Verizon Wireless: An App Store to Take On Apple

In a move that could rattle the wireless industry, Verizon Wireless is gearing up to challenge Apple (AAPL) in the market for software applications that are downloaded to cell phones. Verizon, the top U.S. wireless operator, plans to preview its software store on July 28 and is pouring substantial resources into the effort. But it will be a struggle to catch up to Apple, which has built broad support among software developers and customers in the year since it launched its App Store.

Software apps are all the rage in wireless these days. Customers are flocking to devices such as the iPhone that offer myriad programs, and developers are cooking up software to meet the demand. You can use an iPhone to look for jobs, read golf greens, tune into digital radio, or play games. Juniper Research estimates sales of mobile applications could hit $25 billion in 2014, up from $5 billion this year.

What's yet to be decided is who will control this market. Wireless carriers have long been the gatekeepers for what people do with their phones. But phonemakers, led by Apple and Research In Motion (RIMM), have grabbed an early lead by creating software stores that are easy for customers to use and profitable for developers. Apple says 100,000 developers have created more than 65,000 iPhone applications so far, and customers have downloaded those applications more than 1.5 billion times. "It is going to be very hard for others to catch up," boasted Apple CEO Steve Jobs in a July 14 press release.

To get into the game, Verizon is crafting a strategy that's more open and global than it has ever used in the past. It is teaming up with Vodafone (VOD), Japan's SoftBank, and China Mobile (CHL) to create a common software foundation. Developers will be able to write applications for the standard, which the carriers are calling the Joint Innovation Lab (JIL). When the store launches in the fall, it could reach as many as 1 billion customers, the combined total for the four operators. "I am not here to bash anybody, but if I could write one application that could touch every iPhone customer or one billion customers, who am I going to write for?" says Verizon Wireless CEO Lowell McAdam.

A DEAL FOR DEVELOPERSAnother part of the plan is to make it easier and cheaper for wireless software developers to work with Verizon and its partners. In the past, a developer would have to design an app to work with the dozens of handsets supported by a carrier. Now Verizon says it will offer tools so developers can write one app that will work on all handsets developed under the JIL standard. Verizon is also expected to offer developers a greater share of the application revenue than in the past and a more streamlined certification process. Apps could appear in its catalog within days instead of weeks or months, says Verizon Vice-President Ryan Hughes. To woo the developer community, the company has organized a special conference for July 28 in San Jose, where it will unveil part of its plan.

Still, some developers remain skeptical. Josh Koppel, co-founder of ScrollMotion, a New York-based startup that has developed a hit electronic reader for the iPhone, says it plans to develop more apps for the iPhone, RIM's BlackBerry, and Google's (GOOG) Android system. Yet while he says the Verizon joint venture sounds exciting, he is not convinced the carriers have the software and design expertise needed to pull off such an enterprise. "Every company is suddenly making a mad scramble to make an app store," says Koppel. "It doesn't mean they know how."

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