Apple's Perplexing Verizon Promotion

by Jean-Louis Gassée

Why did Apple give Verizon’s CEO so much airtime during the iPhone 12 introduction last week? Was it a mere tactical advertising transaction, or does Apple have more strategic aim?

There is much to praise in “Hi,Speed”, Apple’s coming out party for the iPhone 12 on October 13th. As always, and perhaps better than before, new products were well served by imaginative staging and superb video production. Before the main attraction, the HomePod mini opening act provided surprisingly rich food for thought regarding Apple’s Home, Intelligent Assistant, and Music strategies. All this for a diminutive $99 device.

But the HomePod was quickly eclipsed by the presentation of the eagerly awaited iPhone 12. On the surface, Apple’s new smartphone line looks promising: A significantly faster and more capable A14 processor; an updated, cleaner design; a shrewd escalation of hardware and software across the four new models, from the iPhone 12 mini (“The world’s smallest, thinnest, lightest 5G phone”) to the fully equipped iPhone 12 Pro Max aimed at serious photographers and video makers. MacRumors provides a size chart that compares the new phones to older models:

Before discussing the iPhone 12, Tim Cook announced the beginning of a new smartphone generation, the 5G era.

The new network standard, Cook tells us, will bring step function improvements, meaning much more than a few percentage point improvements in upload and download speeds — think big files, movies, X-rays, and MRI pictures. Also, 5G will vastly decrease latency, thus improving the response times to apps and user requests. Cook also claims that 5G will improve privacy and security because it reduces the need to connect to an “insecure” WiFi network — as if carriers were paragons of data security, completely impervious to breaches and government actions.

Speaking of carriers, the iPhone’s 5G connectivity is supported by a large number of carrier partners around the world:

And this is where things got interesting…

After the basic 5G pitch, Tim Cook called Hans Vestberg, Verizon’s CEO, to the stage. A Swedish-born executive with decades of industry experience, Vestberg got an unusual amount of stage time, about four minutes of the 70-minute event, which he used extoll Verizon’s infrastructure and collaboration with Apple, culminating in the proclamation that 5G has finally arrived:

Vestberg is an articulate pitchman and did a commendable job in presenting Verizon’s collaboration with Apple as the kind epoch-making event Cook referred to, but we can be sure that the other carriers depicted in the world partnership chart were less than charmed that Apple gave so much airtime to Verizon and its Chairman and CEO.

Surely, say some pundits, there must have been some kind of quid pro quo. Put in starker terms, how much money changed hands, either directly or through a Verizon subsidy to iPhone 12 buyers? A quick look at Verizon’s website shows the iPhone 12 is offered at $799 for the 64GB version, exactly the same as Apple’s price.

Looking at a possible financial consideration for Vestberg’s airtime, Ben Thompson, a long-time industry analyst, wrote that it felt “awfully sordid”. John Gruber, a well-informed and relevant (a rare combination) Apple observer reacted thus:

“…it just felt so gratuitous. I don’t know what Verizon paid Apple for this slot in the event, but it must have been a fortune. Good god would I love to be privy to the negotiations between Apple, Verizon, and AT&T for this.”

- Thoughts and Observations on Apple’s ‘Hi, Speed’ iPhone 12 Event

I agree that the arrangement, not to call it an aggrandizement, felt strange…although if anything has been sordid in the race to a new network standard, we can look at AT&T intentionally mislabeling a legacy 4G offering as 5G.

Carriers in general and Verizon in particular aren’t known as transparent philanthropists. Just try to make sense of a Verizon 5G network coverage map such as this one:

What useful information does it contain?

First, we see two so-called Ultra Wideband points, useless for the immense majority of users. Vestberg promises more by the end of the year, although they can only be used outdoors because the millimeter-sized Ultra Wideband radiation can’t get inside buildings and has limited range.

Next, we see 5G Nationwide, which appears to offer fairly wide coverage. But we’re not told what that actually means, exactly what performance is offered and where. In other words, “5G Nationwide” doesn’t come with numbers and locations. The uniform color insincerely implies uniformity of performance. This is strange because, internally, Verizon maintains a precise and continuously updated “heat map” of cellular stations and their throughput over distance. But, like its competitors, it doesn’t share that information with paying customers.

The question remains: Did Apple really take money from Verizon to give its CEO four minutes on stage at the iPhone 12 event? I don’t think Apple is in such dire straits. Instead of a payoff, this might have been a payback against other carriers who failed to invest enough in their 5G network updates. Failure to invest in 5G networking would negatively impact the sales of new 5G iPhones. In this scenario, Apple would compensate for the underinvestment of carrier X or Y by heavily promoting Verizon and its better 5G network. Apple would be doing what it needs to do to stimulate the sales of 5G iPhones.

We’ll see how Verizon’s competitors react.

— JLG@mondaynote.com