Verizon iPhone: Apple’s chess game has stalemated and the time is now

Those looking for an answer on the Verizon iPhone can look to the philosophical battles that Apple and its CEO Steve Jobs love to wage and usually win. The question is whether pushing the iPhone to majority marketshare without the inclusion of Verizon (or Sprint or T-Mobile) is one of those battles that can Apple can win. Most CEOs view their job as a game of checkers: short term gains and losses, and a zero-sum game with regards to the competition. But unlike almost anyone else in his position, Steve Jobs views his role as that of a chess player: complex long term strategies and an emphasis on getting everyone else to deal with his gameplan.

So how does this relate to the possibility of the iPhone coming to Verizon? Let’s look at Apple’s history over the past twelve years:

When Jobs returned to Apple in the late nineties, he decided minitowers were superfluous for most users. So instead of trying to sell a Mac minitower to a public who was already used to buying PC minitowers (as Jobs’ predecessors had unsuccessfully attempted for years), he decided to try to sell the public on the idea of an all-in-one Mac known as the iMac. Twelve years later, even most people who own PC minitowers consider their minitower to be superfluous, and when PC users consider switching to Mac, the fact that the Mac is an all-in-one is almost never a factor (unless you’re talking about geeks, of course). So what does this have to do with the Verizon iPhone? We’ll get to that in a minute.

Speaking of the geeks… Somewhere along the way Jobs decided that rather than pandering to the influential technology geeks whom he knew were ultimately going to continue buying and promoting Windows-based products one way or the other, he would go the other direction entirely. Why try to win over geeks you know you can’t win over, when you can just make them irrelevant instead? Apple has repeatedly launched products such as smartphones and digital video software, which had long been strictly the purview of the geeks, but launched versions which were so specifically mainstream-oriented that the geeks hated them – and it ultimately didn’t matter. For the first time, the mainstream woke up to the idea that they too could be owning and using such products. And not only have those Apple products become successful, they’ve broken mainstream users of their habit of waiting for the geeks to pass judgment before considering new technology themselves. The geeks hated the iPod because it’s not geeky enough, and yet it dominated the market. The geeks hated (and still hate) iTunes for the same reason, and yet iTunes controls the music industry. The geeks hated the iPhone, and yet in spite of that (or perhaps because of it), the iPhone is the only smartphone that anyone in the mainstream actually wants to be using. And now we’re getting to how that relates to Verizon and the iPhone.

All four cellular network experiences in the United States are subpar compared to what you can find in certain other civilized nations. We could argue all day about whether it’s because the U.S. government allows carriers to legally get away with anything and everything they want, or whether it’s because the American people are just that pre-conditioned to expect big businesses to offer awful experiences that they don’t even bother to fight back. But the bottom line is that the Verizon, AT&T, T-Mobile, and Sprint experiences in the U.S. are all something out of the dark ages compared to the best of the cellular experiences in parts of Europe and Asia; the differences in suckage between the U.S. carriers are merely a matter of degrees. Obviously, someone like Steve Jobs has no desire to see an Apple product be dependent on such a horrible network user experience from any of the four of them. So Apple’s plan, ostensibly, was to offer the iPhone exclusively to one of the four U.S. carriers, on the condition that Apple could contractually demand that said network be whipped into shape and thus offer iPhone users an experience better than what the other three putrid carriers would be offering.

Three years later, and that plan hasn’t worked. Rather than playing along like it was supposed to, comatose AT&T is acting like it’s almost willfully trying to violate that exclusivity agreement for the sake of being free of it. As it turns out, the U.S. cellular networks were in even worse shape than anyone thought going in, and all it took was the popularity of the iPhone to make AT&T’s paper-thin network to fold up like a napkin (the same would have of course happened to a different U.S. network if the iPhone had instead gone exclusively to Verizon, T-Mobile, or Sprint). Rather than do what it has to in order to keep the iPhone exclusively, AT&T has apparently decided that it would be more practical to simply allow some new iPhone customers to go elsewhere. Apple’s failed attempt at reforming AT&T into being a reputable company through the contractual carrot-and-stick approach is absolute proof that the U.S. cellphone carrier industry will never be fixed without government intervention. But more relevant to this conversation is the fact that after three-plus years of trying, this is the rare chess match that Steve Jobs is losing.

Not only has AT&T exclusivity had the unfortunate effect of placing all U.S. iPhone users on one overburdened network instead of spreading that burden across the four of them, it’s also cost Apple a staggering number of iPhone sales. And it’s not just the hardware sales, either. When a Verizon customer settles for a Droid instead of moving to AT&T to get an iPhone, Apple loses the ensuing App Store revenue. Even those who buy an iPod touch instead of an iPhone are all but guaranteed to purchase fewer apps, as the thousands of network-dependent apps in the App Store are broken on the iPod touch at all times except when at home or at Starbucks. No wonder Apple recently added a camera to the iPod touch, so those users can now at least spend their money on photography-based apps.

In my position, every week I hear from someone who’s recently switched from Verizon to AT&T just to get an iPhone. But every day I hear from someone who’s still sticking with Verizon three years later, desperate to find out when or if the iPhone might find its way to Verizon. And even in my own personal space, I hear from friends or family who are on some other carrier and whose perception of the iPhone experience on AT&T is significantly more negative than the actual AT&T iPhone experience.

So, then, Jobs has yet another chess game to play. If exclusivity hasn’t yet fixed AT&T but he wants to continue trying for a little longer – or if he merely wants to wait until the 4G era to open up the iPhone to additional carriers – then the game in the mean time is to convince the mainstream public that using an iPhone on AT&T isn’t nearly as bad as perceived. And while that just happens to be a verifiable fact (verified both by several reputable formal studies and any informal survey of current iPhone users), the notion of “It’s not as bad as you think and the other options are nearly as bad anyway” has never been a particularly marketable message, even when that message is true. The other angle Apple can take is that having a massively better phone more than makes up for a slightly inferior network, which while reasonable enough on its face, is basically the message that Apple has been tacitly pushing for the past three years. It’s worked where it’s worked, but at some point you have to wonder how many more Verizon customers are going to be convinced that AT&T is within a rounding error of offering the same quality of network experience.

And this is where reality takes a back seat to perception: at this point Apple is trying to convince the millions or even tens of millions of Verizon, Sprint, and T-Mobile customers who want an iPhone but are inexplicably so in love with their current carrier that they’ve been willing to deny themselves the phone they want for three years now. But if Apple wants the iPhone to ever have majority marketshare, which is clearly a possibility based on public sentiment toward the product and its obtusely geeks-only competitors, it’ll have to convince these millions of stubborn folks that the iPhone is with leaving their worshipped current carrier for. Either that, or Steve and the gang can call this particular game of chess the stalemate that it’s become, and start a new game in which the iPhone comes to all four carriers and everyone gets to buy one who wants one. It’s Apple’s move.

Here’s more on the prospects of a Verizon iPhone in 2010.