Apple

AT&T's decision to allow Major League Baseball fans to stream games live onto their iPhones while restricting video streaming using another video application has one advocacy group crying foul.

With the release of the 3.0 version of Apple's iPhone operating system this week, subscribers to a popular application from Major League Baseball called At Bat will now get the chance to stream live video feeds of baseball games directly to their iPhones or iPod Touches. The first game was streamed Thursday afternoon, featuring a match up between the Chicago Cubs and White Sox.

But unlike other video streaming applications, such as SlingPlayer, the MLB At Bat live video can be accessed regardless of whether a subscriber is connected to the Internet via AT&T's 3G network or a Wi-Fi connection.

The SlingPlayer app, which allows iPhone users to redirect cable and broadcast TV from their TVs at home to their iPhones, is only permitted by AT&T to operate over a Wi-Fi connection. When the SlingPlayer application was first released last month, AT&T said that it restricted the application to Wi-Fi because streaming live broadcast TV over its 3G wireless network "violated the company's terms of use."

But now AT&T is allowing MLB to do exactly what it would not allow Sling to do, which is stream live broadcast TV over its 3G cellular network onto iPhones. So what gives? Is AT&T playing favorites?

That's exactly what Ben Scott, policy director for the advocacy group Free Press, thinks. The group issued a statement Thursday expressing its concern over what it sees as an inconsistent policy.

"We are troubled that carriers like AT&T are playing gatekeeper to the next generation of wireless Internet applications," Scott said in a statement. "No Internet service provider should be allowed to pick winners and losers online."

Free Press has long supported the notion of a free and open Internet. And the company has pushed the Federal Communications Commission to confirm that its Net Neutrality principles also apply to wireless networks. The FCC's Internet Policy Statement protects consumers' right to access any online content and services on any device of their choosing. These principles were used effectively last year to punish broadband provider Comcast for deliberately slowing some of its customers' BitTorrent traffic, a move that other broadband providers including AT&T has pointed to as evidence that no further regulation is needed to protect consumers' access to Internet applications.

AT&T has also publicly supported the notion that these Net Neutrality rules should also apply to wireless Internet access. In fact, Jim Cicconi, senior executive vice president of legislative affairs for AT&T, said as much during a panel discussion hosted by a Washington Post reporter in November.

"The same principles should apply across the board. As people migrate to the use of wireless devices to access the Internet, they...certainly expect that we treat these services the same way," the Washington Post reporter quoted Cicconi as saying in her blog post.

Free Press's Scott, who appeared on the panel with Cicconi in November, pointed out AT&T's contradiction in his statement.

"AT&T has acknowledged that open Internet principles should apply to wireless and that consumers expect unfettered mobile access," Scott said. "So why is AT&T deciding what online video its iPhone customers can watch and what they can't?"

The argument put forth by Free Press is a compelling one. And right now, AT&T doesn't have an answer or an explanation as to why the MLB streaming video would be treated differently from the Sling video. Mark Siegel, an AT&T spokesman, said the company could not comment yet until it looked into the matter further.

But earlier this year, Siegel had plenty to say about Sling and streaming video in general. As a guest on the Clark Howard radio show, Siegel compared using Sling's service over a wireless connection to sending bulk e-mail and spam, activities that he said eat up too much of the network's bandwidth. "You can't use a service called 'Slinging,' where you redirect a wireless TV signal to your phone. We do not allow that type of application on our phones," he said. "It's absolutely cool (technology), but if we allowed these kinds of services, the highway would quickly become clogged."

Indeed, streaming video eats up a lot of bandwidth. Because cellular networks are divided into cells, users in a particular cell share the available bandwidth in that cell or region. This means that streaming a lot of high-quality video over the network could potentially eat up all the available bandwidth and degrade service for other subscribers in that cell.

This is why MLB.com is using a standards-based streaming technology that will detect the speed of the network and adjust the quality of the video to the bandwidth that is available. The latest version of the SlingPlayer submitted to Apple for the App Store used similar technology that would cap the bit rate to ensure it was below Apple's and AT&T's threshold, according to David Eyler, a project manager for Sling Media, who commented for an earlier story on CNET News on this topic.

