Verizon Rejected iPhone Deal due to Apple's Terms


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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.

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."

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.

Apple and Cingular (which now is solely owned by AT&T and adopting that brand name) have declined to discuss terms of their alliance. But the Apple-Verizon talks offer a peek into the computer giant's thinking.

According to Verizon, Apple CEO Steve Jobs insisted that he have hard control over iPhone distribution.

The problem? While Apple and Verizon stores would have it, Wal-Mart, Best Buy and other Verizon distributors could have been left out. "That would have put our own distribution partners at a disadvantage" to Apple and Verizon stores, Gerace said.

Customer care was another hitch: If an iPhone went haywire, Apple wanted sole discretion over whether to replace or repair the phone. "They would have been stepping in between us and our customers to the point where we would have almost had to take a back seat ? on hardware and service support," Gerace says.

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.

Natalie Kerris, an Apple spokeswoman, declined to comment on any aspect of this story.

Mark Siegel, a Cingular spokesman, said, "We think this is a win for Apple, and it is a win for Cingular."

Siegel declined to comment on customer care plans but said Cingular would field calls related to the wireless service. "I don't want to leave the impression that these (iPhone) customers are not ours. They are."

Siegel would not say whether Cingular distributors, which include Wal-Mart and RadioShack, would get the iPhone. The deal announcement referred only to Cingular and Apple stores and their websites.

souricon.gif News Source: USA Today

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When talking about cell phones, exclusivity isn't too much of a good thing as you can't just switch carriers on a whim. I don't think the iPhone will get too popular at its price point and the required 2-year contract for quite some time.

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So did Apple have plans to make the iPhone a CDMA device or just have a GSM flavor as well as it has a much wider international market? I mean Cingular and Verizon are different technologies. Maybe that could have been a reason as well.

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Makes sense, what if you broke your phone and Verizon told you that Apple wouldn't let them give you a free replacement because your damage didn't qualify....

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Makes sense. I can't blame Verizon for not wanting Apple to get between them and the ability to service their own hardware. Verizon makes money off of repairs, and that could be a huge chunk of money that they would be missing out on.

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I did read.. I'm speculating on what the real reasons were behind the Apple, Verizon deal not going through.

People these days,..

The article clearly states why the deal didn't go through. Verizon rejected it because the terms Apple demanded were too much. You can come up with as many theories make you happy, but there is no reason for Verizon to make up reasons. They rejected ?the iPhone they weren't rejected by Apple...

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I did read.. I'm speculating on what the real reasons were behind the Apple, Verizon deal not going through.

People these days,..

No you obviously didnt read. Apple was rejected, not Verizon.

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If an iPhone went haywire, Apple wanted sole discretion over whether to replace or repair the phone. "They would have been stepping in between us and our customers to the point where we would have almost had to take a back seat ? on hardware and service support," Gerace says.

To be honest.. that is a cheap ass thing. I mean.. nothing is gonna happen to Apple.. If a phone is messed up.. it is Verizon's PR that is going to be damaged.. Shame on Apple for even proposing this.. THey could have given Verizon a set of guidelines or something instead.. but no.. back to the old stubborn Apple.. they will do what they want..

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Not a bad move by Verizon. Now we all know that Cingular probably got a crappy deal from Apple and took it anyway.

I don't know. While I agree that Apple's requirements are a bit to much it might actually make the iPhone better like Mac OS X. The apps will work and look better than what a piece of software on a normal Smartphone does. I actually think this will hurt Verizon IMO. Maybe not at first, but later on I believe it will.

After seeing a lot of iPhone demos, and reading a lot of information on it, I think that once the price starts to drop that the iPhone will become what the iPod is of the MP3 player market, dominate. The iPhone has a lot of useful features that I believe a lot of people will want to take advantage of. And yes it is expensive, but so is the iPod--yet it is #1.

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I don't know. While I agree that Apple's requirements are a bit to much it might actually make the iPhone better like Mac OS X. The apps will work and look better than what a piece of software on a normal Smartphone does. I actually think this will hurt Verizon IMO. Maybe not at first, but later on I believe it will.

After seeing a lot of iPhone demos, and reading a lot of information on it, I think that once the price starts to drop that the iPhone will become what the iPod is of the MP3 player market, dominate. The iPhone has a lot of useful features that I believe a lot of people will want to take advantage of. And yes it is expensive, but so is the iPod--yet it is #1.

