Verizon's Any Apps, Any Device = Any Means Necessary?

  Kudos to Verizon Wireless. In what is unquestionably a bold decision, Verizon has pledged to allow the use of devices, software and applications not offered by the company itself.

• Verizon Wireless Introduces Any Apps, Any Device Option for Customers in 2008

Verizon detailed its plans yesterday in a conference call; here are the basics:

• VZ is setting up a certification lab
• Verizon will publish a set of technical specifications in early 2008
• They will hold a developers conference early in the year to help clarify specs and the certification process
• Customers will be able to provision any certified device via an 800 number or online
• Any 3rd party developer will be able to get certification
• Since devices are running off VZ's EVDO network, they must be CDMA
  • Yes, that means no iPhone (unless a CDMA version is released)
• This is not limited to telephony devices
  • Mobile data focused
  • Gaming-specific
  • Anything goes
• A "reasonable" certification fee will be required (but the terms have yet to be disclosed)

The news evoked massive reaction from all walks of life. Reactions ranged from abject skepticism to ebullient optimism. I'm no expert but I am a Verizon shareholder and can tell you my honest initial assessment:

• Of course this is about the upcoming 700 MHz auction -- Verizon management said yesterday's announcement had nothing to do with the upcoming 700 MHz auction; but that's just posturing. The simple fact is the FCC put an openness requirement into the C-block auction requirements and Verizon (and any other carrier interested in bidding) has to acquiesce because Google appears serious about making someone outbid them.

• This is about competition, not competing with Google -- Google's aggressive stance on bidding on the C-block spectrum as well as its GPhone/Android initiative certainly played a role in VZ's move; that's beyond debate. But understand that Verizon isn't merely embracing openness because of Google; it's embracing openness because it sees an opportunity to further strengthen its position against:

• AT&T, T-Mobile, et al.
• The cable operators

In fact, I wouldn't be surprised if this precedes Verizon joining Google's Open Handset Alliance. Does Google really want to be a telco provider? Or do they want to sell great devices that help them control another portion of people's information consumption? Sounds like a partnership opportunity more than competition. But Google has to be willing to pose a credible threat to that C-block spectrum in order to facilitate change; and it appears to have worked.

• Of course this is about the profits -- I have to laugh at all the critics who are skeptical of this move because they see it as a way for Verizon to protect and maximize its profits. OF COURSE it is; Verizon isn't a non-profit the last time I checked. They're a profit maximizing entity! And what's surprising is that Verizon realized, with just a minor push, that openness is actually the path of least resistance. Giving customers REAL options will help keep those customers; pretty simple stuff really.

Here's the bottom line. Whether you question VZ's motives or not is largely irrelevant. This IS a revolutionary move. And, while I think Verizon is reacting to market conditions; they are doing so far more aggressively and proactively than most have come to expect of BIG TELCO. The only way this isn't a great day for advocates of openness and network neutrality is if VZ fails to win any new C-Block spectrum and, as a result, reverses course and re-erects its walled garden. But that would be an immensely foolish move for a company that has, for some time, been the most rational and well-run U.S. telco.

Note: This is not a recommendation to buy or sell VZ or any other security, but is merely a personal analysis to foster discussion for informational purposes only. At the time of this writing, I and/or funds I maintain discretionary control over, did maintain a position in VZ but did not maintain a direct position (long or short) in any of the other publicly-traded companies mentioned. As always, we reserve the right to do so in the future. We also may, at times, carry derivative options on underlying positions as a hedge.

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