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Verizon To Open Its Network In 2008

Basking Ridge, N.J. — Verizon Wireless will open up its network in the second half of 2008 to compatible devices not distributed by the company, but the carrier will continue to offer handsets that it distributes with its own customized user interfaces and embedded applications.

Verizon subscribers will get “the option to use wireless devices, software and applications not offered by the company,” Verizon announced today. “This new option goes beyond just a change in the design, delivery, purchase and provisioning of wireless devices and applications.”

Verizon will launch the “any apps, any device” option because the carrier otherwise “won’t be able to meet all our customer needs” as the diversity of its subscriber base grows and new handset technologies and applications proliferate at an accelerating pace, explained president/CEO Lowell McAdam. Under the carrier’s current strategy, he continued, Verizon’s scale limits the company’s handset portfolio only to models that can be sold in the “hundreds of thousands” of units. The new option will promote more choices because suppliers could offer devices that tap lower volume niches, he explained.

The strategy will also enable companies other than Verizon to place “bets” on what type of device or application will be a “hit,” and it will enable Verizon to tap a new customer segment that “wants complete control” over their device and applications, McAdam continued.

The company, McAdam stressed, “is not changing our successful retail model but rather adding an additional retail option for customers looking for a different wireless experience.” Service plans for devices not distributed by Verizon will be “usage-based,” a spokesman added.

To be activated on Verizon’s network, the open-access handsets will have to meet minimum technical standards focused on “basic network connectivity and network safety,” said chief technical officer Dick Lynch. The phones’ user interfaces and applications will not be tested by Verizon, but Verizon will continue to test user interfaces and apps on phones that it distributes, he added.

Combined with the growing availability of unlocked-GSM phones at retail, the Verizon announcement underscores the potential for the U.S. cellular industry to return to distribution practices common during its inception in the early 1980s. During cellular’s analog days, carriers marketed phones directly to end users, but handset suppliers also marketed phones directly to retailers and distributors without first selling through the carrier. With the advent of digital, major carriers gradually took total control of phone distribution, requiring retailers to sell phones supplied only by them and provisioned with a user interface and applications customized for their service plans.

In early 2008, the company will publish minimum technical standards that devices must meet to be activated on the Verizon network. Devices will be tested and approved in a $20 million testing lab. After the standards are published, Verizon Wireless said it will host a conference for device makers and applications developers to explain the standards “and get input from the development community on how to achieve the company’s goals for network performance while making it easy for them to deliver devices.”

McAdam also invited retailers to attend the conference to discuss the new distribution model for the handsets. Verizon wants “to facilitate, not dictate” how the distribution model will evolve, he said. Presumably, such issues as activation commissions for the handsets, which presumably will be unsubsidized by the carriers, will come up for discussion.

Although a lack of subsidies would push up a handset’s price, one supplier told TWICE, the price differential shouldn’t deter consumers interested in hard-to-find features, applications or cosmetic designs.

Certification testing will not be onerous and will be “relatively short,” and the cost to the device maker “will be surprisingly reasonable,” Lynch said. If someone builds a device in their basement and it passes the tests, the company will activate it, Lynch pledged.

Customer service for devices that consumers bring to the network will be split between Verizon and the device maker, McAdam noted. Customers will call Verizon “to verify the network connection,” but the supplier of the device and applications will be responsible for all other troubleshooting.

The Verizon strategy will also enable subscribers of competing CDMA networks to activate their existing phone on the Verizon network if it was submitted for testing by its manufacturer and passed, Lynch said. Phones built on Google’s standardized open-source phone platform, called Android, could be approved for use on the network under the “any app, any device” program, a spokesman added, but Verizon hasn’t committed to making Android a part of the phone portfolio that it distributes, as T-Mobile and Sprint have.

Certification would also apply to wireless chips embedded in portables devices such as handheld games, PDAs, digital cameras and the like, McAdam added.