yet have so much to gain.

You are giving your customers the CHOICE. As a successful small business owner myself, I can tell you that it's a very good business practice.

The more cell phones and the better cell phones a cellular provider has, the more chances it will get more customers, and happier customers at that.

It's Apple that has the clear advantage here. Every cell phone manufacturer does (because every cell carrier should want the most and best phones on their lineup as possible). It's too bad the cell phone manufacturers willfully gave up their power a long time ago.

[bigbossbmb]

5yrs...geeeesh!

I really dislike my Verizon service, so I have been looking for an excuse to change. The iPhone is perfect. I want it...Cingular here I come...

[Object-X]

Verizon is going to rue the day they turned down this deal. When the iPhone becomes a run-away success there are going to be some unhappy board members over there. AT&T will siphone away custumers and Verizon will give Apple whatever they want when the AT&T deal is up.

Consider where the iPod landed five years after it's debut. I think it's foregone conclusion the iPhone is going to be an even bigger success story for Apple.

[rjwill246]

Originally Posted by Rodimus Prime

Apple needed Verizon more than Verizon needed apple. Hell apple needs the cellular companies more than they need apple and yet apple demands to be the one in control.. typical apple. I wonder if after being told off by Verizon they change there demands quite a bit.

Not even... Apple was not going to play by the rules that are killing the phone makers and that includes services that are NOT being offered to the American public because the phone companies dictate what will or will not be a feature. One day you may thank Apple for not playing ball 'cause this phone is the start of something new for the American consumer. Apple has not, not it seems, will be content to buckle under someone else's rules, if those rules stifle innovation and Apple's idea of what "best" is. Thank heavens.

[NoCleverSNForMe]

Originally Posted by Andrew F

Wanting a percentage of the cell phone service is totally absurd.

It's not as absurd as you think.

It's common practice in quite a few professions. It's the concept of referrals; if I refer you a client, I will get a portion in your sale. You should be grateful, because if I didn't refer you the client, then the sale never would've happened. The concept applies here.

I don't think Cingular will pick up a bunch of new customers because of the iPhone unless they will be discounting the service greatly. The phone is very pricy and when you can get good phones for next to or for nothing with other contracts, I don't think the iPhone is going to be a must have thing.

That's what they said and some still say about the Macintosh and the iPod. I can't wait until next MacWorld when Apple and Cingular prove you wrong.

[slazareth]

first person to unlock an iphone will be a rich rich human being thanks to good ol ebay.

[darwen]

...wonder if Verizon regrets that decision?

Apple really is tying the hands of the provider with their demands. It makes sense to meet Apple's demands but, seriously, they were asking a lot!

[61132]

First off, I can't stand Verizon at all, they lock up features on a phone that other carriers let us use (bluetooth contact sync for example), then force us to pay if we want to use that. I CANT STAND VERIZON. As soon as the iphone is released I will be trashing verizon moving on to cingular.

[BobbyDigital]

Originally Posted by Andrew F

And I don't think Cingular will pick up a bunch of new customers because of the iPhone unless they will be discounting the service greatly.

Cingular will get alot of new customers from this. I know about 10 people already who are ditching their current provider for Cingular and the iPhone.

Goodbye Sprint!

[budugu]

Originally Posted by bigbossbmb

5yrs...geeeesh!

I really dislike my Verizon service, so I have been looking for an excuse to change. The iPhone is perfect. I want it...Cingular here I come...

If you have t-mobile coverage, i would suggest t-mobile + some unlocked iphone! Just for customer service i would not move away from t-mobile.

As much as i loathe Verizon (paid 175 to break the contract!!!), I think apple went over board as to decide who woud be able to sell it etc. It is none of apple's business to get into the distribution channels. The amount of work needed to keep all these parameters in play + your traditional distributors getting pissed etc is just not worth it. And by the end of a year you will have comparable phones from nokia, RIM, moto, LG (heck they already have one!) and Samsung. iphone for all its hype != ipod of the cell phones. Cingular/Att just bought into it just so that no other network would have the advantage (if there was any).