Verizon rejected deal for iPhone

Verizon, the largest US cell phone service, rejected an exclusive distribution deal for the Apple iPhone because of restrictive terms from Apple. In a USA Today article Verizon says "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."

Verizon has distribution deals with Wal-Mart, Best Buy, BJ's, and Circuit City. Apple would not allow Verizon to sell the iPhone through those stores...only Verizon corporate stores and Apple stores.

Cingular agreed to Apple's terms and will be the exclusive distributor of the phone for 5 years. The phone is expected to cost $500.

The iPhone is a beautiful piece of art, but I don't think it will be wildly successful in a financial sense. Apple needs huge distribution to amortize the costs and they aren't going to get that with Cingular. Second, the cost is at the high end of the range which will limit its appeal to the masses. Third, processing email on the iPhone will be much harder than on the Blackberry, Q-phone or other keyboard devices. The touch screen is not very effective for typing more than a few words.

This controlled distribution strategy sounds a lot like the original Apple Computer model...Apple stores only, premium price, etc. Maybe Apple is happy with 5% market share in personal computers but I thought they would take a different approach with the iPhone.  Time will tell if this is a winning strategy.

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Comments

[AdamD]

When the iPhone was announced, everyone I talked to said great things about it. Price is undeniably an issue, but it seemed like everybody wanted one, even my staunchest MS friends.

And I'm not sure how you can be so certain that their keyboard is tough to use, having not used it yourself.

[DonDodge]

Adam, I agree people are saying good things about the design and appearance. I have said many positive things myself in several blog posts.

I have used touch screens on many different devices...all of them with big screens, and all of them for entering a few words like names or passwords.

The problem with touch screens is that there is no tactile feedback like there is on a button or key so that you know the touch actually registered. That is why many touch screens use an audio cue to let the user know that it recorded a touch. Without a tactile or audio cue the user will hit the same area several times thinking it didn't take.

The second problem is that the touch screen keyboard takes up so much space on the screen that there is little room left to display much of the text that you are writing...so you aren't sure what you have already written. The iPhone screen is relatively small. When the touch screen is activated it takes up most of that screen, and the touch keys are still tiny, hard to see, and hard to press without touching an adjacent "key".

My take is that the iPhone is a music/photo device first, a phone second, and an email device as a distant third. That may be fine for most people. But for people who want to use their phone for quick responses to emails they will probably want to choose a Motorola Q-phone or Blackberry.

[AdamD]

Thanks for the clarification. I agree it looks like the iPhone is more about the flashy stuff than the utility.