Is Verizon ready for the iPhone?

If the rumors are true that Verizon Wireless is negotiating a deal with Apple for the iPhone, then I have two words of caution for Verizon: Be prepared.

AT&T's launch of the iPhone last summer sent its data networks into a tizzy, spawning numerous complaints from customers about less-than-3G performance, extreme network congestion and in some cases 3G outages forcing customers onto the 2G network. At the time, Apple shouldered much of the blame for the capacity problems due to firmware issues on the device, but other studies have shown that AT&T also was a culprit, unable to handle the sudden flood of millions of devices all demanding high-capacity connections to the network. Ultimately those problems didn't hinder the iPhone 3G's rapid proliferation in the U.S. and around the world. Even though customer complaints still persist, AT&T activated 1.6 million iPhones in the first quarter alone. As the iPhone matures, though, customers may not be so tolerant of network problems.

"AT&T was forgiven because they were the front-runner," said Robert Smithline, director of product management for VPIsystems, a vendor specializing in network resource planning. "If AT&T came out with a new iconic 3G device today and it had the iPhone's problems at launch, it would kill their business."

In some cases, AT&T's core network was basically overrun with signaling traffic as it tried to negotiate an obscene number of handoffs between the 2G and 3G networks, Smithline said. In other cases, such as in high-demand areas like San Francisco, so many users were competing for limited network resources that capacity available to individual users dwindled down to zero, Smithline said. AT&T is rectifying those congestion issues, doubling the peak capacity of its current high-speed packet access (HSPA) network to 7.2 Mb/s and adding second and even third HSPA channels in high-demand areas. By the time any CDMA iPhone would emerge in 2010, the issue of AT&T's over-congestion will probably be moot.

But that does the raise the question of whether Verizon's network is ready to handle an iPhone onslaught of its own. I'm still skeptical that Apple is seriously considering a CDMA iPhone, but according to USA Today, Apple and Verizon are in just such discussions. Verizon's 3G network is much more mature than AT&T's, VZW having gotten a few years head start deploying its EV-DO technology. Even though Verizon has no iconic device like the iPhone to drive data plan activations, it's holding its own against AT&T in the data race. In fact, VZW's data average revenue per user grew sequentially in the first quarter while AT&T's remained flat — despite 1.6 million iPhone activations. That data revenue wasn't just from text messages either. Verizon reported 58% of all data revenue comes from non-messaging services such as Internet subscription plans.