Report: Apple and Verizon in Talks to Develop Two New Phones

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The iPhone took the smartphone world by storm, dominating sales charts and creating a revenue juggernaut via the App Store. AT&T has long been the sole official carrier of the iPhone in the U.S. While that may continue, its monopoly of the Apple-branded phone market may soon be compromised as Verizon is reportedly in talks with Apple to develop two new phone products.

Business Week cites inside sources as saying that prototypes of the new phones are complete and negotiations have been ongoing for over a year. Reportedly, Steve Jobs is in on the talks.
One device is a small phone, described as the "iPhone lite", which would be cheaper than the iPhone. Its key would be that it would use a system-on-a-chip (SOC) design, which would compact the phone's electronics and make production cheaper. A source states, "It will have a much lower cost that will blow away the margins on the BlackBerry and the iPhone."

The second device is a tablet/media pad which can make calls over a Wi-Fi connection. It would be designed primarily for listening to music, viewing photos, or watching high-definition video. The new media pad is reportedly smaller than a Kindle, but with an equally big touch-screen. Either device could debut as early as the summer, according to the source.

Another source about the media pad, which they claim to have seen, adds, "The media pad category might go to Verizon. We are talking about a device where people will say, 'Damn, why didn't we do this?' Apple is probably going to define the damn category."

Verizon Wireless CEO Lowell McAdam confirmed talks with Apple, stating, "In the last six months, I have talked to Steve Jobs."

He would not, however, say what they talked about.

Even if the hardware devices indeed exist, there is still friction between the two companies. Both parties want to get a bigger piece of the revenue pie. Furthermore, Verizon has long been a vocal critic of the iPhone, debuting "anti-iPhone" commercials and ads, which portray the iPhone as closed and on a poor network.

Still, with 7 million new subscribers to AT&T from the iPhone, the lure of Verizon’s subscriber base will likely be hard for Apple to resist. The company could also use a phone offering to stop Verizon from offering the Pre smartphone from Palm, which is considered the first real threat to the iPhone. The multi-touch Pre is set to be offered to Sprint's 35.5 million customers, and Verizon, with 86.6 million subscribers, was reportedly also considering adopting the phone.

The news of the Apple phone products for Verizon comes hot on the heels of a USA Today report on April 27 that Apple was in talks to adapt the current iPhone for the Verizon Wireless network. The move would require Apple to rework its phone to work with a CDMA wireless network, different from the AT&T's GSM technology.