January 11, 2011: MEDIA ALERT
UMD Marketing Expert Says Verizon’s Success with iPhone Will Depend on Performance
P.K. Kannan, Ralph J. Tyser Professor of Marketing Science and Chair, Department of Marketing at the University of Maryland’s Robert H. Smith School of Business, reacts to Verizon Wireless’ announcement today that they will now carry Apple’s iPhone. He says the carrier’s success will depend on its network performance.
Contact Prof. P.K. Kannan
Phone: 301-229-7379
Email: pkannan@rhsmith.umd.edu
Website 
Marketing Professor P.K. Kannan Talks with NBC-4 in D.C. about Verizon's iPhone 
“The impact of iPhone 4 release by Verizon on the competitive landscape boils down to one word: performance. That is, the performance of iPhone 4 on Verizon's CDMA wireless communications network.
“Verizon has been touting that its CDMA network's reliability will afford iPhone users to be to ‘on’ all the time and continue interacting with usage-heavy iPhone applications without having the current problems they experience with AT&T's network, whose performance has been spotty. AT&T rolled out its usage tiered-pricing schemes for its iPhone 4 precisely to counter its network quality problems, some of which were partly due to the unlimited data usage plans for the previous versions of iPhone.
“Verizon could steal many of AT&T iPhone customers if its network holds up to the heavy iPhone usage and delivers the reliable service Verizon is known for. In addition, it could also sign up significant new iPhone customers. Analysts expect Verizon to sell 9 million to 12 million new iPhones, some of which could be converts from AT&T.
“AT&T boasts of better speed and functionality (one can use the iPhone for multi-tasking with their GSM phones, which is somewhat difficult in Verizon's CDMA versions), but it has been plagued by dropped service with heavy usage of iPhone. If Verizon performs well, it can have a significant impact on AT&T. The exclusive deal AT&T had with iPhone has been responsible for its increased retention rates of customers spurred by die-hard iPhone fans. Now these customers will have another option — a more reliable, all-you-can-eat model for their iPhones. In addition to losing some iPhone customers (who value reliability more than speed and functionality) immediately, AT&T's customer retention rates could fall over time. The better Verizon's performance is, the larger this retention rate decrease will be.
“If, on the other hand, Verizon is not able to keep its promise of more reliable network quality than AT&T, the downside impact on AT&T will be minimal. While Verizon is likely to pick up more customers following the immediate release of its iPhone version, their network quality performance over time will determine the long-run impact on the competitive landscape.”
— P.K. Kannan, Ralph J. Tyser Professor of Marketing Science
Chair, Department of Marketing,
Robert H. Smith School of Business
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About the University of Maryland's Robert H. Smith School of Business
The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.