Eyler also said during that earlier interview that the explanation he had been given for not allowing the SlingPlayer to be used over the 3G network was that AT&T doesn't allow video services that redirect TV signals onto its network.

What's even more puzzling about why AT&T would allow MLB's At Bat application to be used over its 3G network and not the SlingPlayer, is the fact that the MLB application is likely to put a lot more strain on the network than the SlingPlayer App. Here's why. The MLB At Bat application is likely to have more subscribers streaming video than the SlingPlayer app. MLB.com At Bat 2009 ranks among the top 100 overall paid applications in the App Store, according to the MLB's own Web site. And the application, which costs $9.99 to download, has only been available for about two months.The new, free streaming capability is likely to encourage even more downloads.

Meanwhile, the SlingPlayer app, which costs $29.99 to download, is likely to appeal to only a niche audience, since it also requires users to have a $150 SlingBox device in their homes to redirect the TV signals to their iPhones.

But more importantly, MLB At Bat subscribers will be tuning into the same video event at the same time. And since sports fans often root for teams in their own city, there is a good chance that many fans tuning into a particular game on their iPhones will be in the same geographic area, which is exactly the kind of scenario that could bring a cellular network to its knees. AT&T struggled to keep its 3G network up and running in Austin during the South By Southwest (SXSW) conference earlier this year when there was a high concentration of iPhone users.

By contrast, SlingPlayer users are not likely to be accessing the same video content at the same time in the same exact cell or region, which is actually less taxing on a wireless network.

But this isn't the first time that AT&T has shown preferential treatment to one application over another. OrbLive, which is offered on the App Store, also redirects TV signals onto the iPhone using a Wi-Fi network or the 3G cellular network. The application is designed to allow people to stream media from a PC to the iPhone wirelessly, much like how the SlingPlayer works.

For right now, iPhone users are simply left to wonder "why?" But stay tuned for more updates. I'm confident that AT&T will have an explanation shortly.

Concept art for an Apple touch-screen Netbook.

(Credit: Gizmodo)

Over the last few months rumors have continued to swirl around a possible Verizon-Apple deal to bring the iPhone to Verizon once Apple's exclusive pact with AT&T expires in 2010. But Tuesday BusinessWeek added a new twist to the rumor, reporting that Verizon and Apple are in talks to develop two new wireless devices that may hit the market this year.

Allegedly, one device would be a thinner, lighter, and lower-priced version of the iPhone--an iPhone Lite, if you will. While the other device would be something akin to the jumbo iPod Touch that we wrote about previously. BusinessWeek's anonymous source describes it as a "media pad that would let users listen to music, view photos, and watch high-definition videos."

The source, who claims to have seen the new media pad, says it's "smaller than an Amazon Kindle electronic reader, but its touch-screen is bigger than the Kindle's." It would be able to place calls over Wi-Fi and a high-speed wireless data connection from Verizon.

In discussing the latest rumor, BusinessWeek and some analysts seemed to downplay the possibility of the iPhone Lite coming to Verizon as long as Apple has an iPhone deal in place with AT&T. While details of that agreement remain scant, the assumption is there's a clause that very likely imposes "strict limits on Apple's ability to introduce an iPhone on a rival network," according to BusinessWeek. There's also a strong possibility that Apple is using all the Verizon talk to put pressure on AT&T to extend its deal with Apple at better terms.

All that said, with all the chatter, it seems more likely we'll see that media pad--or what some people are calling Apple's version of a Netbook--this year. And the wireless portion of it might very well be powered by Verizon--or AT&T.

Comments?

(Source: BusinessWeek via Silicon Alley Insider)

A correction was made to this story. See below for details.

Updated at 2:54 p.m. PDT with with additional information about the volume of NAND chips Apple is reportedly purchasing and its effect on the number of units the company could ship.

Apple has reportedly ordered 100 million units of 8-gigabit and 16-gigabit NAND flash chips, with the bulk of its order coming from its main iPhone chip supplier, Samsung, according to a research report released Monday by a Lazard Capital Markets analyst.

