2/15/11

This is why it's so much fun to do business with the mobile operators

"Quite frankly, we’re happy that we’re not first to market with the iPhone."--Dennis Strigl, Verizon COO, 2007 (link)

"I don't think Verizon needs the Nokia and Microsoft relationship."
--Tony Melone, Verizon CEO, 2011 (link)

There's a backstory to this.  Verizon sells CDMA phones, a technology which Nokia dropped years ago.  Microsoft jerked Verizon around on the availability of the Kin phone last year.  So Verizon doesn't love either company.  On top of all that, Verizon has always been a lagging adopter of new phones.  It has a reputation for doing more testing than the other operators, and doesn't mind being late on a product or technology.

Still, the quotes are very revealing of an almost subconscious arrogance that I often see in operators around the world.  They view their customers as possessions who are allowed to buy only the phones that the operator chooses to offer.  The operator sits in the middle and extracts money from everyone.  What Melone's really saying is that Microsoft and Nokia will have to pay him a lot of money in order to have the opportunity to sell phones to Verizon customers.  Never mind what the customers might want; all that matters is what the vendors do for the operator.

This is why the operators love the increasing competition between smartphone platforms.  It gives them that much more leverage to play them off against each other.

Picture yourself as a smartphone company trying to deliver a great new phone to customers.  What do you do about these restrictions?  It puts a lot more pressure on your financials and your ability to execute -- you need to create a strong brand through heavy marketing, and create products so iconic that people will demand them.

And if you're a phone customer looking to choose whichever phone you want?  The situation varies around the world.  In some places, phones have to be sold separate from mobile service.  That gives the greatest customer choice.  In many areas, you can buy a phone and then switch SIM cards to use a different network, but you lose the operator subsidy on the phone.  So it costs you hundreds of dollars to exercise freedom of choice.  But Verizon doesn't even support that level of choice, so you are stuck with only the phones that Verizon allows you to buy.

The options for Verizon customers:  Change operators (if you can find another one with coverage in your area).  Change the law to mandate free choice of phones.  Or change countries.

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