Android To Lose From Verizon iPhone?

Don't bet on it.

Verizon is set to announce plans in New York today to bring the iPhone to its network, according to a person familiar with the matter. A Verizon iPhone may cannibalize about 2 million Android phone shipments a year, said Dan Hays, partner at management consultant firm PRTM. Gartner Inc. says 20.5 million Android devices were sold in the third quarter.

Bah.

There are already rumors that Verizon is going to offer unlimited data service in order to poach off AT&T customers (who now have a data limit cap that is quite-easy to exceed.) This would be a monstrous mistake on their part, but I can see it being one they'll make.

See, here's the problem - all these nice Smartphones are great for doing things like sitting on the commuter train and watching streaming video or listening in the car to streaming audio such as Pandora. But there's a problem with that, which is the data requirement to keep the voracious appetite these applications generate fed.

Carriers have a generalized problem with that data appetite - it's expensive to feed. Wireless data is inherently a shared medium - that is, what you use someone else cannot, and there is only so much spectrum, and thus so much data, that can be passed in a given area covered by a given tower. In addition each tower must be "fed" by a backhaul circuit that has enough capacity to shove the bits down the pipe at the required speed.

This is a non-trivial problem and yet is unappreciated. As the users poured onto AT&T's network, along with other carriers, the "all you care to eat" data plans disappeared. All now have some form of cap, with only T-Mobile being a "soft" one (they limit speed when you exceed your quota as opposed to attacking your wallet.)

Like all carriers, AT&T has a general problem in that 5% of their users generate the load issues in a given area. Capped and overcharge-billed data plans are an attempt to control this. If Verizon actually offers an unlimited data plan they'll poach users all right - the ones AT&T doesn't want! When you add the "subsidy" (really nothing more than consumer leverage - that is, debt - you know - "buy now pay later") to the picture Verizon is likely to find that they've walked right into a black hole.

The idea that Verizon will nearly double Apple's iPhone shipments in the US is a fantasy. Yes, those customers who are on AT&T and want to switch, and are out of contract (or run out during the year) will move over, and have to buy another device. But those will be customers AT&T loses, and the upgrade cycle for them on AT&T will end.

Ultimately the iPhone craze will die out. Closed-ecosystems almost-always eventually lose to open ones, if only due to diversity. And while there will always be Apple fanboys who will buy anything with that icon on it, the fact remains that cannibalization signifies that a market is maturing - not show the sort of hyper-growth that many are looking for.