The majority of the sizable order is expected to be applied toward the 16-gigabit NAND, signaling that a 32-gigabyte iPhone is in the works to debut in June, said Daniel Amir, a Lazard Capital Markets analyst.

An order of 100 million 16-gigabit chips, for example, could produce roughly 12 million of Apple's 16GB iPhones, far more than the 7 million iPhones Wall Street expects Apple to make in the second quarter. But the same order of 100 million chips could produce roughly 6 million Apple 32GB iPhones.

Last month, Amir noted in a research report that he had heard from industry contacts that Apple was expected to begin production on a 32GB iPhone in April and May, with a release in early June.

Apple currently has a 16GB iPhone on the market. Wall Street is expecting the computer maker to ship 3 million to 3.5 million of its iPhone smartphones in the first quarter and to virtually double that figure in the second quarter.

Amir said that while the sizable NAND order could be used to dramatically increase production on the 16GB iPhones, that scenario is unlikely, given that Apple appears to be searching for ways to reduce inventory of the 16GB iPhones through special promotions and discounts.

And while the flash memory could be used in a refresh of Apple's iMacs, Amir said the bulk of the NAND order was made with Samsung, Apple's main iPhone chip supplier.

"Historically, Apple's orders with Samsung have been for iPhone flash (memory), since Samsung has worked with Apple in developing special packaging for the iPhone," Amir said.

He added that a large order from Apple also tends to result in a rippling effect through the flash memory market, and he anticipates as much as a potential 20 percent increase in pricing by the other memory makers.

Correction: When it was initially published, this story used an incorrect acronym for the 8-gigabit and 16-gigabit NAND chips. Gigabits are represented as Gb.

Though Apple has yet to offer built-in 3G on MacBooks, pairing them up with phones like the Blackberry Storm provides a decent wireless workaround.

The MacBook Air can use the Blackberry Storm as a Bluetooth 3G modem

(Credit: Brooke Crothers)

In December, I took the MacBook Air (i.e., the designers of the Air) to task for what I thought was a serious technological gaffe: not building 3G into the Air. At the very least, I thought 3G should have been included in the October refresh of the Air.

But I'm not going to rehash those gripes here (or repeat Apple's likely reasons for not including 3G). This time I bring good tidings.

After recently picking up a Blackberry Storm (Verizon), I quickly set it up as a Bluetooth "3G" modem by pairing it with my MacBook Air. The Blackberry uses an EV-DO 3G connection.

The Storm was relatively easy to set up and "tether" to the Air. And the results were better than I expected. Using Speedtest.net, I got download speeds of up to 1,088 Kbps (though it was typically closer to 500-600 Kbps) and uploads of up to 127 Kbps. Not torrential bandwidth but certainly good enough for the occasions when I don't have access to Wi-Fi (or when the Wi-Fi is iffy).

By comparison, on my Hewlett-Packard 2510p ultraportable with a built-in Verizon EV-DO modem, Speedtest.net said I was getting download speeds of up to 1,392 Kbps and uploads of 469 Kbps. (The Air's Wi-Fi connection gets about 2X download and 4X upload more than the Storm.)

As to setup: First, pair the two Bluetooth devices, then configure the phone on the MacBook side, telling it during the configuration process that you want to "Access the Internet with your phone's data connection." In Verizon's case, the account name is yourphonenumber@vzw3.com Then, in the next screen, you select "vendor: other" and "Verizon support, PC5220." (See screen shot of OS X 10.5.6 configuration Network setup.)

Setting up the Blackberry Storm as a Bluetooth modem was relatively easy

(Credit: Brooke Crothers)

Do I still wish Apple would build 3G into the MBA? Of course. But I am pretty satisfied with this solution for now. Particularly when it allows me to extract more functionality out of the Storm. (Which as a standalone 3G phone I like a lot and which I will review in the near future.).

Verizon, however, does charge extra for tethering, particularly if the Storm is connected via USB. I have no interest in a USB connection (at least, not at this time) because that defeats the purpose of having a wireless Bluetooth-enabled phone. As people have pointed out, a Bluetooth modem is much more convenient. Particularly for frequent travelers. I can just attach the Blackberry to my belt and use the Air as though it had a built-in 3G modem.

