Who Benefits From Verizon's Open Network?

• Email
• Share
• Print

It's been just a few days since Verizon Wireless announced that it will embrace an open network policy, rather than fight it. The company, a joint venture between Verizon Communications (NYSE: VZ) and Vodafone (NYSE: VOD), has only laid out a theoretical plan, with a lot of details remaining hazy. But while the industry struggles to grasp the change's importance, some companies are already getting a small benefit of the doubt.

Wireless technology developer Qualcomm (Nasdaq: QCOM) is one of those lucky beneficiaries. Shares of the San Diego wireless giant bumped upward Wednesday, as Oppenheimer analyst Lawrence M. Harris noted that Qualcomm could benefit from increased demand for its chipsets in phones that move among various networks.

Qualcomm has been gearing up for a future that includes far more than just phones. The company started ratcheting up R&D spending years ago in anticipation of the very same sort of future that Verizon and others such as Google (Nasdaq: GOOG) are now mapping out. In that rosy scenario, a whole plethora of electronic devices and novel applications transmit information across ubiquitous open networks.

A possible sneak peek at this future just hit the digital shelves at Amazon.com (Nasdaq: AMZN) -- the world-changing Kindle digital book reader. This device uses Sprint Nextel's (NYSE: S) nationwide network to download books, which is not a remarkable feat in itself. But bookworms don't have to pass a credit check, sign a contract, or commit to two years of payments for the privilege of downloading an occasional read.

The eventual success of Verizon's open-network experiment will largely come down to one thing: price. If access to Verizon's network carries constrictive pricing structures, it will be a pyrrhic victory for consumers. Even if open network carriers charge minimal "pay per use" fees, the costs must be negligible with respect to the service. Users won't pay a couple of bucks each time they want to upload a few photos.

Once again, true change is in the hands of the carriers. Device manufacturers and technology developers such as Qualcomm are definitely hoping that the open network revolution turns out to be more than a weak uprising, quickly dispersed by the absence of a viable business model.

For more Foolishness:

• Why Kindle Will Change the World
• The Stocks Shall Rise Again!
• My No. 1 Top Holding