We have to see the iPhone in person before we can really garner its strengths and weaknesses properly... Now that my disclaimer is done...

I don't really bit the line Apple is throwing out. They are claiming this phone will be so great because it runs OS X and people like you are assuming that means any OS X app will work on there. That can't possibly be the case. Simply because the hardware in a phone, no matter how powerful of a phone, is far weaker than a desktop PC. Most phones have processors in the 400Mhz and below range and even if Apple pushed that higher they aren't adding a 2GHz chip to a phone. The form factor just won't support it. So that alone means the OS has to be altered and limited in a way to make it functional on the hardware that it will be running on. Meaning the applications it will support will be different and it won't be all that similar to the OS X your familiar with. Apple has made this clear when they said (at least it is rumored?) that the iPhone won't support any third party applications. The only thing it might be able to run that OS X runs is widgets; maybe.

The iPOD is #1 in a totally seperate industry. The MP3 player market was still in its infancy when Apple entered it. The other players who were in it before Apple weren't really pushing the industry fast enough so Apple took the torch and is still spearheading a relatively young industry. The cell phone industry is the exact opposite! It isn't a new industry and it is even looked at as being at or near maturity. There are lots of large established players like Nokia, Samsung, and HTC, for example, that won't be easily defeated by Apple. That is why Apple is only targeting 1% of the cell market! They know the industry will take far more options that are done far better than what they are starting with to even make a realistic dent. If Apple meets its 1% goal we may see a few more iPhones, but i think seeing Apple as knocking the big cell phone makers out of the water is nothing more than a pipe dream; especially if Apple doesn't get phones below $50 with 2 year agreements!

Edited by frazell
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but so is the iPod--yet it is #1.

That's because it came out with a more attractive player to the market ahead of others therefore pulling it ahead of every company. When it comes to the mobile market, Apple won't have that pleasure and will have a very hard time gaining any popularity.

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That's because it came out with a more attractive player to the market ahead of others therefore pulling it ahead of every company. When it comes to the mobile market, Apple won't have that pleasure and will have a very hard time gaining any popularity.

I personally haven't found any mobile phone/mp3 player that appeals to me like what the iPhone does. I have friends who have them and they just don't appeal to me visually or feature-wise. The iPhone looks like a winner to me.

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I personally haven't found any mobile phone/mp3 player that appeals to me like what the iPhone does. I have friends who have them and they just don't appeal to me visually or feature-wise. The iPhone looks like a winner to me.

Gonna agree with you fully here.

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I personally haven't found any mobile phone/mp3 player that appeals to me like what the iPhone does. I have friends who have them and they just don't appeal to me visually or feature-wise. The iPhone looks like a winner to me.

I completely agree. I want to play with one first-hand, of course, but the demos (both Apple-supplied and those on the news) really get me excited about the feature set.

Also, a not on "running OSX" - the big deal isn't that OSX apps will work, it's that the core of the OS is preserved and being used. Core Audio, Core Video, Core Image, Core Animation... it's a promise that the apps that ARE made for iPhone will look, feel, and work great.

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Apple seems to have a hard time making deals with other companies that are mutually beneficial.

Remember when they tried to make a deal with Cisco for permission to use their registered iPhone name, failed, then just used the name anyway?

Verizon is the clear winner in their decision not to partner with Apple, given the terms they would have had.

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Verizon is the clear winner in their decision not to partner with Apple, given the terms they would have had.
I don't see how anyone can say that without first knowing how the iPhone will do in the market. If the iPhone becomes a huge hit like the iPod, will you change your tune and say that Verizon is the clear loser?
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I don't see how anyone can say that without first knowing how the iPhone will do in the market. If the iPhone becomes a huge hit like the iPod, will you change your tune and say that Verizon is the clear loser?

I think your taking stabs in the dark... If Verizon saw the agreement as not mutually beneficial then they saw their burden as being far more than Apple's. With that in mind it meant Verizon saw iPhone's success as costing them more than not carrying it. Since the deal wasn't going to help Verizon, least in their eyes, it wouldn't be possible for the iPhone becoming a top phone to be a smack to Verizon.

Although since none of us saw the agreement or heard the negotiations we don't know what the exact terms or hotspots were. As a result, we all have nothing more than guesses to shoot off...

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It was because Apple was being arrogant and asking for too big of a cut from Verizon. Apple needs to do drop this notion that the world owes it something. Drop the arrogance, you are NOT inventing anything!

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