With Apple?s iPhone reportedly coming to Verizon Wireless sometime next year, rival handset manufacturers and carriers are going to have to step up their game.

While rumors have been swirling about such a move for some time now, the Wall Street Journal recently reported that AT&T would lose its exclusivity agreement and that Verizon would start selling iPhones early next year. So this is definitely happening, right? Well, not so fast?

?These are just reports, and they have surfaced before?while conditions in the market have changed, they will continue to evolve, and I don?t necessarily see anything critical or see the stars aligning that would point to an early 2011 launch,? said Ross Rubin, executive director of consumer technology industry analysis at the NPD Group, New York. ?There?s still the not-insignificant issue of Verizon being a CDMA carrier.

?I?d be surprised to see Verizon offering the iPhone until late 2011 or early 2012?there are various reasons why we might not see a Verizon iPhone in early 2011,? he said. ?The first-generation LTE chipsets are power hungry, which Apple has eschewed in its iPhone designs to date.?

That said, with Verizon and AT&T converging on the same 4G LTE network standard down the road, and Apple supporting multiple carriers in Europe, there may well come a day in the not-too-distant future when the iPhone is at Verizon.

Competitors are not looking forward to that day.

?The iPhone would likely do very well on Verizon,? Mr. Rubin said. ?It still has a great brand association, Apple has done a very strong job in terms of preserving battery life and the design and aesthetics of the phone, and it has the lead in applications.

?Having the iPhone on Verizon would increase Apple?s market share,? he said.

Churn, baby, churn
It is no secret that the rivalry between the nation?s top-two carriers, AT&T and Verizon Wireless, has reached a fever pitch.

The two behemoths have gone back and forth in a television advertising battle over whose network is better and whose phones have a better experience when it comes to apps, maps and WAP.

Apple device users are well-known for their loyalty, so would they flee AT&T in droves when Verizon gets the iPhone?

?We will certainly see some users churn from AT&T to Verizon in the hopes of finding a more efficient network,? said Carolina Milanesi, Milan, Italy-based vice president of mobile devices, technology and service provider research at Gartner.

?The iPhone would add to the successful Android products that Verizon has to make an even stronger high-end offering and retain or attract high-end users,? she said.

A Verizon Wireless iPhone would level the playing field in terms of smartphone OS diversity by allowing the two largest carriers to offer the three major U.S.-centric platforms: Apple's iOS, RIM's BlackBerry OS and Google's Android, according to Strategy Analytics.

?Consumers who previously avoided the iPhone because it was only offered by AT&T will find the offering appealing, as might current iPhone owners looking to change carriers for one reason or another,? said Alex Spektor, senior analyst of wireless devices strategies at Strategy Analytics, Newton, MA.

?The net impact is unlikely to double Apple's market share in the U.S., but it will help to further boost the Apple's mind-share among consumers, and strong mind-share is already one of Apple's greatest assets,? he said.

Verizon transitioning from CDMA to LTE
The top executive at Verizon Communications Inc. announced his company?s deployment of the first large-scale 4G Long Term Evolution network (see story).

Steve Jobs blamed the media for the iPhone 4?s antenna problems, stating that Apple?s data proves that consumers were not dissatisfied with the device since the return rate was one-third of the iPhone 3GS's and that reporters made it out to be a bigger issue than it actually was (see story).

Apple might be a little more careful as far as jumping into a new technology given the recent issues with antenna coverage.

?They certainly do not need another issue with their flagship device, especially since customers on Verizon have been waiting for so long,? Gartner?s Ms. Milanesi said.

?The other point is how much it would actually matter to have LTE when it is to be expected that the technology would cover only certain areas,? she said.

AT&T was initially unprepared for the flood of data usage stemming from iPhone users.

There may be a map for that, but the real question is, how much will Verizon?s network suffer once iPhone users are surfing the mobile Web, watching mobile video and downloading and using applications?

?The really interesting question is, what happens to Verizon's network once it launches the iPhone?,? said Dmitriy Molchanov, analyst at Yankee Group, Boston. ?For the moment, Verizon has avoided AT&T's network problems largely because the majority of Verizon's subscribers are feature-phone owners?data consumption on the typical feature phone is limited.

?If Verizon launches the iPhone, my hunch is that a good number of these feature-phone owners upgrade,? he said. ?Verizon will need to act quickly to build out its network and make the move to 4G to keep up.

?Ironically, the more iPhone users AT&T loses to Verizon, the more attractive its network starts to look.?

Even if Verizon does begin to offer the iPhone early next year, AT&T will have plenty of breathing room, per Yankee Group.

Market share in the telecommunications world moves rather slowly, as subscribers are often locked into two-year contracts, have multiple phones on a family plan or have actually bundled their mobile phone into a quad-play plan.

As a result, consumers have plenty of incentive to stick with their current carrier. In fact, carriers have strategically raised their early termination fees to ensure that this is the case.

In the meantime, AT&T will have the opportunity to improve its network and introduce new handsets that rival the iPhone.

?Ironically, most of the early-adopters for the Verizon iPhone will be Verizon subscribers,? Mr. Molchanov said. ?There are simply fewer barriers for a Verizon subscriber hoping to change handsets than there are for an AT&T subscriber looking to change carriers.

?As a result, the biggest losers in the Verizon iPhone scenario would be Motorola and RIM, whose handsets are selling well on Verizon's network,? he said.

Effects on Apple?s competitors
In addition to Motorola and Research In Motion, Samsung, HTC, LG, HP?s Palm, Google and Microsoft will be closely following the news of the Verizon-iPhone courtship.

A Verizon Wireless iPhone would inevitably cut into the market share of other platforms and devices.

?The Android-based Droid family is better equipped than BlackBerry to hold its own against Apple, as RIM still lags in its touch-screen user experience and applications offering,? Strategy Analytics? Mr. Spektor said.

Other analysts believe that the iPhone demographic is unique, and that other smartphone operating systems will be able to hold their own.

?The iPhone will certainly have an impact on other devices, but ultimately if you want an iPhone, you want an iPhone?it is not like you walk into a store wanting an iPhone and you walk out with a Torch,? Gartner?s Ms. Milanesi said. ?What I mean is that you will have different types of users.

?Certainly it will be interesting to see how much shift in marketing we'll have,? she said. ?The Droid was positioned by Verizon as the best thing yet, and this is likely to change once the iPhone comes on board.?

NPD?s Mr. Rubin said that RIM?s BlackBerry continues to have strength in the enterprise space.

The company has invested a tremendous amount in its management tools targeting the corporate market, and there are still many fans of its QWERTY keyboard design.

RIM is in the process of rebooting its BlackBerry OS, moving to QNX, which will debut in the PlayBook tablet.

?RIM is losing market share but it still has a strong presence across the carriers,? Mr. Rubin said. ?Android is seeing tremendous adoption, a lot of it from Verizon as a foil to the iPhone on AT&T?NPD was the first to report that Android handsets were outselling the iPhone back in May.

?Android has tremendous momentum, and there are many features in those devices that will have appeal for customers that Apple will not pursue for a variety of reasons,? he said. ?Steve Jobs earlier this year expressed skepticism of a 4.3 inch display, and yet the Droid X did very well.

?Android offers very favorable economics for the carriers, and the OS will likely continue to do well.?

Final Take
Dan Butcher, associate editor, Mobile Marketer

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