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1/18/2011
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Dave Methvin
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Windows Phone 7, Collateral Damage Edition

Verizon getting the iPhone is cruelly timed torture for Microsoft and Windows Phone 7, already facing an uphill battle against Android and other smartphones.

Although we don't know the exact sales figures for Windows Phone 7, some of the phone makers have said they were disappointed with Microsoft's inaugural push into the market. Verizon's announcement of an iPhone and the already-robust Android market will prevent an effective second push in 2011.

There's no doubt that Verizon will sell a lot of iPhones out of the gate. What we don't yet know is whether those sales will come from existing Verizon customers or from disgruntled AT&T customers who have been yearning for another network to satisfy their iPhone desires. Right now, only AT&T is The Official iPhone Carrier. That has given other carriers the opportunity to fill an anti-AT&T niche, using BlackBerry, Android, and yes, Windows Phone 7. A Verizon iPhone changes all that, especially since Verizon is the country's largest carrier.

As for who is hurt by a Verizon iPhone, most people are focusing on Google's Android. Together, the two iPhone carriers hold more than 60% of subscriber share, more than doubling the iPhone's potential reach from when it was at AT&T alone. Since Verizon was not selling the iPhone before, it's a near-certainty that some of the iPhone's success on Verizon will come at the expense of other smartphone makers. But at least BlackBerry and Android are already well-established in the overall market and offered by all the carriers, not just Verizon and AT&T. Microsoft doesn't have that luxury.

Analysts are haggling over how much Verizon's iPhone sales will be due to a larger smartphone pie over time, how much results from AT&T defections, and how much comes at the expense of competitors who currently have Verizon customers comfortably to themselves. If this graph of Android ad impressions is credible, it seems like the iPhone has basically sucked the oxygen out of the room for any other smartphone on AT&T. That should have Microsoft very concerned, because they're in an even weaker position than Android.

But let's not forget that iPhone had a multi-year start on AT&T's network; it basically defined the modern smartphone category when it was released in 2007. At Newsweek.com, Dan Lyons argues that the Verizon iPhone is too late, and perhaps it is -- if Apple's goal was to prevent Android from gaining a competitive foothold. But Android has established itself whether Apple likes it or not; millions of users have Android phones and multi-year contracts that ensure they'll be staying with Android for a while. When it comes time to choose a new phone, their familiarity with Android and its Google-centric services may be a strong factor in their choice. But again, there's no silver lining here for Microsoft, since they have almost no market share to provide momentum against the iPhone's braking force.

When Microsoft announced the carriers that would have Windows Phone 7 at launch, there were only two: AT&T and T-Mobile. Verizon was notably absent. Now it makes sense why Verizon decided to skip the coming-out party. Sure, it's possible that the taste of Kin hadn't yet left their mouth, but that seems like a petty reason. Most likely they didn't want to overshadow their iPhone launch in any way.

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