Banking

The Apple and Verizon partnership may never materialize

TechRepublic member dcolbert believes that Apple and Verizon are used to getting their way, and neither company will be able to negotiate an acceptable partner agreement. Until one company has a firm advantage over the other, this partnership may never materialize.

ZDNet's Larry Dignan recently wrote that the "antenna-gate" Apple 4 fiasco may have delayed the long-rumored arrival of the iPhone to the Verizon network. In one of the most interesting paragraphs of the article, Larry quoted Piper Jaffray analyst Christopher Larsen, who said:

"While we can never know for sure, it is possible that this strict testing has helped Verizon maintain its strong network image (if all of Verizon's phones are better tuned and engineered to not drop calls, then the network would appear better)."

It's a little ironic that the "Flash-flap" and countless other Apple controversies over the last four years have revolved around the iron-fisted control that Apple maintains over their device and the apps that are allowed to run on the phone – and that Steve Jobs insists this is "quality control" that improves the perceptual experience of iPhone owners. I also apply a similar philosophy in my management style and the policies I create and implement.

For several cycles of the rumor mill now, I've insisted that Verizon and Apple are incompatible business partners. They both have too strong of an urge to be "alpha dog" in any business partnership to easily relinquish the lead-dog position to any other company. The problem is that both Apple and Verizon are at the top of their game and unaccustomed to having to bend or make concessions.

I'm sure anyone can quickly come up with an analogous example of the inevitable failure of relationships where both parties have such strong, dominant, and inflexible A-type personalities. As long as Apple and Verizon continue to so completely dominate their own respective areas of the wireless mobile device market, neither really achieves enough benefit from a partnership to outweigh the inevitable sacrifices that such a business relationship would require.

Many people have argued that for both parties, a business partnership between Apple and Verizon is ideal, that the market demand for such a partnership can't be ignored, and that it makes too much sense not to be inevitable. While I agree with this from a high level perspective, I think the reality is that Verizon has the most to lose here.

Ultimately, a partnership with Apple very rarely benefits the other party. Just ask Sony, Geffen, Elektra, and other recording labels what happens when you enter into a partnership with Apple. And honestly, how much press would AT&T be enjoying if they weren't the exclusive domestic carrier of the iPhone?

It may be hard to see Apple and Verizon as direct competitors at the moment, but isn't too hard to see the possibility that this will be the case in the future, as both companies diversify from their core business models to a variety of consumer media consumption services.

Verizon isn't interested in just supplying your wireless connectivity. They want to replace all of the pipes that deliver content into your home. Apple is no longer content to be just an electronics manufacturer. For awhile now, their model has fundamentally shifted away from a focus on PC manufacturing to consumer electronics manufacturing and content distribution.

The other giants in the industry, including Google and Facebook, will continue to find themselves in conflict and competition, and that competition is likely to lead to strange bedfellows. In fact, the competitive rift between Apple and Verizon has already benefited Google and Android.

Google is in a position to be far more flexible toward accommodating Verizon's desire to be top-dog in any partnership. At this point, Google can enter into a "partnership" with Verizon by proxy. If such a business model existed for Apple, it would be much easier for me to envision an Apple mobile device on Verizon's network.

When Verizon makes demands of Motorola or HTC, it allows Google to save face while accommodating Verizon's desire to maintain control. It doesn't take a lot of imagination to see why Google and Verizon make a good match – and why AT&T and Apple make a bad match.

The interesting observation here is that both AT&T and Google still have, once again by proxy, a business relationship as well. It's fine for both AT&T and Google to hedge their bets and split their hands to make sure they have as many options open as possible. Verizon and Apple do not enjoy this flexibility. Whoever concedes the demands of the other loses face and appears to need the other partner more, and that's probably an unpalatable position for either party.

Even with the media flap, the iPhone is still hugely popular, and mind-boggling numbers of iPhone users are willing to put up with AT&T in order to own the Apple device. Apple's biggest reason for seeking alternative carriers isn't about network quality, it's about avoiding unpleasant federal oversight into their business model. Apple can achieve the necessary requirements to appease those federal authorities without conceding to a partnership with Verizon.

Verizon, for their part, has remained the most popular wireless carrier, despite several years of onslaught by Apple – even through a period where Verizon's best phones seemed like Stone Age relics compared to the highly polished iPhone. Verizon has put tremendous resources into pushing Android, and Android has matured into a compelling alternative to the iPhone.

Android has the potential to severely undermine Apple's ability to make demands. It may be in Verizon's best interest to wait, because the optimal window for Apple to negotiate a dominant partnership agreement may be rapidly closing. One possible wild card, which should come as no surprise these days, is Google.

Google is another alpha-dog organization – they're just still wearing sheep's clothing. It's possible that Verizon may eventually come to regret giving Android the boost it needed to more effectively compete with iOS. Google remains one of the hardest companies in the current tech battle-royale for me to read. I honestly think that their multiple different directions, sometimes seemingly in competition with themselves, are evidence of a lack of clear and defined internal direction.

Google's relatively laissez-faire approach to Android – which allows for that partnership by proxy between Google, Android handset manufacturers, and Verizon to work so well – is also troubling. It's possible that Google's lack of commitment and direction, in particular with the Android OS, is what continues to keep Verizon and Apple in an uneasy balance and prevents either from acquiescing to the demands of the other.

Without a clearer direction and more stringent controls in place, Google may never be as competitive or attractive to consumers as iOS. This keeps Apple firmly in the game, and it keeps Verizon from having a platform that makes iOS irrelevant.

I have no doubt that Apple has done the necessary engineering and design and that their manufacturing partners are ready to move forward with production of iOS CDMA phones. Likewise, I think Verizon would be pleased to add the iPhone to their line-up, realizing that there are a lot of customers who are buying smartphones from AT&T, because they want the iPhone – not Android, Blackberry, Palm or Windows Mobile.

However, as long as both companies are used to getting their way and not giving an inch, neither will be able to negotiate a partner agreement that will sit right with the other. The bottom line? Until one company has a firm advantage over the other, I think we'll continue to see Apple and Verizon courting a partnership that never materializes.

What's your opinion? Am I on target or completely off base in this assessment of the business climate between Verizon and Apple? Let's hear your thoughts in the discussion thread.

About Donovan Colbert

Donovan Colbert has over 16 years of experience in the IT Industry. He's worked in help-desk, enterprise software support, systems administration and engineering, IT management, and is a regular contributor for TechRepublic. Currently, his profession...

Editor's Picks

Free Newsletters, In your Inbox