Hey Verizon: What’s Your Beef With Windows Phone?
The Nokia Lumia 900, put on store shelves just two days ago, is one of this week’s hottest topics. It may even be the most-talked-about device in the history of Windows Phone. But while it and its less-buzzworthy cousins, the HTC Titan II and Lumia 710, do their part to grow the platform on two of America’s wireless carriers, elsewhere the platform is stagnating. The other two companies offer a single Windows Phone apiece, each one seeming like an aging, ineffectual ambassador of a forgotten country. So I’m wondering, Verizon Wireless and Sprint Nextel: what’s your damage?
Last September at the Goldman Sachs Communacopia conference, Verizon Communications CEO Lowell McAdam said, “the carriers are beginning to coalesce around the need for a third ecosystem” and, in his opinion, the battle for third place would “be between RIM and Microsoft, and I expect Microsoft to come out victorious”.
At the time of this statement, Verizon Wireless’ only phone running the Windows Phone 7 platform was the HTC Trophy, then four months old. Today, we’re coming up on the Trophy’s one-year release anniversary, and its solo status hadn’t changed. This is a device that was fairly midrange even on its release date, yet it’s still Microsoft’s lone soldier on Big Red’s battlefield.
Hopping across the aisle to the pin-drop network, the situation is even more dire. Statements from Sprint CEO Dan Hesse relating to WP7 are hard to find, but this January quote from VP of Strategy Russ McGuire paints a bleak picture. “As the #3 player, Sprint has fewer resources to apply, so it’s more critical for us to make good decisions about where we focus our investments For now, there’s no opportunity to gain a differentiation advantage by taking a risk on Windows, so we’re better off focusing most of our resources on proven market winners (iOS and Android).”
Pictured: not a “proven market winner.”
As much as it stings, Sprint’s argument does make sense. The company certainly isn’t in the best shape of its life, and it needs to be selective in where it focuses its attention. Whether you agree with the strategy or not, it’s at least justifiable because of the company’s persistent condition just a step away from being on the ropes. Of course, personally, I disagree: I value differentiation more than marching in lock-step with the popular crowd, and I think a lot of people agree with me. But I’m not a massive corporation with shareholders to answer to. And after Sprint’s bad bet on webOS, it’s unsurprising that they’re a little gun-shy.
But what about the nation’s largest carrier? Verizon took a loss in the last quarter of 2011 due to an adjustment to its pension plans, but it’s doing much better than its smaller CDMA competitor. Its subscriber count is almost double that of Sprint’s. It can afford to take risks on smaller, less successful platforms – so why isn’t it?
The publicly acknowledged reason is speed. Anyone who’s paid any attention to the US smartphone landscape knows that the carrier has been pushing its LTE network hard: as of now, almost half of the company’s total device offerings -47 of 112- are LTE-equipped. It’s become a key selling point of Verizon’s, whose focus has always been on calling out their superior network performance. As the customer base transitions to 4G, the carrier wants phones capable of providing that superior performance. Without LTE support, Verizon Wireless’ Chief Marketing Officer Marni Walden told CNET in December, WP7 devices are a no-go. “We’ve communicated to Microsoft that LTE is critical to us,” she said. “We need to see a timeline that makes sense if we want to continue to represent them.”
“In the meantime, let’s just take the same approach with this thing as we did with the Pre 2.”
Let’s get the obvious rebuttal out of the way right now. Yes, the iPhone 4/4S devices are 3G-only. But they’re also very successful devices in spite of that fact, which is why Verizon Wireless is happy to give Apple a pass. Whether you agree with the strategy or not is irrelevant; Verizon sold 4.2 million iPhones in Q42011. They’re doing fine. What’s more interesting than debating strategy is what’s happening now.
Because we now live in a world where LTE-enabled Windows Phones are a reality. AT&T just launched two of them. In fact, just yesterday I walked from my local Verizon Wireless outlet, with its dusty, nearly year-old HTC Trophy riding solo on the Windows Phone shelf, right across the street to the AT&T store, where I found a whole quadrant of the sales floor dedicated to Microsoft’s new offerings. New posters hung behind the bright displays, the phones were charged up and surrounded by accessories, and a huge banner behind the front window invited customers in to experience something “beautifully different.” This being wireless retail, the experience wasn’t perfect, of course; none of the Nokia-specific applications were installed on the Lumias, and the Windows Marketplace wasn’t set up on any WP7 device but it didn’t seem to matter to the two customers who bought Windows Phones in the fifteen minutes I was there. In all, the platform was presented beautifully. It was obvious how serious AT&T took their new differentiator.
Why Verizon Wireless didn’t take the same approach with the newly available LTE hardware may boil down to being conservative and “staying the course.” The loss of AT&T’s iPhone exclusivity might not have been recent, but they’re still hungry to adopt differentiators as Verizon continues to nip at their heels. According to a February ComScore report recently cited by AdAge, Verizon is rapidly closing the gap in smartphone subscriber count. The carrier already found their key to standing out from the pack in a big way with (An)DROID, and their fidelity to that approach makes good business sense. By contrast, AT&T has never really pushed Android -certainly not as hard as their red rivals- preferring instead to outclass their competition in niche areas with support for less-popular platforms like webOS and Windows Phone.
It’s a case of different strategies, with AT&T taking on all comers and making risky bets, while Verizon quietly continues putting money on the green robot that got them back in the game. They’ve invited Microsoft to sit for a while, but asked them to keep their boots on while they see how AT&T fares with their
$150 million WP7 marketing campaign.
“Good luck with those dictionary ads, suckers.”
Of course, this is only one possible angle. Verizon’s tight relationship with Google and their desire to stay in Apple’s good graces might also explain their reluctance to support Redmond’s offering, as both are critically important to Verizon’s long-term growth. While that’s also true for AT&T, Verizon’s clearly playing the game in a more conservative fashion. Maybe they see an opportunity for AT&T to do the heavy lifting in boosting the platform’s mindshare, and only once WP7 takes off will they swoop in with a multi-device deal. It’s impossible to say. The politics and “strategery” of corporate product negotiations are a dark and scary place, unfit for all but the most brazen of speculators. Only one thing is certain: something needs to change in a big way for Verizon to throw their weight behind Windows Phone. What that change will be is anyone’s guess; personally, I’m hoping it’s a surge in popularity fueled by AT&T’s boldness in adopting an underdog platform.
Are you one of those brazen speculators I mentioned? Of course you are; this is the internet! Sound off in the comments below and weigh in with your thoughts on why Big Red continues to eschew Metro and live tiles for widgets and live wallpapers.
UPDATE: Reference to AT&T WP7 marketing budget amount pulled due to new information uncovered by The Verge.