Verizon-AOL: A War of All Against All

[Commentary] When Steve Jobs released the first iPhone in June 2007, Apple and Verizon were worth almost exactly the same in the public markets: About $115 billion. What came over the next eight years was one of the greatest transfers of power and wealth in corporate history. Mobile phone operators -- who had been brutish, intractable gatekeepers to the customer -- were turned into Apple’s lackeys. The customer was still spending money with the carriers, but now she was spending far more with Apple. Today Apple is worth about $735 billion, nearly double that of Verizon and AT&T combined. The carriers still love to romance the “power of the network,” but this has the feel of a crumbling empire, vainly proclaiming its domain over places long overrun. The shock announcement of a Verizon purchase of AOL makes these big changes ever more clear. Physical communications networks are less of a competitive advantage. They are becoming table stakes.

Google and Facebook are launching gliders and blimps and laying fiber in the ground; cable TV operators are deploying Wi-Fi workarounds; there are now mobile-phone carriers in which Wi-Fi is the default; and cellular technology is the backup. Neither Verizon nor AT&T is going away. But their place in the world seems ever more insecure. Over the long-term it seems the benefits will accrue to the company that can stitch everything together -- software, connectivity, content -- into one undeniable package. Right now, the advantage seems strongest with Facebook and Google. Of course, that was precisely the idea of the wretched ur-merger of AOL and Time Warner. A generation later, we are still chasing its ideal, with Verizon just the latest to pick up the harpoon and pursue the great white whale.