In the wake of Verizon’s announcement to offer the iPhone, my main reaction is: What’s all the fuss about? Ok, sure, the current model of iPhone, the iPhone 4, will finally be unlocked from AT&T’s grasp and offered to customers on Verizon’s network (note, this isn’t a LTE iPhone or an iPhone 5 – just a normal iPhone). And yes, as a long-time iPhone user myself, I’ve certainly had my share of AT&T nightmares – dropped calls, poor data connections, battery drain from weak signal, voicemail messages that inexplicably appear on my phone a week after they’ve been left, and so forth. AT&T has been consistently flagged as the worst carrier in the United States for its service. On top of that, AT&T has recently eliminated unlimited usage data plans, whereas Verizon will offer unlimited 3G usage on its iPhone.

That said, a 3G Verizon iPhone doesn’t seem that exciting to me, or to some others, apparently. The iPhone isn’t the be-all-and-end-all of smartphone platforms anymore. Android is growing more rapidly and becoming more important (in fact, Android devices just overtook the iPhone in market share). It won’t be long before Verizon offers dual-core, LTE Android phones either – better hardware, with a more open development process, on a better network. Now that is worth some excitement.

But I can understand why a legion of Apple fans will be excited about this – and why Apple retail stores are forbidding their retail employees from taking vacation on the first weekend the Verizon iPhone will be available. Apple makes popular and well-designed electronics, and Apple’s products always have a tremendous impact on the market.

Small step

Which brings me to my first real point in this post: Why didn’t this happen nearly four years ago with the first iPhone? How much has the mobile broadband market suffered because of the original anti-competitive exclusive deal between AT&T and Apple (which was unprecedented in its scope)? AT&T has been milking this cow for years, keeping its churn rates below 2% despite underinvesting in its network by approximately $1.5 billion annually compared to its closest competitor, Verizon. If Apple’s devoted fan base had had a choice of mobile providers from the beginning, AT&T and Verizon would have spent the past few years competing more on service price and quality, and less on advertising. Remember the ad wars and lawsuits over the coverage maps? Remember Luke Wilson? Where would AT&T’s network and its subscribers be today if the company had invested its payments to Luke Wilson into infrastructure?

This is a step in the right direction towards more competition in the mobile ecosystem. The single most popular smartphone will be available on the nation’s two largest wireless carriers. But it’s a small step, and it’s being taken far later than it should have been. The market had to free itself from the shackles of that original AT&T/Apple deal, because the Federal Communications Commission and Congress didn’t do anything about it, despite waves of protest from the public interest.

Consumers still suffering

What will happen now? Honestly, probably not that much. A number of people will sign up for Verizon iPhones – but many, many more are still trapped into long AT&T contracts by the artificially high early termination fees (ETFs). In fact, AT&T likely just signed up another wave on standard two-year handcuffs by dropping the price of the iPhone 3GS to $49. Two years?? In this market, a two-year contract means a consumer misses three full generations of innovation, trapped by a punitive ETF that bears no proven relationship to actual sunk costs by the wireless carrier or other cognizable harm. Noise at the FCC and on Capitol Hill raised the profile of the issue, but no government body did anything about it, so consumers are still suffering.

On top of handset exclusivity and ETFs, many other obstacles continue to plague the mobile broadband market and competition. The FCC has not acted on special access reform, punitive data overage charges, or the increasing disparity of spectrum ownership – all barriers to a consumer- and competition-friendly mobile broadband industry. With all these things getting in the way of competition, it’s possible that the biggest impact of the Verizon iPhone announcement will be that we’re all spared any further rumors of a future Verizon iPhone announcement.

So for consumers, a Verizon iPhone brings (at least a little) more choice. For policymakers, I hope it brings a wakeup call. Effective competition in the mobile market remains a myth thanks to many unresolved policy problems. Opening the iPhone to multiple carriers, and other pro-consumer market changes, could have and should have happened years ago, and consumers and the market would have been better off as a result, if only more of our government leaders were willing to get their hands dirty. It’s not too late, but it’s definitely time to get to work.