Verizon Embraces Google's Android

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Verizon envisions a similar explosion of wireless applications. The company currently offers about 800 applications such as music, games, and videos. The menu might have been even larger by now if not for the rigorous testing that Verizon requires of each developer for every application. "Small companies have a hard time affording the development," says Greg Pelling, CEO of CounterPath, a Canadian provider of Internet calling software for Verizon Communciations and other phone companies. Google is hoping the large, open scale of its Android platform will remove that hurdle, slashing development costs. So does McAdam, who expects a flowering of tens of thousands of applications.

FCC Wireless Spectrum Auction

Verizon's conversion to open systems began last winter when McAdam, freshly promoted to run Verizon Wireless, began thinking about the implications of a federal auction of some especially valuable wireless spectrum in early 2008. At that time, Google and other tech companies began lobbying the FCC to require that auction winners allow any device or application on that spectrum. That got McAdam thinking it might be time to open up Verizon's airwaves. He batted the idea around with Chief Marketing Officer John Stratton and Chief Technology Officer Richard Lynch.

In the spring, Verizon Communications Chief Operating Officer Denny Strigl challenged McAdam to crunch his ideas down on paper. "Denny Strigl says if you can't put it on half of one side of paper, you haven't figured it out," says McAdam. "I kept playing around with it until I got it to one-third of one sheet of paper." Separately, Verizon CEO Ivan Seidenberg laid down his own challenge, urging McAdam to find ways to keep Verizon Wireless growing at a time when a quarter-billion of the nation's population already has cell phones, limiting the available crop of first-time customers.

By late summer, McAdam walked into Strigl's office on a Friday night and struck up a conversation about his crumpled paper. "Denny's eyes lit up," says McAdam. Then Seidenberg walked into the office, and after McAdam laid out his thoughts, the CEO said the open model might even help solve the growth challenge.

With a green light from above, McAdam held a meeting in October with his top managers and explained the new direction the company would be taking. Most of his staff got it, though some were apprehensive. "Others said, 'Whoa, this is a big change,'" recalls McAdam.

Jumping on the Bandwagon?

Then Google unveiled its Android platform (BusinessWeek.com, 11/6/07). While Sprint Nextel (S) and T-Mobile (DT) were among the 34 charter members of this Google-led "Open Handset Alliance," the two biggest U.S. carriers, AT&T (T) and Verizon Wireless, were notably absent. "To get into that press release really didn't do anything," says McAdam. "We needed to understand the details of that operating system."

When Verizon executives and engineers examined Android's software tool kit, however, they were impressed. "Clearly the Android system gives a lot of developers the opportunity to develop applications for a wide range of handsets," says McAdam. Not only did the company decide to support Android, but McAdam says the new platform was a key influence in adopting open access. "Android really facilitated this move,"says McAdam.

Some critics are suspicious of Verizon's cellular glasnost, alleging it's merely trying to curry favor with regulators or scare rivals from bidding in the FCC auction. Yet there's little doubt Verizon also recognized that market demand for open networks would be impossible to hold back indefinitely. "Five years from now the industry will be open like us," McAdam says. "I think we could be at an inflection point."

Business Exchange related topics:
Verizon Wireless
Google Android
Wireless Communication
Mobile Industry

Ante is an associate editor for BusinessWeek.