Verizon Wireless' iPhone killer

Apple has the best, most sought after cell phone in the business. That's great for AT&T. Not so good for Verizon Wireless.

The problem for Verizon Wireless, like other cellular carriers, is that its tight control over the end device hardware and software - a great way to lock in users - is stifling innovation. The iPhone demonstrates the power of innovation to bring in new customers. AT&T has it. Verizon Wireless doesn't.

Nothing that makes it through the Verizon Wireless corporate bureacracy, which controls which phones consumers can buy and what software and features they can offer, will ever be able to compete against an iPhone.

So it's time that Verizon Wireless started thinking outside of the box. And the box, in this case, is its own company stores. The tightly controlled cell phone hardware and software allowed on its network will never be able to compete with Apple. Why? Because not only does Apple have a great product, but it is the first cell phone developer to gain some autonomy for its technology without having it dumbed down by carrier bureaucrats with veto power over every aspect of a new phone that will run on the carrier's network.

So now that AT&T's sales have run amok what is Verizon Wireless to do? AT&T opened the door to innovation, but only a crack, allowing only Apple creative license. Verizon Wireless should go AT&T one better by opening up its network to all comers, as it promised to do way back in November 2007.

Out-innovating Apple is a tall order, but developers and designers don't have a prayer of doing it with their hands tied behind their backs. If Verizon Wireless ever hopes to have a blockbuster product that brings in new users, it needs to open up its network and get out of the way.

Some people inside Verizon Wireless realize that they have more to gain than to lose by opening up the network to third party hardware and software. By doing so, it can create a competitive advantage that could blunt AT&T's advance with the iPhone as an army of developers create new features and services that increase traffic and bring new users to Verizon Wireless' network.

But opening up the network isn't enough. Verizon Wireless will have to stop subsidizing its own phone offerings to level the playing field so that others can compete.

Ultimately, Verizon should get out of its own way by phasing itself out of the cell phone retail sales business entirely. Selling high volume, low margin consumer electronics is not what the carrier does best. Instead, it should leave that to the Wal Marts, Best Buys and Amazons of the world.