Will Calling on Verizon Bring Stalled IPhone Sales Up Again?

As Smartphone's Market Share Hits a Ceiling, Apple Could Benefit From Partnering With Largest Carrier

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NEW YORK (AdAge.com) -- For years the iPhone has been indefatigable, gobbling up mobile market share and rocketing AT&T into the smartphone lead among carriers. But the Apple platform has leveled off recently with about a one-quarter share of the U.S. smartphone market for the three months ending in August, per ComScore, and its archrival Android is making fast gains.

Can Verizon, rumored to start offering the iPhone next year, return it to growth?

Credit: Source: ComScore MobiLens

"When you're tapped out, the next obvious question is: Where do we go from here?" said Ramon Llamas, IDC senior analyst on mobile devices. "But do all roads lead to Verizon?"

For now, yes, according to a Wall Street Journal report that has the phone moving onto Verizon's platform sometime next year. And there are plenty of reasons why Apple needs another carrier partner now more than ever.

For one, Apple is hearing fast-growing Android's footsteps, as has AT&T; the carrier has watched Verizon, which has heavily pushed Android phones, slowly gain on its once-substantial lead in smartphones since the beginning of the year.

Google's mobile software continues to pick up percentage points every three months. It was also the best-selling smartphone platform over the past six months while Apple was second, neck-and-neck with BlackBerry, according to Nielsen. If iPhone will indeed be available to consumers on Verizon by early next year, it marks Apple's first step toward an all-carrier strategy like BlackBerry or Android.

"To be at Verizon -- the No. 1 carrier -- for anybody, there's a lot of potential and opportunity," said Mr. Llamas.

Both Verizon and Apple are notoriously controlling, the latter exerting tight control over the entire iPhone ecosystem, from the operating system and third-party applications to advertising and the device itself. "Verizon controls everything about the handsets -- what manufacturers make, what features to have, how it'll work," said telecom industry analyst Jeff Kagan. That contrasts sharply with AT&T, which "jumped right on it and basically had to give Apple free rein." "If you want to play at Verizon, you have to operate by Verizon's rules," added Mr. Llamas, who is skeptical we'll see iPhone on that carrier in January.

With iPhone, Verizon could become the U.S. smartphone leader, a title now held by AT&T, at 38% market share. (Second-place Verizon has almost 27%) The internet-phone category represents the future for cell-service providers -- Nielsen predicts smartphones will overtake more basic feature phones in the U.S. in 2011. While Verizon is the bigger U.S. carrier and gaining ground in smartphones, it lags behind AT&T in the segment largely thanks to the iPhone.

So where does that leave AT&T?

AT&T continues to take bets on new devices to keep that smartphone lead. Research in Motion launched its touchscreen BlackBerry Torch exclusively on AT&T, and while it's not the exclusive carrier, AT&T will also be the lead mobile operator and co-marketing partner for the U.S. for the new Windows Phone. The question is whether those bets pay out as big as iPhone did. Early reports signal Torch sales have not met expectations, while Microsoft faces the challenges of zero-consumer mindshare and devices that don't look anything like app-centric iPhone or Android. Microsoft plans to combat its hurdles with sustained and competitive marketing this fall, which could prove a win for AT&T, too.


With all its dropped-call PR troubles, why does the carrier get its pick of devices?

Generous marketing
Microsoft "clicked" with Apple as a marketing partner, said Todd Peters, Microsoft corporate VP-mobile communications marketing group.

AT&T is the No. 3 marketing spender in 2009, according to Ad Age DataCenter. Meanwhile, Verizon's rich coffers (it was No. 2) have focused on its own Droid brand.

Hefty subsidies
AT&T was said to offer significant subsidies to Apple to snag the iPhone.

Common technology
AT&T's core technology -- GSM -- is a standard around the world, meaning manufacturers can produce a global phone. Verizon runs on CDMA, which is only used widely in the U.S. -- KUNUR PATEL

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