It’s lucky for both Verizon (NYSE:VZ) and Apple (NASDAQ:AAPL) that the early preordering crush for the iPhone’s debut on Verizon’s network wasn’t hampered by more troubling news: Bloomberg reported Thursday that Verizon plans to cap data usage to ease the influx of millions of new users on its 3G network.
More specifically, Verizon won’t allow the download of full videos, breaking up data transfers and only letting users watch portions at a time to “ease capacity burdens on the network.” Verizon also will truncate download speeds for high volume users who fall in the top 5% of usage.
Even the range of colors in downloaded videos will be limited, reducing “color accuracy and sharpness,” according to Verizon. Company spokesman Jeffrey Nelson said that the measures were necessary to make sure the release goes smoothly. “[These changes are for] specific high-traffic locations at specific high-traffic times of the day, where we are seeing instances where lots of people are negatively impacted.”
The iPhone will be a major seller and a boost for Verizon’s subscriber base in the short term (projections range from 8 million to 25 million additions), but it’s worrisome that the company is already concerned about its 3G network handling the increased traffic — especially as the company commits more resources to its 4G network.
If Verizon pre-emptively limits service when it doesn’t yet know how many new customers will come to its already well-established 3G network, it spells trouble for long-term customer satisfaction. AT&T (NYSE:T) has been plagued by customer dissatisfaction with iPhone service, particularly in urban markets where iPhone adoption has been fastest.
ChangWave Research estimates that as many as 26% of AT&T iPhone users will switch to Verizon this month, but if service is just as poor on Verizon, what will that mean for both AT&T and Verizon? The device’s popularity will probably keep adoption high, but it’s also a significant possibility that the iPhone won’t sell as well as it could if Verizon’s service isn’t markedly better than AT&T’s.
Also in question is how a flood of new users on the Verizon’s network will affect its existing Reasearch In Motion (NASDAQ:RIMM) BlackBerry and Google (NASDAQ:GOOG) Android phone users. Verizon hasn’t said whether it will limit video downloads to those users to ease overall data burdens, but it follows that they will be equally affected next week.
At the time of publication, Anthony John Agnello did not own a position in any of the stocks named here.
