How Verizon blew the Apple iPhone deal

“Verizon Wireless, the No. 2 U.S. cellphone carrier, passed on the chance to be the exclusive distributor of the iPhone almost two years ago, balking at Apple’s rich financial terms and other demands,” Leslie Cauley reports for USA Today.

Cauley reports, “Among other things, Apple wanted a percentage of the monthly cellphone fees, say over how and where iPhones could be sold and control of the relationship with iPhone customers, said Jim Gerace, a Verizon Wireless vice president. ‘We said no. We have nothing bad to say about the Apple iPhone. We just couldn’t reach a deal that was mutually beneficial.'”

Cauley reports, “Verizon’s decision to pull the plug on talks sent Apple into the waiting arms of Cingular, which will be the exclusive U.S. carrier for the iPhone. The multifunction device is expected to ship in June and cost about $500.”

“According to Verizon, Apple CEO Steve Jobs insisted that he have hard control over iPhone distribution,” Cauley reports. “The problem? While Apple and Verizon stores would have it, Wal-Mart, Best Buy and other Verizon distributors could have been left out.”

Cauley reports, “Cingular won’t talk about the financial terms or say how long its iPhone exclusivity lasts, but two people with direct knowledge of the deal say it’s a five-year contract. The exclusive is USA-only, leaving Apple free to market its iPhone globally.”

Full article here.

[Thanks to MacDailyNews Reader “LinuxGuy and Mac Prodigal Son” for the heads up.]
History will show that Verizon made a very big, very costly mistake. That they have a VP willing to explain all the details to a USA Today reporter only emphasizes Verizon’s general stupidity.

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RealMoney: Apple just blew up the whole damn mobile-phone supply chain with its new iPhone – January 11, 2007
eWeek: Apple iPhone fallout: ‘They must be crying in Nokia-ville and other telephony towns today’ – January 10, 2007
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  1. I don’t like Verizon.

    They are nazis the way the control how and what is allowed on the phone.

    Funny I say that now that I think about it, but Steve will be too. But that is Steve doing it and not the cell phone company.

    Plus, Verizon has always been not as mac friendly as Cingular.

  2. Verizon is really a stupid company – they don’t get it. That VP ought to be fired!

    The company is not Mac friedly. When I bought my V810 a few years ago they tried to sell me a CD installation kit to sync my phone with my TiBook. they had no idea what iSync was all about and said that it couldn’t be done. What a bunch of idiots. All I needed was a syn cable which I bought at Readio Shack.

  3. >That they have a VP willing to explain all the details to a USA Today reporter only emphasizes Verizon’s general stupidity.>

    That VP will either get a raise or a severance bonus of $200 million or so.

  4. I, like Denny, have seen many, many people that have had a hell of a time with Verizon in terms of syncing their “smart phones” with their Macs. Verizon is not Mac-friendly at all to say the least.
    I think that Cingular is a better choice as a US carrier.

  5. The truth is that verizon has the best network in the united states of america. But they lack international networks (phones do not work properly over seas). Edge and gprs are slow. The emails and multi media that verizon supply (data) is the fastest system out(Cdma) for usa only. Apple should and hope to change in the next 5 months should go with hsdpa.

  6. No biggie. The iPhone still won’t be a success because I predict that Cingular’s greed will prevent it from happening. Expect to pay more than $100 a month to be able to use all the features of the iPhone.

  7. Apple has a strategy to establish iPhone’s market. Like iPod, distribution channels will grow once the phone is established as a leading product. If it becomes popular, greater distribution will also follow.

    I keep wondering if Leopard will have some sort of tie-in to the iPhone beyond iTunes and such.

  8. Can you imagine the money stream into Apple’s coffers if Apple gets a piece of the monthly contract revenue? That is implied in the article as a possibility. That would be about the only reason I could fathom as the quid pro quo for giving Cingular five years iPhone exclusivity in the USA.

  9. Bunk!

    Verizon uses CDMA. If Apple went with that, they would have the market in S. Korea, Japan, andthe US. Forget the rest of the world.

    Saying that, Verizon is the best carrier in my area.


  10. The question is: how much control does Apple have over the plans and what concessions, if any, did they negotiate for the same. If volume sales is the target then I don’t see Apple risking the business model by tolerating overpriced plans.

    Irressistible as the iPhone may be, overly complicated, misleading plans, or draconian extra charges for busting limits, are no-go items for me – easily.

  11. Maybe this one should have the chair graphic too — because that’s probably what Steve Jobs did when he read this. Verizon going public with the negotiations is very antagonistic. I doubt Apple will ever negotiate again without the company signing a nondisclosure agreement.

  12. In light of the fact that I have NO cellular service choices except Verizon, this makes me upset at both Apple and Verizon. Mutual control freakage I guess…

    News like this only proves it really is Monday morning – Crap.

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