Verizon's iPhone Deal Ups Smart Phone Competition

Verizon announced Tuesday that it will start selling a version of the iPhone. The communications company is hoping that new and current customers will sign up for Apple's popular phone. The deal also increases competition in the smart phone market.

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Verizon wireless announced, yesterday, that it will begin selling its own version of the iPhone. This move is being called a game changer in the world of smart phones. Until now if you wanted one of the iPhones you had to sign up with AT&T. That was it. Now Verizon will begin offering the phone to its 93 million customers. NPR's Jim Zarroli looks at how the competitive landscape has shifted in wireless.

JIM ZARROLI: Tim Cook is chief operating officer at Apple and he says ever since his company started selling the iPhone in 2007, he's heard the same question over and over again.

Mr. TIM COOK (Chief Operating Officer, Apple): I can't tell you the number of times that I've been asked, and my colleagues have asked, when will the iPhone work on the Verizon network?

ZARROLI: The question has come because Verizon didn't sell the iPhone, at least until now. Yesterday, Verizon said it will offer the phone starting at $200 each for those who sign up for a two-year service contract. Verizon wouldn't talk about its monthly pricing plans, nor would it say whether it would offer unlimited data plans to customers, but it did say it will sell the phone to some of its customers online, and then a bit later in Apple and Verizon stores. Verizon Wireless CEO Dan Mead.

Mr. DAN MEAD (Chief Executive Officer, Verizon Wireless): We are confident that wireless consumers everywhere will welcome this device, will welcome this partnership, and will welcome the superior experience of the iPhone 4 on the Verizon Wireless network.

ZARROLI: Verizon and AT&T are the countries two biggest wireless carriers and they compete intensely. The fact that AT&T has been the exclusive distributor of the smart phone since its launch was a huge advantage for the company. But now, that advantage has probably been neutralized. Forrester Research analyst Charles Golvin:

Mr. CHARLES GOLVIN (Analyst, Forrester Research): It certainly takes away one of the most powerful pieces of ammunition that AT&T has had over the past several years: that if you wanted the iPhone, AT&T was where you had to go to get it.

ZARROLI: With some 93 million customers, Verizon Wireless has a huge untapped market for the iPhone. And there are plenty of potential customers who may have thought about getting an iPhone, but didn't want to switch carriers. Verizon is also hoping to lure some disgruntled customers from AT&T, people like Eric Sunday(ph). He bought the iPhone when it first came out.

Mr. ERIC SUNDAY: I think AT&T has had the stranglehold on it, so I've seen them take away like the unlimited data plan and some different things like that that I wasn't necessarily happy with. And I think if you have more competition between the carriers, it's just going to be better for the consumer.

ZARROLI: But Sunday can't change carriers now. Like a lot of people, he signed a long-term contract with AT&T. Golvin says because of that, Verizon shouldn't count on taking too many customers away from its rival.

Mr. GOVLIN: Most of those iPhone customers are already on a long-term contract with AT&T and I think not very many of them will be willing to pay the significant early termination fee to get out of that contract and go get the phone on the Verizon network.

ZARROLI: But over time as those contracts expire, a lot of customers will have a chance to reassess their loyalty to AT&T. Then too, Apple tends to update and redesign its products on a fairly regular basis, something that invariably generates a lot of buzz. As those new versions of the iPhone come out, the competition to win customers over can only intensify.

Jim Zarroli, NPR News, New York.

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