- Verizon turned down Apple to be the exclusive carrier for the iPhone, primarily due to Apple’s “financial terms.” Apple didn’t want to play the subsidy game, instead wanting a piece of the action for each phone sold. Verizon wouldn’t have it.
- The iPhone is released and selling like the proverbial hotcakes. Estimates are that 25% of iPhone users left their previous carrier. (The total number is likely more than that since it doesn’t count those who let their contract lapse awaiting the iPhone’s release.)
- Verizon is in need of new phones to compete with the iPhone, but is unable to get them as planned due to their being banned by the FCC because the Qualcomm chips they contain violate Broadcom patents.
The above represents the gist of the situation as it now stands.
So what does Verizon do? They ink a deal with Broadcom to pay $6 for every phone that violates Broadcom’s patents. They wouldn’t pay Apple, now they have to pay Broadcomm.
What makes this so interesting is that Qualcomm is actively fighting the ban. Further, Verizon and Qualcomm petitioned the FCC to have the ban overturned. And yet, here is Verizon coughing up money for the phones.
Why doesn’t Verizon wait for a decision regarding the ban? Because it appears their current offerings aren’t getting the job done, so they need new phones. Further, the iPhone has them running; they can’t afford to wait around for the FCC to act (or not).
What’s funny is that these phones, such as the Motorola RAZR2, are not going to compete with the iPhone as well as Verizon is dreaming. The good news for Verizon is that if the phones don’t compete well then they won’t have to shell out their six bucks very often.