As reported in today’s Wall Street Journal, Verizon announced it would open up its mobile network next year to non-Verizon phones. Obviously, Google’s noise for open networks has finally gotten a rise out of the nation’s second largest carrier. More importantly, this move could signify a major shift in business practices across the industry, as carriers finally ditch their outdated turnkey system practices.
Verizon’s move doesn’t necessarily translate to a literal definition of open networks; the move is more akin to Microsoft publishing the file format interfaces to its Office software products. And, while the step could place the industry more in line with modern practices from the computing sector, there remains one important difference: while computers are commodities, handsets as a generalization are not. Yes, voice handsets could be regarded as commodities, but the handset/mobile device market is so diverse that you have multiple types of products with different functions competing for different demographic slices of the marketplace. So that lays waste to the established notion of the computing industry that 90% of the value is now in the software.
But for mobile carriers, Verizon’s move signals a realization that their true value is the network and the services that networks provides. The impending auction of new bandwidth recovered from analog TV broadcasters underscores that point: with new spectrum, carriers can dispense more services. Yet, existing business models, restricting freedom of choice would simply act as a speed bump. With fewer hardware options, customers could not as easily gain access to new models that could take advantage of these new services, and with a restricted market, handset manufacturers would be slower to roll out updated models.
Ergo, there is far more upside for network operators to open their networks, because they will gain access to larger markets to which they can sell more valuable services to more customers.
While of course distinctions remain between telco network service providers and their IT counterparts, ZDNet blogger Dana Gardner suggested that recent trends of convergence are likely to promote more cross acquisitions in this space. Verizon’s move is entirely consistent with that.
Consequently, while it’s easy to conclude that Google’s rants for open spectrum might have prompted Verizon’s move, our take is that the advent of new spectrum finally brought the carrier to its senses.