Verizon does not need to create another Microsoft. In the early eighties, IBM gave their most valuable asset to Microsoft, the operating system space (using Microsoft DOS) for their new IBM Personal Computer. While IBM was co-developing OS/2 with Microsoft, Microsoft was secretly developing Windows. With the release of Windows 3.0, IBM (eventually) lost both the PC hardware and software operating systems market, because the operating systems software (Windows 3.0) turned out to be the most valuable asset. Verizon does not need to repeat history.

The advantage of the iPhone above its competitors is that it was the first to incorporate an engaging user interface, and more importantly – gained the massive amount of free advertising Apple has obtained from the press, which has easily been in the billions of dollars in value (from cover stories to countless articles). This amount of advertising will sell nearly any product. The iPhone deserved the good press, but in the wireless industry, the network is king (at least for now, until there is network quality parity among carriers) – and this is where Verizon excels. Over 50% (in a 2009 survey) of iPhone users (with their disproportionately massive use of AT&T’s network resources) are dissatisfied with AT&T’s network problems and would move to another carrier if given an appropriate choice. This migration (speculation) may start in 2010 if Verizon has compelling smart phones, with or without the iPhone. The Palm Pre is the one phone that can do that (with Palm’s WebOS – which is the most innovative operating system since the release of the Apple iPhone). Now that the Palm Pre and to a lesser extent Blackberry (with an improved UI) and Android – will all soon be on the Verizon network, Verizon will be inept to carry the iPhone and handover control of their customers to Apple. The Palm Pre is selling well on the Sprint network, but three factors acted to mitigate sales. Sprint’s perceived customer service problems (which has improved greatly), Verizon’s overtures since the release of the Palm Pre that it will become available on their network, and Sprint’s initial subdued advertising of the Palm Pre phone. Without doubt the WebOS user interface (UI) software for the Palm Pre phone, which was released to rave press reviews, is more innovative than the UI for the iPhone. With Verizon’s more aggressive advertising, they can target those 50% unsatisfied AT&T iPhone customers. AT&T’s problem has definitely improved the branding power of the Verizon Network, which has already benefited from the real and perceived quality of the Verizon FiOS Internet Service.

The last thing Verizon needs is for them to handover unprecedented control of their assets to a company like Apple in what would amount to a land grab of their customers. A company that has the power to take your customers to another carrier is tantamount to playing with fire.

iPhone/AT&T:
- hottest phone in the world
- desktop Web browser that alone accounts for more than half of all mobile Web browsing bandwidth
- unlimited data plan which encourages the users to eat up data at a high rate
- network congestion at peak times in some areas

Verizon:
- small selection of proprietary phones, typically years behind GSM
- has never had a phone on its network that has a desktop Web browser (their upcoming Droid phone will be their first) so all Verizon users combined do much less mobile Web browsing than just AT&T’s iPhone users
- no unlimited data plans, after 5GB you pay through the nose per megabyte, you’re encouraged to use much less data than you might otherwise
- no network congestion at peak times

It’s my simple opinion that AT&T’s desktop Web browsers on phones and unlimited data have a direct relationship to their network congestion issues, and that Verizon’s opposite position with no desktop Web browsers and no unlimited data has a direct relationship to their lack of network congestion issues. Whoever had the iPhone right now would be suffering and would be building out as fast as they can.

Finally, consider that if Apple made Verizon an iPhone, Verizon would have to compete with AT&T in iPhone pricing. If the iPhone 3G is $99 at AT&T with $30 per month for unlimited data and at Verizon it’s $99 with $50 per month buys you 5GB and 10 cents per megabyte after that then how could anyone realistically buy the Verizon phone?

My iPhone bill for the past 2.5 years has been pretty much exactly $80 per month every month. Looking at the data usage, I would have had to pay over $10,000 extra to Verizon for bandwidth above the 5GB cap. We’re talking about a completely different investment. We’re talking about a completely different kind of phone usage.

So I wouldn’t hold my breath for a Verizon iPhone before iPhone 4G, if Verizon builds out standard 4G so they can run iPhone and 99.5% of the world’s phones.