(Note: A reader in Ireland provided the inspiration to use the Storm as a modem when he correctly pointed out that internal 3G access would start to get expensive if you had a modem in each computer, with each requiring a separate subscription. Or would become inconvenient if you kept having to move SIM cards between computers.)

(Also note that a quick search will yield examples of people who have hooked their Blackberry up to a MacBook.)

Apple's MacBook Air doesn't live up to its wireless promise.

To quote an Apple tagline, "without wires, you're free to go anywhere." But the wireless part of the "air" play on words fails to deliver. (The other half its light-as-air weight: here it does deliver.)

As I've written in the past, I like the Air. I got one in February as soon as it was available at retail and have been pleased with the performance, screen, keyboard, build, and, until recently, the battery life (which has dwindled to under an hour). Of course, the head-turning aluminum aesthetics is also a major appeal to many people.

That said, after a spurt of trips including a 10-day stay on the East Coast and a few treks to Los Angeles, the Air's wireless shortcomings have become painfully clear. In a word (or two), no 3G.

Now, before I get slammed, let me say that I fully realize that I'm not the first person to reach this conclusion so I'm not claiming any unique epiphany. There were a number of observers citing this paradox way back in January. Some frustrated users even attempted hacks to shoehorn a 3G modem into the Air. The point is: because of the price and the way it's marketed, 3G should be built in.

But the full brunt of not having 3G hit me on Friday when I made a trip to Qualcomm to get briefed on a new version of the Snapdragon applications processor (more on this in another post). Sitting there in the nerve center of one of greatest wireless companies in the world, I couldn't get a wireless connection. Everyone else in the room had 3G connections of one kind or another. The Air instantly became the proverbial doorstop (or paper weight--choose your simile, or maybe it's more apropos to say it was a dinosaur.)

It didn't take much prodding from me to get the Qualcomm product manager to point out this fatal flaw.

This came after weeks of not being able to use the Air in many situations when I desperately needed a wireless connection. For instance, not all LA airports have reliable Wi-Fi connections. The John Wayne Airport in Orange County being one example. And when I was on the East Coast, one sprawling place I stayed at for several nights had Wi-Fi only in one inconveniently situated area that was inaccessible at night.

In these situations, the Air is nothing more than a slab of beautifully sculpted aluminum.

Hewlett-Packard Compaq 2510p (L) and MacBook Air. The HP comes with a built-in WWAN option, the Air does not.

(Credit: Brooke Crothers)

Which brings me to the cult of Steve Jobs. Apple was brilliant enough to deliver a groundbreaking design like the Air but why wasn't it savvy enough to build in 3G?

Before I get slammed again, let me throw out some reasons (excuses) why Apple didn't build in 3G, based on reports I've read and my own observations. Apple didn't like the fact that 3G modems often made the user commit to one service provider, i.e., Verizon or Sprint or Vodafone. Or, it believed that if users wanted 3G, they could simply plug in a USB 3G modem.

I have serious problems with both of those reasons. Particularly when you're paying typically more than $1,800 (or $2,500, depending on the model) for a notebook billed as a wireless wonder (for Apple ad copy on why the Air is such a wonderful wireless laptop, just cruise over to Apple's MBA page.) And I have even more of a problem when ultrathin Netbooks are coming with 3G at one-third (and potentially a tiny fraction of) the cost of the Air.

For comparison, let's look at another Valley company, Hewlett-Packard. HP has been selling WWAN (Wireless Wide Area Network) modems in its business laptops for at least two years (and probably longer). The HP-Compaq NC6400 laptop introduced about two years ago was offered from day one with WWAN built in.

Granted, the choice of carriers at first was limited but look at HP's offerings today. Models (including those in the EliteBook line) are offered with Qualcomm's Gobi modem. Gobi obviates the need to have unique radios for each carrier. Gobi supports Verizon, Sprint, and others in one device.

Where was Gobi when Apple refreshed the MacBooks in October? I'm sure Apple has plenty of excuses (for example, not enough space in the Air's ultrathin design).

