Verizon iPhone Buzz Is Building: Five Things It Could Mean

Verizon is set to announce an iPhone on Tuesday
Verizon is set to announce an iPhone on Tuesday

The Apple (AAPL) blogosphere is buzzing with what seems to be solid evidence that Verizon (VZ) will finally be offering an iPhone to run on its network. A number of prominent Apple bloggers and writers have apparently gotten invites from Verizon to an event on Tuesday. The invitations are nontransferable, which implies that a select audience is desired and, therefore, that a big announcement is in the wings. So what would an iPhone for Verizon really mean? Here are five:

1)Verizon's network is going to be tested. iPhone users are notorious data hogs. Many bloggers have slammed AT&T (T) for failing to provide good data and voice service on its network, even though AT&T has consistently claimed that its network is the fastest in the country. Both sentiments could well be true. But Verizon, which everyone agrees has built a very good wireless network, will certainly struggle to keep up with the massive usage habits of iPhone users.

One feature of Verizon's CDMA-based network will probably work heavily in its favor, though. The network doesn't support simultaneously phone call and data network operation. So, at least when Verizon users are talking, which is a relatively data-light application, they won't also be Web surfing.

2) Verizon will likely surpass AT&T in number of subscribers. This competition is currently neck-and-neck, with Verizon just a million shy of AT&T. But Verizon, which will probably put extensive sales muscle behind the iPhone and will feature the handsets in its stores, should gain enough momentum to surpass Ma Bell in total subscribers. That's big because Verizon has struggled to keep up with AT&T as the latter rode the iPhone to rapid subscriber growth.

Apple should see an additional bump in sales and profits. How could it not? The iPhone is highly profitable for Apple -- not quite as profitable as its computers but more so than any other product in its lineup. What's more, additional iPhone users will feed into Apple's fast-growing revenues from its highly popular App Store for the iPhone. Those revenues could hit $2 billion in 2011.

That's a drop in the bucket of Apple's total revenues, but it's pure profit, for the most part, since the incremental cost of operating the App Store is relatively low at this point. It's also likely that a number of new iPhone users, introduced to Apple by Verizon, will end up buying Apple computers. All told, it's a win-win-win for Apple CEO Steve Jobs.

4)Apple could turn its phones loose on Verizon's superior LTE 4G network. Verizon is the first mobile carrier to roll out a network using a technology called LTE. While other carriers are running networks they call 4G -- most notably Sprint (S) -- LTE is supposed to be a real speed demon and have the capability to handle much higher data throughput. No doubt, Jobs would love to see what happens when Apple's iPhones start running at warp speed, which Google's (GOOG) Android phones are already doing on Verizon's LTE network (and something Verizon is hyping big-time with its "Download a Song in 4 Seconds" ad campaign).

AT&T is also pursuing an LTE network but at a more stately pace. So, expect Apple to come out with an LTE-ready phone, perhaps this winter or perhaps in the summer. But no doubt, it's coming.

Verizon's data plan structure will determine the future profitability of the mobile data business. The Wall Street Journal is reporting that Verizon will offer an unlimited data plan to iPhone users. AT&T started out that way but moved away from unlimited data offerings, partly because some people used so much data it slowed down the network. AT&T, clearly, is trying to create a more finely grained tiered-pricing structure. But unlimited data is a powerful marketing tool. With unlimited data, however, comes unlimited risks and, potentially, an unlimited appetite for bandwidth as more and more rich mobile applications suck up more network time (like TV, streaming apps and music, among others).

For Verizon, this could be a very smart move. With its LTE network and possibly knowing an LTE-ready iPhone is in the pipeline, it could use its faster network and unlimited data plan to take subscribers from AT&T. Whatever the case, a future with unlimited data is likely less profitable for mobile carriers.