Shades of a Master Plan: Why Apple Won't Get Beaten AgainS

The iPhone is coming to Verizon, soon. That's the blinking-neon-light message tucked inside the iPad's arrival on Verizon. Apple is in this to win it.

It's always been politics, not chipsets, that have kept the iPhone off of Verizon. Steve Jobs famously offered the iPhone to Verizon before AT&T—then Cingular—and Verizon turned down Apple's demanding terms. If there is a carrier with an ego, it's Verizon. It calls the shots with partners, whether it's RIM or Microsoft—when the phone launches, how it'll be marketed. Phonemakers should be happy Verizon's allowing their phone on its network. Knowing Apple, you can see how this didn't work initially.

A few years later, things are different. The iPhone plays no small part in the ridiculous, record-setting income that AT&T generates on a quarterly basis. Apple sells millions of iPhones on AT&T every quarter. It's the one thing AT&T has that Verizon doesn't. AT&T's exclusivity has no doubt cost Verizon customers (like my entire family, who I dragged over to AT&T so I could get an iPhone). Verizon's CEO has all but publicly panted how he wants the iPhone on its network. It would be Verizon's crown jewel, especially if the influx of data-hogging customers didn't pout prolifically about shitty service, as the hordes have done on AT&T. "The iPhone on Verizon. It actually works."

For Apple, it's all about scale. At a superficial level, the math is pretty simple. Verizon is the largest carrier in the US, with over 90 million customers. And the fact is, most people buy the phones that are available on their carrier—they very rarely chase phones. An iPhone on Verizon instantly doubles the number of potential iPhone owners, and quite possibly entices a bucketful of folks on the other carriers who are either fed up with AT&T, or not willing to jump on the Death Star from Sprint and T-Mobile.

Shades of a Master Plan: Why Apple Won't Get Beaten AgainS

Why would Apple go to Verizon now, given the lucrative arrangement it's got with AT&T? It's gotta be good enough to maintain exclusivity, since the iPhone's available on multiple carriers in most European countries. One word: Android. Take a look at this chart from Gartner, depicting worldwide mobile OS marketshare. Android's marketshare last year was just 3.9 percent, compared to 14.4 percent for iOS. Just a year later, Android will skate past iOS with 17.7 percent to iOS's 15.4 percent. Daring Fireball's John Gruber—a plugged-in dude if there is one—noted back in April that "The number one priority at Apple is to grow mobile market share faster than Android. Anything that is not directly competitive with Android is on the back burner."

The reason Android's marketshare is exploding is quite simple: There are many tens of Android handsets, available on every major carrier in the US. There's only one iPhone, on one carrier.

A favorite parallel is to compare Android to Windows and iPhone to the Mac, determining that Android will beat the iPhone the same way Windows beat the Mac over a decade ago, relegating it to small-but-incredibly-profitable segment of the market. (Anybody can use and license the Android software, just like anybody could license the Windows software, and the Mac was tightly integrated, just like the iPhone. Ergo, history repeats itself.) That comparison is flawed for a few reasons, but even so, Apple could still do quite well holding just 15 percent of the market—right now it's pulling in nearly half of the mobile profits. It seems clear that Apple isn't happy with that though, the way it's happy with the Mac. The past can still sting. Apple didn't want just 10 percent of the PC market, after all. It wanted it all.

So Apple's avoiding those same mistakes. A major reason the Mac lost to Windows was retail distribution. It's why you can buy an iPhone and iPad in the Apples Store or Walmart or Best Buy. The experience isn't as nice as the one in an Apple Store, which Apple must loathe, but it needs to be everywhere. The final piece is Verizon. Exclusive dominion as the only decent smartphone on Verizon is Android's biggest advantage in the US, and the major marketing push from Verizon—in the absence of the iPhone—is why so many people in the US even know what a Droid is. Taking that away from Android at the same time it's got a brand new platform is doubly awesome for Apple.

Apple's got the developers. It's got the mindshare. And soon, it'll have the half the country able to buy the iPhone.