NEW YORK--Verizon Wireless unveiled specifications for its new open wireless program Wednesday as part of a strategy that could change the future of the wireless market. But the road ahead will likely be a long and slow one.
Traditionally, cell phone operators have tightly controlled the entire cell phone experience--from the network to the handsets to the applications running on those devices. But now Verizon, and others like AT&T, are looking for ways to open up their networks.
Verizon first announced plans for an open development network in November with the hope that it would make it easier and less expensive for third-party developers to bring new devices and applications to its network. Ultimately, Verizon hopes its open network will help spur innovation and provide a testing ground for new devices, applications, and services.
"The U.S. market has been conditioned to have the carrier control the wireless network end to end," Lowell McAdam, Verizon Wireless' CEO and president, said in an interview at Verizon's Open Handset Development Conference here. "We'll have to see how willing people are to give up the subsidy and pay $200 or $300 for a device. We think it will take a long time before the old model dies."
Analysts agree that Verizon's new initiative has big long-term implications, but in the short term will have little impact on the market.
"When talking about the future of wireless this is a big deal," said Avi Greengart, research director for mobile devices at Current Analysis. "It enables connected devices that futurists have been talking about forever. All devices will have network connectivity. But in the short term, people will still buy a subsidized phone if they have the choice."
Verizon's move to create a more open network comes at a time when everyone from application developers to handset makers to customers to government officials are insisting on more openness. Apple's iPhone, which generated more buzz than any other consumer electronics device in recent memory, has proven that some segments of the market don't care about having their phone subsidized. But Apple's exclusive contract with AT&T has also spawned debate over whether the device should be locked to a specific carrier's network.
On the application front, Internet search giant Google announced plans to develop an open operating system it calls Android to help handset developers and carriers bring new applications to the market more quickly.
But there has also been pressure from regulators and lawmakers, who are considering regulation and laws that would require service providers such as Verizon to be more open. In the Federal Communications Commission's 700MHz spectrum auction, which ended Tuesday, the government required operators winning licenses on one particular block of spectrum to make their network open to any device.
Google, which had pushed for the rule, was a bidder on this part of the spectrum, but it's widely believed Verizon Wireless was the ultimate winner of that spectrum. Winners of the auction aren't expected to be announced for a few weeks.
Verizon's McAdam conceded that the company's open-network program was motivated in part by some of these developments.
"We are always resistant to government trying to put themselves in the middle of the market," he said. "That is always a recipe for disaster."
But McAdam said a bigger motivation for creating the open-network program was Verizon's customers, who are demanding cooler phones and more applications.
"We saw what was happening with the iPhone and what Google is doing and we listened to what customers wanted," he said. "We saw this moment in time coming, and we thought if we open this up, it will be great for our customers and great for our shareholders."
One of the biggest criticisms of Verizon has always been its lack of cool or cutting-edge phones. Traditionally, Verizon has been known as the most stringent carrier about the devices and applications it allows on its network. It also has one of the more rigorous testing processes for device and application developers. A more open network could allow Verizon to offer customers many more handset and application options than it can offer today.
Testing requirements loosened
As part of the open development program, Verizon has released specifications and best practices for new devices and applications that can be used on its network. The new specifications only allow customers to bring any CDMA (code division multiple access) or EV-DO (evolution data optimized) phone to its network if it's been precertified by Verizon. But the testing requirements are much less, the company said. And the time it takes to get through the process is greatly reduced. For example, the testing period for the open network is expected to take roughly four weeks, compared with the three to four months that it takes to fully test a device on Verizon's traditional network.
Tony Melone, Verizon Wireless' chief technology officer, said the testing process isn't meant to be a profit center for the company. Developers can use Verizon's testing sites or they can contract with a third-party developer. The goal is to make sure the devices meet basic specifications, which are based on adhering to the CDMA and EV-DO wireless standards, the technologies that are used on Verizon's network. In addition to these basic requirements, Verizon will also test to ensure that new devices meet E911 specifications such as GPS location proximity.
"We don't want to be a barrier to entry," McAdam said. "But as all of you can appreciate, with 65 million customers and billions of dollars of investment in our network, we need to protect our customers and our assets."
Customers will be able to activate these "open" devices by calling or going online. They will also be able to download applications directly from developers instead of going through a Verizon store.
The new devices won't have contracts or early-termination fees. And subscribers will be able to choose from Verizon's existing rate plans. The company also said it will open the network to wholesalers, allowing device makers to become Mobile Virtual Network Operators.
A chance to experiment
McAdam said he sees the open development network as a testing ground for the company to experiment with new services and business models. For example, he said the company is already considering a subscription model that would allow a single user to use multiple devices on the network while paying for a single subscription.
"I could easily see people connecting three, four, and five devices to the wireless network and they aren't going to want to pay a $50 subscription on each one of those," he said. "We aren't ready to launch any new service plan. But we do have the ability to move to this when the timing is right."
This new pricing model could work well with Verizon's new fourth-generation network that uses a technology called Long-Term Evolution, or LTE. The company will be testing the new network later this year and will extend the open-network concept to it as well. It is likely this future network that will truly benefit from openness.
But in the short term, some Chinese handset manufacturers may find it easier and cheaper to get their handsets to market. The open network could also help Nokia get some of its high-end N series devices into the U.S. market. And it could potentially provide a window of opportunity for companies developing handsets and applications based on Google's Android platform.