Microsoft's Windows Phone 7 Launch Could Crash and Burn Without Verizon

Windows Phone 7The smartphone category is the most exciting, fast-moving, cutthroat, and lucrative category in the electronics world today. It's made kings of companies like Apple and HTC, it's brought Motorola back from the brink, and it's killed long-running and respected companies like Palm. Succeeding in this category takes an uncanny combination of timing, marketing, innovation, hardware/software chops, and, frankly, luck. Screw up one of those key elements, and your product is doomed, regardless of its overall quality.

Microsoft, set to launch Windows Phone 7, its last chance at entering the smartphone market, can't afford to make any mistakes. And an announcement today shows that they've made a big one.

Microsoft had in the past noted that Windows Phone 7 will be initially launched this holiday season, and will eventually end up, like Android or BlackBerry, on all four major U.S. carriers (Verizon, AT&T, Sprint, and T-Mobile). Today, Verizon announced that they will not be carrying a Windows Phone 7 device at launch, or even any time this year—there won't be a Windows Phone 7 smartphone on Verizon until 2011. Windows Phone 7 will, according to rumors, instead launch on AT&T, and possible T-Mobile.

AT&T and T-Mobile use the same basic wireless protocol, GSM, whereas Verizon and Sprint use CDMA—these two protocols require very different hardware and are not at all interchangeable. GSM is the standard worldwide, while CDMA is really only widely used here in North America. The component parts of a GSM phone are sometimes cheaper, which might be why Microsoft is going that route. On the other hand, Microsoft has always had CDMA phones, even launching the failed Kin experiment on Verizon earlier this year.

Launching on a lesser network is major problem for Microsoft, and not a new one, either. Back in June of 2009, Palm staged a similar relaunch: A totally new OS, with a new app store, new hardware, and new philosophy. The Palm Pre was exceedingly well-reviewed, and many predicted that Palm would retake its place on the smartphone throne from Apple. Yet one year later, Palm was kaput. A large part of that rapid tumble was due to the Palm Pre's launch on a much smaller (if not technically inferior) network, Sprint. Sprint offered fewer existing customers than AT&T or Verizon, and hardly any customers were willing to switch networks to join the scrappy Sprint team.

A Windows Phone 7 launch on AT&T is at least as big a problem. AT&T has not only a much-maligned network but also the hottest phone in the world, the iPhone 4. How does Microsoft plan to attract existing AT&T customers to Windows Phone 7, a totally untested platform, when the iPhone, the revolutionary and obscenely successful smartphone, is sitting right there next to it? And Microsoft can forget about getting customers to switch to AT&T for a Windows Phone 7 phone: AT&T is renowned for its spotty service, and customers are not likely to be eager to jump onto AT&T for a first-generation Windows phone.

Microsoft needs Verizon at launch. The Motorola Droid at launch wasn't necessarily an objectively better device than the Palm Pre at launch, but one of those became a runaway hit and one of those doomed its company to oblivion. Not coincidentally, that same runaway hit, the Droid, also launched on Verizon.

The circumstances are a little bit different these days—when the Droid launched, Verizon's smartphone lineup was pathetic, and droves of smartphone-hungry Verizon users were ready to snatch up the first solid offering they could. That's not the case anymore; Verizon now has an extensive array of top-tier Android phones, as well as the iconic "Droid" brand.

But Verizon is still the best network for a new smartphone platform to launch: While its Android offerings are excellent, Verizon's lineup is not particularly diverse, lacking the newest BlackBerry phones and, of course, the iPhone. There's still room on Verizon shelves for another platform, and Verizon's massive customer base has already proven willing to try out new mobile OSes. Verizon is the biggest and most reliable network in the country, and doesn't have the handicap of the world's most famous smartphone overshadowing every other offering.

This doesn't necessarily doom Windows Phone 7. You could also pick Google's Android as a model—the first Android phone, the HTC G1, launched on the smallest major network, T-Mobile, and Android is doing just fine these days despite those inauspicious beginnings. Microsoft, like Google and unlike Palm, has the deep pockets to be able to wait around for its new platform to gather an audience. But why are they willing to do that? Why not just launch on the biggest and best network right off the bat?

Windows Phone 7 is an innovative and appealing OS with some great new ideas, and if Microsoft handles the marketing right, it could be a big hit. But the decision to neglect Verizon as a launch partner is baffling, and could well keep Windows Phone 7 in the background, losing money, for months.

Dan Nosowitz, the author of this post, can be followed on Twitter, corresponded with via email, and stalked in Brooklyn (no link for that one—you'll have to do the legwork yourself).

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  • Jane chars

    Far more phones at rollout than I had expected and Dell was a surprise to me. I love my iPhone, but with the products coming out from Google and Microsoft- I may have to really look at the other options when my contact renewal is up. These all look like solid offerings from Apple, Google, and Microsoft. Can't say anything about HP as we haven't seen that yet.

  • Deftdrummer

    I really find many of your statements to be presumptuous.

    Doomed you say, if WP7 doesn't land on Verizon this year? Hardly. Like you said, Microsoft as the late comer can't afford to make mistakes, although the mere thought of what Microsoft "can and can't afford" is startling in and of itself. Trust me when I say neither you nor I have comprehension of what this company is capable of at this stage in the game.

    If mistakes are costly, then why would Microsoft try to get hardware on Verizon's 3G network when LTE is just around the corner? Rather than push CDMA devices, which are some of the most expensive in the world to produce - they can just wait till the #1 network is that much better for phones to be launched on it. That is called momentum and I think it will be good timing for Microsoft.

    So the other companies that support 3G want to get the phones on their network, OF COURSE THEY DO! AT&T's iPhone jackpot money making machine is about to run out and T-Mobile needs platforms other than Android to compete.

    Basically you are wrong on every level my friend. Android was launched on T-mobile first which is not the to notch provider. Even the ever popular iphone will only be released on Verizon around the same time as WP7 itself. Things should get real interesting come 2011.

  • Christopher Yates

    Dan, I want to add to Lou's post. Microsoft half-heartedly tried to launch a phone/Mobile OS on Verizon earlier this year, the Kin, and it was scrapped by both companies almost before it was launched. That more than likely has left Verizon bitter at and disappointed by MS. So blaming it all on MS ignoring Verizon is a bit over-simplistic. Don't forget, they are also "ignoring" Sprint who has been a loyal Window Mobile carrier for years.

    Also, rumor has it that WP7 is being released in Europe before NA, where GSM is king and the iPhone doesn't have quite as strong a hold on the masses. Going up against the iPhone has proven costly on two occasions for MS (WinMo and Kin) and on one occasion for PALM. It's not an easy fight. They are choosing their battles.

    I believe that you've read something more sinister into Microsoft going with GSM vs. CDMA than what is actually there.

    Thanks for the article though.

  • Lou Zucaro

    Dan, I have to say, your article here feels a bit confused. You condemn Microsoft for choosing a "lesser network", then point out that CDMA is really only viable in North America, but then say Microsoft should be on Verizon at launch...which is CDMA.

    And you didn't consider that one of the reasons Palm's Pre didn't do well is that it was almost universally panned for sub-par build quality and feel...whereas Motorola's Droid products are generally considered to be as well-made as most Motorola products.

    The truth is that Verizon needs Windows Phone 7 more than WP7 needs Verizon. Putting GSM first means that they're putting a more world-focused technology first, which is good for business users who travel outside the U.S.

    And consider, too, that by being GSM-only at first, and being available on AT&T as a result, that they're sure to capture some of the (growing numbers of) iPhone-weary people wanting to get off of that platform.