Analysis: What Does Verizon iPhone Mean to The World?

I have been monitoring the iPhone from long before it was even launched, and I gave the world's first international market opportunity analysis for the iPhone three days after it was announced and five months before the first model was sold.

That is so long ago, that AT&T was still known as Cingular at that time. Funny to see that I had the international footprint for the iPhone very accurately forecasted, which is still very close to how Apple sells iPhones in 2010. In the analysis I clearly stated that Apple had to evolve the iPhone, and that a 3G/GSM version had to be offered first, before a CDMA version - exactly as Apple did in 2008. And now we have the CDMA version, which Verizon starts to sell in early February of 2011.

There are some differences on the Verizon iPhone 4. Technically it is a CDMA device, so it is not compatible with GSM networks and the Verizon iPhone users cannot use their iPhone in Europe and most of the rest of the world, for example. While CDMA forms a little over half of all mobile phones used in North America, GSM forms 90 percent of all mobile phones used worldwide, so outside of the USA, about 93 percent of the rest of the world uses GSM (and is only compatible with AT&T's iPhone).

The PR people of Verizon have said that the most accessories of current iPhone 4 owners should work but warned that some cases will not - suggesting that the casing of the CDMA version of the iPhone 4 will have some cosmetic differences - related to the antenna, as Verizon does not want to experience a return of Antennagate with their own launch.

The impact on the American market

The US market will definitely see a boost in iPhone sales as Verizon is one of the three big mobile networks with AT&T and Sprint. T-Mobile the fourth biggest network is significantly smaller than these three.

There are also many regional networks, so AT&T and Verizon together very roughly speaking account for half of all US mobile customers.

Because AT&T and Verizon are on the two rival standards that most American phones use, it is easy to think that once Verizon releases the iPhone, it would double the sales in the USA.

That won't happen. There will be significant growth yes, and Verizon will gain plenty of disgruntled AT&T iPhone users yes, and some ex-Verizon users will return. But the total US market for the iPhone after Verizon will not be double that what it is today.

Let's take some known metrics to understand. The latest TNS survey of US consumers tells us that the current iPhone owners are the wealthiest segment of smartphone owners in the USA, with an average income of over 100,000 USD.

This means that for the typical existing iPhone owner, there is no financial burden whatsoever to consider a second phone and second account on a rival network. If the US consumer had wanted an iPhone, and earned more than 100,000 dollars annually, they could easily walk into an AT&T store, sign the two year contract and get a new, second phone, no matter what network their other phone was on.