Verizon Tears Down the 'Walled Garden'

Busting down the "walled garden" traditionally enjoyed by the U.S. cellular giants, Verizon Wireless will be throwing open its CDMA network to users, devices and applications in the second half of 2008.

The Basking Ridge, N.J.-based operator announced this morning that it plans to allow any CDMA devices that meet straightforward connectivity requirements to get on its network. These so-called "bring-your-own" customers will be able to use their devices to download any application from the CDMA network. (See 'Open Access' Gets Closer and Verizon Goes 'Open'.)

"This is a whole new model, a whole new paradigm, not just for Verizon Wireless, but for the entire wireless industry," crowed Verizon Wireless CEO Lowell McAdam on a conference call this morning. "Over time, what's referred to as the 'walled gardens,' they'll come down some."

Verizon said it intends to continue the "open access" strategy as it moves towards fourth generation (4G) wireless networks, likely towards the end of the decade.

The bold move makes Verizon the first major operator in the U.S. to open up its network to customers from other CDMA operators and -- potentially -- to a flood of new CDMA devices. "We believe anyone that's paid for their cellphone should be able to move," McAdam said. "In fact, we encourage them."

The other "big three" cellular operators, AT&T Inc. (NYSE: T), Sprint Wireless (NYSE: PCS), and T-Mobile USA , use a "walled garden" policy, locking devices to the networks and keeping a tight leash on what applications can be downloaded onto phones.

Ironically, Verizon has been one of chief opponents of Google (Nasdaq: GOOG)'s seemingly similar call for "open access" requirements on the C-band of 700MHz spectrum, which is due to be auctioned off in January 2008 by the Federal Communications Commission (FCC) . (See Now Wait for Wireless Broadband .)

While acknowledging that there has been "a lot of talk" about open access over the past year, McAdam claimed Verizon's move isn't so surprising. "We've been talking about this for a long time... We've listened to our customers and customers from other wireless operators," he said. "We think this model is the best model to position us for the next phase of wireless growth."

McAdam stressed on the call that the opening up of its network won't mean that the operator will drop its "full service" Verizon-approved portfolio of devices and services. "It will complement, not replace, our full-service model," he said.

The carrier getting the hardest smack in the face here is Sprint. The smaller CDMA operator has already been losing a steady stream of its customers to rivals over the last few quarters. This Verizon move could potentially hasten the flow. (See Sprint Stumbles Again.)

During the conference call, Unstrung specifically asked if Verizon will allow Sprint users and devices on its network. "Simple answer: Yes," replied McAdam.

At press time, the Sprint spokesperson that is dealing with the open access issue hadn't returned Unstrung's call for comment.

The move is less likely to affect AT&T and T-Mobile immediately. These operators use GSM technology for networks and phones, so customers cannot change carriers without also changing devices.

Amusingly, McAdam and his crew had to keep reiterating this fact due to a barrage of questions about whether the Apple Inc. (Nasdaq: AAPL) iPhone, tethered to AT&T's service, could be taken to Verizon's. "The iPhone, as it exists today, will not work on our network," McAdam said more than once.

Unlocking the Future
What holds sway today, however, isn't the big news for device vendors, operating system providers, and application developers. It is how Verizon's move will open up the U.S. market for them in the future that matters.

For instance, as Verizon indicated on the call, Apple could build a CDMA iPhone that isn't locked to any network. The strategy could also help Google to get its Android open-source OS and application platform out to the wild, as well as providing Microsoft Corp. (Nasdaq: MSFT), Palm Inc. , and others with more opportunity to sell their wares. (See Google Makes Mobile Move.)

The implications go beyond cellphones and smartphones. Verizon is anticipating that many more wireless devices will be able to roam onto its network as time goes on. The firm is anticipating everything from gaming consoles to home appliances and PDAs getting tiny slices of its spectrum in the future.

Verizon intends to hold a developer's conference in the first quarter of 2008 to lay out its minimum technical specifications and requirements for devices and applications. Device vendors will pay Verizon to test their devices for connectivity compliance in the lab. "We do not expect this to be a difficult or lengthy process," promises CTO Dick Lynch. "The provider of the device will have some fee to pay. It is going to be surprising reasonable."

The operator isn't going into many details on its consumer pricing models yet, but a usage-based model is expected to be the norm. In practice, this means users who download gigabytes of video will be paying far more than users that update their fancy new Kindle eBook once or twice a month. (See Book to the Future.)

— Dan Jones, Site Editor, Unstrung