) Communications Inc., last week announced that it would open its wireless network to any devices, not just Verizon-branded cell phones. The Associated Press noted that the company’s chief operating officer contributed the move in part to Verizon’s desire to cut costs.
In the past, Verizon has been fiercely protective of its network, tightly controlling the devices and services – such as music downloads – that are made available to customers. This latest announcement departs significantly from the company’s traditional strategic approach.
Consumers in the marketplace have been demanding more flexibility for their mobile phones. Verizon is seeking to capitalize on this demand, even though it has the potential to turn the company into a basic provider of wireless access instead of a value-added content provider.
Although this loosening of the strings is not scheduled until late next year, Verizon is hoping to carry traffic generated by third-party companies. The company hopes this traffic could build in access to Verizon’s data network not just in phones, but also digital cameras and other consumer gadgets used in the market.
At an investor conference hosted by UBS on Wednesday, COO Denny Strigel shared: "We think it's a phenomenal new source of revenue for us. It is also, to be totally fair here, something which helps us reduce cost in this new business."
Verizon has structured its strategy such that the third parties will handle marketing and customer service and pay the company based on the network usage racked up by their customers. Stringl highlighted that this would not be something customers will buy through Verizon.
According to Strigl, Verizon will not be the only company taking this road. "My gut feeling is that our competitors will arrive at the same conclusions we did," he said. If so – Verizon will have significant competition that will require a clear-cut strategy.
) Nextel Corp. – a Verizon competitor – is already providing a similar service to Amazon.com Inc. Last month, Sprint launched a reading device for electronic books in which e-books are downloaded wirelessly through Sprint’s network.
It is possible that Verizon could run into problems if too many customers try and use its data network at the same time. Verizon does plan to charge by usage and popular video service that takes full advantage of the network would be a boost for the company – but only if the network can handle it. If not, customers will quickly look elsewhere for their solutions as they will have little patience for poor performance.
Susan J. Campbell is a contributing editor for TMC (News - Alert) and has also written for eastbiz.com. To see more of her articles, please visit Susan J. Campbell’s columnist page.
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