Since the launch of the iPhone one critical factor has remained constant. In the smartphone's biggest market -- the United States -- the iPhone was sold exclusively on AT&T. But that's about to change.
The Wall Street Journal claims that multiple sources brief by Apple have said that a CDMA iPhone will land early next year on Verizon's network. CDMA is Verizon's 3G tech of choice. Sprint also uses CDMA, while T-Mobile and AT&T utilize GSM, a rival standard.
The iPhone undeniably helped AT&T hang on to its second place spot in the U.S. However, many customers -- particularly in 2007 and 2008 -- were disgruntled about AT&T's poor voice network. While AT&T has made a concerted effort to improve, the experience has still left a bitter taste in many's mouth, and many still hold a negative opinion about the carrier's quality of service.
Meanwhile the iPhone is struggling to stave off dozens of handsets sporting Google's Android operating system which have flooded the U.S. market. Android has already passed the iPhone in U.S. sales and analysts generally believe that it is only a matter of time before it does the same worldwide. More worrisome for Apple, interest in the iPhone is also dropping.
A shift to Verizon, the nation's largest carrier, could help Apple somewhat with both problems. According to James Ratcliffe at Barclays Capital, a Verizon iPhone would grow the carrier's subscriber base by 900,000 in 2011 and sell 9 million iPhones in total (most sales going to existing customers). Hudson Square Research, on the other hand, believes that Verizon could gain even more new subscribers, estimating that 4 million iPhone users would switch from AT&T -- roughly 18 percent of AT&T's iPhone subscriber base.
Verizon Communications Inc. President Lowell McAdam refused to confirm or deny the rumors of an Apple deal, stating, "At some point our business interests are going to align. I fully expect it, but I don't have anything to say."
The report offers a lot of compelling details to support its claims that the Verizon iPhone is real. It claims that Pegatron Technology Corp., a contract manufacturer subsidiary of Taiwanese electronics giant Asustek Computer Inc. won the contract to produce the phone. And reportedly Qualcomm is providing the CDMA chipset for the new phone, though the form factor will stay the same.
A Verizon iPhone was already prophesied earlier this year by Bloomberg, which says the phone will land in January (coinciding with one of Apple's typical product launch times). However, one of the sources briefed by Apple told The Wall Street Journal offers a new piece of information -- Apple is also working on a different form factor of its popular device.
If it truly exists, the real question is whether this form factor is bigger or smaller than the existing iPhone. A likely scenario seems a smaller candy-bar like phone, similar to the iPod Nano 5G.
The need for a Verizon iPhone is illustrated most clearly by subscriber numbers. According to market researchers at Comscore, in August 2009 there were only 866,000 Android smartphones, compared to 7.8 million iPhones in the U.S. In August 2010 Android had exploded to 10.9 million phones, while Apple managed an impressive, but lesser growth to 13.5 million handsets.
Ultimately despite the "danger" of getting passed by Android, the release of a Verizon iPhone may be more about bumping up profit and less about staving off its competitor. After all, Apple currently has only 2.8 percent market share in the global phone market, but it makes 39 percent of its profits thanks to its ability to move less-than-premium hardware at premium prices and its aggressive negotiation of supply deals. Android eventually passing Apple seems inevitable, even if Apple does launch a Verizon iPhone, but the new phone could send the already profitable company soaring to new heights in profitability.