iPhone Vs iPhone: Let The Battle Begin

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With longstanding speculation about whether -- or when -- Verizon Wireless would get the iPhone finally ending Tuesday, the question turns to how it will alter the balance of power in the wireless world, especially between Verizon and AT&T. The latter, of course, will lose its nearly 4 years of iPhone exclusivity with Verizon planning to launch a 3G version of the Apple device next month.

Since each side now will have the same potent weapon in their phone arsenal, the fight will come down to the competing service offerings and network quality that Verizon and AT&T provide, according to analysts. That could lead to a new series of moves and countermoves as the nation's two biggest carriers try to convince consumers to choose their version of the iPhone.

I feel the dynamic is going to change a bit now," said Michael Morgan, a senior analyst at ABI Research. "It's all going to come down to the network experience and kinds of services these guys are offering." He noted that Verizon will benefit immediately by luring dissatisfied AT&T iPhone customers nearing the end of their two-year contracts.

AT&T has faced longstanding complaints about iPhone service, but Morgan and other analysts do not expect the No. 2 carrier to be devastated by defections. UBS analyst Jon Hodulik has said that even if AT&T lost twice the 2.3 million iPhone customers he predicts, it still would not be a severe blow to the company. Analysts have projected that Verizon overall will sell anywhere from five to 15 million iPhones in 2011.

There's little question that the years of anticipation and online rumors about a coming Verizon iPhone have whetted the consumer appetite for an AT&T alternative. "There is enormous pent-up demand for an iPhone on Verizon Wireless' network, and that is precisely what Apple has delivered," said Avi Greengart, research director for consumer devices at Current Analysis.

Verizon has said its network is prepared to handle the addition of millions of iPhone subscribers, and analysts seem to agree. Based on its ability to add millions of Android phone customers in the last year, Morgan said taking on the iPhone shouldn't be a problem. "Because of the Android phones, there's not going to be the shock of this whole new paradigm for them," said Morgan.

But the real head-to-head battle between Verizon and AT&T will not likely begin until June, when Apple releases its latest version of the iPhone, according to Forrester mobile analyst Charles Golvin. "It's this new product -- call it iPhone 5 -- that will reveal who has the advantage," he wrote in a blog post.

Even so, the decision to launch the iPhone on Verizon's 3G network rather than its faster 4G Long Term Evolution (LTE) network should give AT&T some breathing room and allow it to play up its claim to having "the fastest mobile broadband network" with respect to its version of the iPhone. Company officials have already warned that iPhone customers may not be "ready for life in the slow lane" with Verizon.

At the Tuesday press event announcing the Verizon iPhone, Apple COO Tim Cook said the company is not launching with a 4G-ready phone on Verizon because existing LTE would have required design compromises it didn't want to make. But ABI's Morgan noted that if Apple is prepared to launch a 4G-capable iPhone in six months, Verizon could have the upper hand, because it is farther along than AT&T in rolling out its LTE network. Verizon's 4G network is already live for about 100 million Americans, and AT&T will not launch its own 4G LTE network until later this year.

"Verizon has had its LTE network up for a while, with broad reach and proven capability, and AT&T will just be ramping up," he said. But AT&T will slug it out over other features and services related to the iPhone as well. Verizon Wireless CEO Dan Mead Tuesday acknowledged that the company's CDMA-based network will not allow iPhone users to talk and use data at the same time, as they can on ATT's GSM network.

Forrester's Golvin pointed out that such multitasking is "a capability AT&T heavily promoted during last year's advertising battle royale between the two carriers." No doubt it will continue to highlight that limitation again in any upcoming marketing efforts comparing the two versions of the iPhone.

But Verizon has some sweeteners of its own. While the carrier didn't reveal data plans for the iPhone on Tuesday, it has been widely reported that it will offer an unlimited data plan for the device. That could prove an advantage, since AT&T has abandoned unlimited plans, capping data usage at 2 gigabytes a month for $25.

Unlike AT&T, Verizon is also offering a mobile hotspot feature that will allow iPhone customers to tether up to five Wi-Fi devices to the phone at no extra charge. "It will be these kinds of things they have to do battle on now," said Morgan.

In addition to upgrading its network over the last year, AT&T last week cut the price of the iPhone 3GS in half to $49. The carrier is also planning to add a dozen Android devices to its smartphone lineup this year to help offset the loss of iPhone exclusivity. It also added a trio of Windows Phone 7 devices in October.

But after relying on the iPhone for so long, Morgan said AT&T would have to come up with its own Android line to counter Verizon's success with the Droid phones. "As a response, AT&T has to really beef up its portfolio of Android phones," he said. Data from comScore last week showed that Android surpassed the iPhone in subscribers for the first time as of November, taking 26% market share compared to 25% for Apple. But the iPhone could gain back ground through the new pairing with Verizon.

Tags: apple, mobile, telecom
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