But Apple should have had 3G from the beginning and certainly in the October refresh. In today's 3G world, continuing to call it the MacBook Air brings another meaning to the play on words: lightness of weight with a touch of advertising hot air.

Additional comments::
The point is not that a user can potentially add an external WWAN modem (though even that's not necessarily easy to do), the point is that the Air should come with 3G capability built in considering how the computer is marketed.

Apple's iPhone jumped to the top spot on the AdMob Network for the month of October, with 4.1 percent of the mobile ads requested from the network, according to the AdMob Mobile Metrics Report released Wednesday.

Requests from advertisers for mobile ads targeted to iPhone users rose to 236 million in October, more than doubling from the 103 million requests recorded in the previous month. Worldwide, AdMob's mobile-ad requests for all device makers grew 13.8 percent in October, to 5.8 billion.

AdMob delivers banner and text ads to mobile devices, and these figures were analyzed and aggregated as part of its monthly Mobile Metrics report. AdMob-served ads are seen by people visiting clients' Web sites with their mobile phone. Advertisers can choose to have their ads appear on a certain type of device, or region of the world, and then AdMob places the ads on partner publishers' mobile sites.

Mobile advertising is on a fast track, with research firms projecting market revenue to reach $19 billion per year by 2011, up from the approximately $3 billion seen for last year.

Fueling the iPhone's October performance was particularly strong traffic outside the United States, which accounted for 37 percent of its ad requests, according to the AdMob report. Western Europe represented 17 percent of the iPhone ad requests, and Asia represented 8 percent.

Other handset players following close behind included the Motorola Razr V3, which received 3.4 percent of the requests; Nokia's N70, with 3.2 percent; and the Motorola Krzr K1c, with 1.8 percent.

But in the U.S. market alone, the iPhone ranked No. 2, with 6.9 percent of the requests, while Motorola's Razr V3 led the market, with 7.7 percent. The U.S. market accounted for 62.8 percent of the iPhone's ad requests in October.

Requests from advertisers for mobile ads targeted to iPhone users more than doubled from September to October.

(Credit: AdMob)

Apple's iPhone 3G apparently created a summertime switch itch: 30 percent of all the smartphone's buyers bailed on their existing carriers in order to purchase the device, according to an NPD Group report released Monday.

AT&T has been the iPhone 3G's exclusive carrier in the U.S. since the smartphone was released in June.

According to the report, which covers June through August, 47 percent of those switching to AT&T to get the iPhone 3G came from Verizon Wireless, 24 percent from T-Mobile, and 19 percent from Sprint.

"While the original iPhone also helped win customers for AT&T, the faster network speeds of the iPhone 3G (have) proven more appealing to customers that already had access to a 3G network," Ross Rubin, NPD director of industry analysis, said in a statement.

By contrast, about 23 percent of consumers overall switched carriers from June through August.

During that same time frame, the smartphones with the highest unit sales were Apple's iPhone 3G, followed by Research In Motion's BlackBerry Curve, RIM's BlackBerry Pearl, and the Palm Centro, according to NPD.

Prior to launching its 3G version, Apple's iPhone accounted for 11 percent of the smartphone market in 2008. But since the 3G's launch, that figure has risen to 17 percent of the market since the start of the year.

"The launch of the lower-priced iPhone 3G was a boon to overall consumer smartphone sales," Rubin said.

Monday was the deadline to submit applications for a chance to bid on the 700MHz spectrum auction scheduled for January, and the lineup is taking shape.

Google, Cox Communications, Frontline Wireless, and AT&T all appear to have submitted an application Monday for a chance to bid on the spectrum, which is set to be freed up with the Federal Communication Commission's decision to move everyone to digital television in 2009. The 700MHz band is sought by companies that wish to build wireless voice and data networks, and is probably the last time for a while that such a chunk of spectrum will be up for grabs.

The deadline for applications was 6 p.m. ET Monday. Google, of course, announced its intention last week. A representative for Frontline Wireless contacted CNET News.com to confirm that it, along with a consortium of partners such as former Netscape CEO Jim Barksdale and Kleiner Perkins VC John Doerr, would be bidding on the spectrum in hopes of creating an open-access network that would also double as a public-safety network. IDG News Service reported on Monday that AT&T planned on bidding, but a representative reached after the deadline said he was unable to comment on the auction, citing FCC confidentiality rules. Cable Digital News reported Cox would be involved, but a company representative did not return a call seeking comment.

