Apple May Have Two iPhones For VerizonApple May Have Two iPhones For Verizon

The talks between Apple and Verizon Wireless are heating up, and the negotiations could potentially lead to two iPhone-like devices on the nation's largest carrier.

BusinessWeek, citing sources familiar with the negotiations, said Apple already has working prototypes of these devices. The first will be a stripped-down version, or an "iPhone lite," that will have a lower price tag than the iPhone 3G. The second is reportedly a tablet-like media pad that can play music and videos, view photos, browse the Web with mobile Safari, and make calls over a Wi-Fi connection.

Apple and Verizon have not responded to press inquiries for comment, but a potential deal shows the increased strength Apple has in the mobile space. Apple reportedly wanted Verizon to be the exclusive provider of the original iPhone, but Verizon balked at not being able to put its branding or software on the device. With the iPhone selling nearly 20 million units in two years and poaching away many of its smartphone customers, Verizon may be changing its tune.

"They didn't want to be involved and now realized it was a mistake," said independent wireless analyst Jeff Kagan. "The bottom line is you got to keep your customers happy, or you'll lose subscribers. As hard as they want to compete, they don't have an iPhone. And that matters."

For Apple, a deal would give it nearly 80 million more mobile customers to sell products to. But Kagan said the company could face a challenge if its smartphone proliferates too much because it would lose its "special" quality that makes it so attractive.

"If you look at the Motorola Razr, it came out on one provider, was expensive, captured a lot of interest, and made a lot of money," said Kagan. "But it eventually spread to all the carriers, its price went down, and the interest went from 100 to zero. Apple doesn't want that to happen."

Kagan said Apple's marketing department is too good to let the iPhone become commoditized, and the company may eventually create for each carrier it partners with exclusive devices that have the same iPhone functionality, but may have a different form factor. Apple will likely have mobile devices on carriers other than AT&T, but Kagan doesn't expect it to happen until at least next year.

Some are speculating that the talks with Verizon, as well as the unnamed leaks to the press, are negotiation tactics by Apple to get better terms from AT&T. The carrier is reportedly trying to extend its exclusivity agreement with Apple because the iPhone has brought millions of new customers who signed up for long-term contracts with mobile data plans.

"It looked like half of AT&T's net new subscribers last quarter were iPhone customers, and that's really significant," said Charles Golvin, analyst with Forrester Research. "It speaks to the power of the device, and I think they'd be willing to invest in it. Of course, there's always a point where the numbers no longer work."

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