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
Jefferies downgrades Motorola on fears of market share loss to Apple iPhone – January 10, 2007
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49 Comments

  1. This is a classic reflection of Steve Jobs’ arrogance with making big business deals. He has always wanted the sale and distribution of anything involving Apple on his terms (Apple Hardware – Best Buy, Circuit City; Apple as distributor – movies, music). When it comes to the end-user dealing with lots of defects on their new releases, Apple is never apologetic and sometimes will quietly offer exchanges, while most of the time you are left to inconsistent service policies quoted by incompetent AppleCare support repts.

    Because of Apple’s clout, big retail and big media has always been forced to comply to his every whim, and we are now seeing the same with Cingular.

    Even though Apple’s products are great, I don’t think Apple’s clout will last forever, and I certainly don’t think that there “management by arrogance” strategy is sustainable.

  2. This could not have been a serious discussion with Verizon using CDMA. Cingular, with GSM (as well as most of the world) is the future, more features, lighter phone, better battery life. Besides, Verizon is the most self-righteous ‘take or leave it’ cellphone company, so thanks for saying no to Apple. Apple may be self-righteous as well, but at least they have a multitude of reasons for being so.

  3. >MDN Spin Zone :: How Verizon blew the Apple iPhone deal

    Shame on them for not wanting to bend over while smiling and standing on one leg while Apple slaps them around and steals their lunch money!

    You fellas are running the Spin Zone on high lately.

    MPC Guy

    It’s okay for me to say this because I typed it on a Mac.

  4. There was never any chance of Verizon agreeing to work with Apple. Verizon thinks that VCast is their future, and they’re making too much money ripping off their customers with it to give it up for any phone.

  5. I’m bummed about the Cingular deal. I’ve got Verizon here in Socal and it’s the best service for coverage. I shudder to thing about going back to Cingular and their “customer service” department. Ugh… Also, I use a program called MySync to sink my palm treo, works great with .mac. Even had the guys at the genius bar show me how to set it up with the iMac.

    Dang I want an iPhone, but Cingular’s lack of Customer Service is a real draw back.

  6. Yup, Verizon blows and I absolutely hate being stuck with them. When you walk into one of their stores in the region where I live its like walking into a mafia reception room. If you’re not interested in buying into whatever their current deal is you get verbally abused, and when you make it clear that you are NOT going to buy anything that they want you to buy, they literally turn and walk away – I’m not exaggerating even a little – its truley incredible. I’ve been there four times, one of those times was for service (and I have to say that it is friendly and fast), and the other three times it was to upgrade our service. We always end up driving a little farther and going to a Verizon associate store where they can at least muster an ocassional ‘Please’ and ‘Thank you’.

  7. MPC Guy – are you new here? MDN‘s headlines are part of the humour of this site. It is flame-baiting plain and simple. Most people know not to take it too seriously. This is an ad-revenue supported site, and controversial headlines lead to more page impressions.

    In all seriousness, you are right. It was pretty funny to compare the headlines from this story as they came in across the RSS feeds:

    AI: Verizon passed on 5 year exclusive iPhone deal
    iLounge: Verizon passed on exclusive iPhone deal
    MacRumors: Verizon Rejected iPhone deal due to Apple’s terms
    MDN: The freedom hating terrorist lovers at Verizon screw up the deal for the device that will likely end up saving the human race

    I am surprised they didn’t include a graphic of the Verizon VP in a Nazi uniform snorting coke off the bible while listening to his Zune.

  8. “This is a classic reflection of Steve Jobs’ arrogance with making big business deals. He has always wanted the sale and distribution of anything involving Apple on his terms”

    What is so arrogant about wanting to control distribution? It’s called good business sense. Apple is a company that relies heavily on branding of its products to create the buzz and demand that allows them the higher margins they get. It’s what companies who have premium products do.

    All you have to do is looks at how Macs were distributed before Apple retail came along to realize that it makes a lot of sense to be able to have your own distribution channel. Prior to Apple retail, Macs were often sitting on messy shelves, covered in dust, with half working systems, being sold by people that were hostile to your product.

    We all know how that changed once Apple retail came along and all Steve wants is to be able to create the same kind of selling environment for the iPhone.

    Doesn’t make him arrogant, it means he’s smart. A lot smarter than people like you want to give him credit for.

  9. Mike K….

    For some of what they slant, it’s no biggie at all. But damn… they sure spin things in a big way at times. You’re right though… compared to a real news site, MDN’s Takes and Titles are laughable. Just as funny, people here get so wound up over topics. You make one critical post and everyone jumps on you like you stole their girlfriend.

    BTW… I think you calling me out without using common MDN vocabulary (jackass, stfu, wannabee, idiot, and such) speaks highly of you. Thanks and G’day, Mike!


    As for the iPhone on Cingular/AT&T… I hope it turns out to be a good combination. Contrary to their ads, we get lots of dropped calls up and down the west coast.

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