Under the rules of the auction, companies do not have to announce their intent to bid, but at some point their involvement might become public as the FCC publishes information related to the auction. An FCC representative did not return an e-mail seeking an explanation of the rules, but a PDF copy with tons of detail can be found here.

A Verizon representative declined to comment to IDG News Service on her company's plans, despite flying the "openness" flag as high as possible last week. Time Warner Cable and Comcast confirmed that they would not be applying to bid on the spectrum, and a Sprint representative was also quoted saying his company was not going to participate. It's still quite possible that other companies applied, however, and we may not know the full roster for a few weeks.

Slowly but surely, we're reaching the point where future mobile computers will be able to hook up to the wireless Internet just like a PC.

Verizon Wireless' announcement that it will open its network to outside devices and applications by the end of next year is the latest step in the dismantling of the traditional wireless industry. For years in the U.S., we've been locked to networks, saddled with expensive two-year contracts, and restricted from doing things we'd like to do with the products we buy.

It seems like that is finally starting to change. Verizon's strategy is very simple, assuming it follows through on the promises made Tuesday. Any phone or device maker will build a CDMA-compatible (code division multiple access) device, have it tested to meet minimum technical requirements, and sell that device as capable of running on Verizon's network. And it will let any application on that phone access its network. The company said it will release the technical requirements early next year and host a conference around the same time to discuss those standards, with the goal of having devices ready by the end of next year.

The idea is that you'd be able to use any CDMA-compatible phone like you do with a Wi-Fi equipped computer or wireless PC card: When you need to connect, just log onto the nearest Verizon access point without having to sign up for a long-term contract. The cellular industry is starting to realize that it has a chance to capture the huge projected increase in wireless Internet traffic as mobile computers become capable of so much more.

Carriers such as Verizon are drooling over the potential revenue from data usage fees, and while Verizon executives seemed to still be kicking around how much to charge for this open-access service, CEO Lowell McAdam said on a conference call Tuesday that it would be akin to reading a utility meter and charging a price per bit.

CEO Lowell McAdam

(Credit: Verizon Wireless)

They're also feeling the pressure from outside forces. Google's Open Handset Alliance is trying to bring handset makers, software developers, and wireless carriers together to build devices that can run any kind of application across multiple phones and networks. The Federal Communications Commission also plans to impose "open requirements" for a small portion of the 700MHz spectrum slated to be auctioned off next year, and Verizon and the rest of the carriers want very much to be part of that auction.

This is about more than just phones, though. There's an emerging category of devices that fit in your hand and do something really well, yet offer the capability to do so much more: like, say, compute. These include portable game players like the PSP, digital cameras, in-car navigation systems, Intel's evolving Mobile Internet Device concept, and, of course, the traditional smart phone.

Verizon wants those devices to run on its network. But in order to cash in the proliferation of these devices--all of which use very different software--the company had to abandon its "walled garden" approach.

"Over time, expect to see those walled gardens come down some as we think we can continue to provide the most reliable wireless experience to our customers," McAdam said. Om Malik at first compared this morning's announcement to former President Ronald Reagan's exhortation for Mikhail Gorbechev to "tear down that wall," but his enthusiasm was tempered after giving it a bit more thought.

"The about-face taken by Verizon Wireless today when it said it will open up its network and platform is, at first blush, a good thing for consumers and developers. But I just got off the company's conference call, and there are certain details that have left me with eyebrows raised," wrote Malik, a veteran reporter who has extensively covered telecommunications companies.

Until recently, Verizon was notorious for exercising near-total control over its phones, forbidding customers to use even simple Bluetooth applications unless they were meant for use with one of those ridiculous-looking headsets. By next year, that will no longer be the case.

"The provider of the device will determine the OS, distribution system, and whether to include Java applications. It is not ours to make that determination, that is up to the provider," said John Stratton, Verizon's chief marketing officer.

