Open Questions for Verizon's Open Access

Developers and device makers get their first taste of what Verizon Wireless means when it promises to open its mobile network to "any device, any app"

by Spencer E. Ante

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In the wireless industry, "open access" has been the buzzword of the past year. Problem is, it can mean almost anything to anyone.

What it means to Verizon Wireless is a little bit clearer now, although many factors remain a mystery. On Mar. 19 the second-biggest U.S. carrier revealed for the first time details of its plan to allow more outside devices and services on its mobile network, a surprise strategy shift announced late last year.

In a packed room at a New York hotel, a slew of Verizon executives unveiled some technical specifications and policies that explained how device makers would go about developing new handhelds and getting them tested and certified to connect with Verizon's network. "Today is the opening of the door—and it's a huge door," Verizon Wireless CEO Lowell McAdam said afterward in an interview. "We've kept the door closed. It served us well for 20 years. Now we're saying to the smartest innovators, come work with us." McAdam says he is hopeful the first open-access devices will arrive later this summer.

As Many Questions as Answers

Many of the attendees at the Open Development Device Conference said the event marked a good first step toward defining an open-access model. But they noted that many questions remain.

Among the biggest concerns: Verizon did not divulge any details of the pricing plans customers would be offered to use such devices. Nor did it publish any specifications to help software developers create applications for the network. In fact, the company distributed materials to attendees online, stressing that the company "will not approve, test, or service third-party applications that customers load onto their Open Development Devices."

And despite numerous claims by Verizon executives that testing and certification for new devices could take as little as four weeks, many attendees are skeptical the process will be that easy. "I was most impressed with how they thought through the process," says Bill Alberth, Motorola's (MOT) chief technology officer for mobile devices based on CDMA, which is the wireless technology used on Verizon's network. "But I want to see more details on testing."

Mobile carriers such as Verizon have always tightly controlled which devices and applications ran on their networks, supporting only phones sold through their own retail stores or distribution partners. The carriers have insisted this approach assured customers better service and fewer glitches. But critics have long argued that those restrictions steered revenues to the carriers while imposing costs on partners, thereby stifling the incentive for innovation. "[Wireless operators] could be doing so much more if they weren't so darn frustrating to work with," says Adam Grosser, a general partner with the venture capital firm Foundation Capital, who has worked with many telecom carriers over the years. "The qualification to get a product in their network is averaging 20 months. It's just brutal."

Potential New Revenue Stream

Last November, Verizon Wireless, a joint venture between Verizon Communications (VZ) and Vodafone (VOD), decided a radical shift was needed to generate new sources of revenue as the U.S. wireless market reaches saturation. About 80% of the U.S. population, or more than 250 million people, now use a cell phone. With the supply of first-time customers dwindling, Verizon chose a course it hopes will generate novel new phones and applications that can lure users from rivals or inspire existing subscribers to spend more money each month.

Verizon's U-turn came after months of mounting pressure from government regulators and Internet companies such as Google (GOOG) to open the nation's wireless networks. As a result of that push, one of the blocks of spectrum that was just sold in a federal auction carries certain open-access requirements for the owner. The Federal Communications Commission has not disclosed the identities of the winning bidders yet.