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Purposeful limitation

December 28, 2008

I always wonder why Verizon Wireless purposefully limits its phones.

Verizon Wireless

Verizon Wireless

I recall writing a post about Sprint before, but now I want to set my sights on Verizon. See, Verizon has a good reputation for call quality (yes, we can hear you now, after all) and they’ve won a few awards. The problem is that everyone also knows that Verizon has a dark secret.

They gimp most of their phones.

Gimp…what does urbandictionary have to tell me about this word?

a derrogatory [sic] term for someone that is disabled or has a medicial [sic] problem that results in physical impairment.

Oh, wow, that’s just terrible. Wow, I would never say that a person is gimped. But phones, inanimate as they are, can be disabled at the whims of their creators based on the specifications of what any carrier, like Verizon, wants.

Verizon has historically limited its phones in specific ways…for example, it has limited phones that have open GPS function so that they can only use their GPS with Verizon’s VZNavigator service. That’s actually kinda clever, because then Verizon can snag a better plan out of the deal if people so want GPS.

In truth, this isn’t just Verizon either. Most companies try to lock phones to their own service or at the very least encourage software with that carrier. To an extent, it can be seen as just good business.

But something that I don’t understand is how Verizon rips apart perfectly good hardware. HTC made a little phone called the Touch Pro, and it’s interesting to see how as it has migrated to the different carriers, they’ve made their own changes to the device. I have no problem with the fact that AT&T’s Fuze still has the diamond faceted back that the phone originally was known for, and I don’t necessarily have a problem with the fact that Sprint’s Touch Pro has a different keyboard layout than AT&T’s Fuze.

But when we come to Verizon, not only do we have these minor cosmetic changes, but Verizon has ripped out 96 megabytes of RAM from the phone! For Verizon customers, it essentially means that they aren’t even getting the same phone as Sprint and AT&T are — they are getting a veritably inferior phone.

Sorry, this one just isnt as good!

Sorry, this one just isn't as good!

Normally, when companies want to differentiate, they add features to distinguish them from the competitor. Or, if they have to reduce features, they do so to cut costs (and perhaps lower prices). Not Verizon. I really wonder if anyone has an explanation of this perplexing phenomenon…it really baffles me!

In my sprint article, I think I made some kind of crazy analogy between Sprint’s behavior and the Mormon church’s — I think I’ve gotten somewhat decent at this. But every time I try to make a similar comparison, I come to this realization that the church just doesn’t do this.

Now, there is some “purposeful limitation” going on in the church…the church will rarely inform people of everything that goes on in the Temple before they actually go — but that’s because of a guise of “sacredness,” so I won’t argue against that too much.

When I think cynically about limitations of information or “features” from church members, it’s much more apt to refer back to Apple…which I’ve also written about. But Apple, unlike Verizon, does what they do in an oddly admirable way. Apple has amassed such a great fanbase of people who are willing to support any Apple product because Apple has successfully advertised itself. Apple is become its own kind of luxury good, so people are willing to buy things like Macbook Airs even though they are less functional than…most computers from a few years ago. The thinness doesn’t hurt either.

In a similar way is a good church. Good churches (not good in a theological sense, but in an organizational sense — I’m not touching theology) advertize themselves in a way that make people reluctant to leave. Sometimes, asynchronous information exchange is necessary to reach those ends.

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  1. I am an economist who specializes in intellectual property valuations and anti-trust analysis for (mostly) technology-based companies like Verizon. When you have a dispute (say, patent infringement or accusations of improper market behavior like collusion), one of the things that often gets shouted out by some witness is that “there is no good reason” for doing business like that.

    The problem is, such a claim flies in the face of economic theory–not to mention common sense (as an economist, I think of these as synonymous:)): Firms are profit maximizers, and they only undertake activities to that end. While I have not an inkling as to what Verizon’s motive is, I am confident they have a very good reason for doing it, and that it pads their bottom line significantly.

    Of course, you already knew this–so I actually haven’t added anything, beyond a confirmation that there must be a good reason. If Verizon ever retains me as a consultant (not unlikely), and I get into their pricing and product docs enough to find an answer, I’ll let you know.

  2. That’s the thing: I know too that it has to be profitable for them — after all, Verizon Wireless *is* the second largest wireless carrier after AT&T (and actually has the highest revenue of all carriers and will be the largest carrier after its merger :o), so I can’t say that Verizon is in a downward spiral — because that’s just not true.

    But it’s so neat to get perspective from someone in the know :D.

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