The Federal Communications Commission and consumer groups have been calling on the wireless industry to make moves like this for some time, and McAdam acknowledged that customer demand was forcing Verizon's hand. "A competitive market responds to market forces and customer needs," he said, appearing to make the point that forced regulation of these matters is unnecessary.

Malik points out that Verizon's move could have several benefits for both phone users and phone makers. For one, cheap data-capable CDMA phones designed for the Asian market could arrive in the U.S., and many of those phones are beyond what we're used to in this country. You could get a VoIP capable phone for voice calls and just pay a metered fee, which might work out better for some people who don't place a ton of calls but like to do e-mail or browse the Web.

It could also hasten the end of the subsidy model, and make buying a phone more like buying a computer. As Apple showed us this summer, people are ready to buy phones from a retailer or direct from phone makers like Nokia, Motorola, or Samsung. You'd get your support from them, and all Verizon would do is hook you up to the world. This might make for more expensive phones up front, but it could also give phone makers the opportunity to come up with more innovative devices without having to get approval from Verizon for every last piece of software.

This change isn't going to happen overnight, however. The so-called "full-service" customer option will not go away, and McAdam said that he thinks most customers will want to stay with the traditional plans.

Verizon thinks that restricting the number and type of applications that access its network makes for a more reliable network, which is the centerpiece of its marketing campaign. Apple CEO Steve Jobs made a similar argument in the early days of the iPhone, that opening up the device to applications could cause all kinds of unforeseen security and reliability problems.

Before Tuesday's announcement, Verizon was known for its tight control over what ran on its phones, such as the LG Venus.

(Credit: Verizon Wireless)

However, that's clearly not always going to be the case, and Apple plans to open the iPhone to outside application development next year. Mobile software development grows more sophisticated by the day, and as we all start to realize what we can do with a fast Internet connection available at all times, we're going to want to do more than whatever a certain company's executives decide is appropriate for us to do.

"Customers' needs are increasing and diverging, Verizon won't be able to meet every customers needs with our specific devices and applications," McAdam said. Verizon's current business model forces it to only choose devices that it thinks will sell in large volumes. That's difficult to consistently pick what fickle phone users will want to buy 8 to 12 months ahead of time: just ask Motorola.

CMDA world
One problem for Verizon is its use of CDMA technology. According to the GSM Association, more than 80 percent of the cell phones in the world use the GSM standard to get connectivity. If you're a developer that has come up with an incredible new idea for a phone, do you want to address 20 percent of the worldwide market or 80 percent?

In some ways, Verizon's move actually catches it up to the rest of the world. In the GSM cell phone market (AT&T, T-Mobile, and practically the entire rest of the world), unlocking a phone to run on another company's GSM network is simple. Perhaps a little too simple for some, but swapping in a T-Mobile SIM card once you've grown tired of AT&T (and are free of your contractual obligations) is like changing CDs.

But in the CDMA world (Verizon, Sprint, and countries like South Korea and Japan), it isn't quite that simple. If I wanted to leave Sprint and take my Treo 700p to Verizon, they could make it happen, but they wouldn't honor the manufacturer's warranty for that device if something went wrong. And Sprint only accepts outside phones under the table: I once bought a cheap old Nokia CDMA phone on eBay to use with Sprint, and the representative activated it even though they said they weren't really supposed to do that.

Now it will be simple. Sprint has announced that it plans to allow customers to unlock their phones after settling a class-action lawsuit. The dozens of companies gearing up to build phones based on Google's Android software will have a huge network to design for in the U.S. And application developers will have 63 million potential new customers.

Verizon CTO Dick Lynch even responded enthusiastically to a question from Gizmodo about the potential for home-built CDMA devices. "If somebody has the technical capability of building a device in their basement on a breadboard, the philosophy and structure of this program would say, 'have at it.'"

There are lots of details to be ironed out, perhaps most importantly how much this is going to cost and how the billing will work. But for now, the move is a very interesting look at how cellular networks could evolve into something that resembles physical or Wi-Fi networks, where you just plug and play.

And if you're Sprint, you'd better be thinking about some way to keep customers from defecting en masse to Verizon next year.