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msnbc.com
updated 4/28/2009 3:23:07 PM ET 2009-04-28T19:23:07

An iPhone “lite” and an iPhone “media pad” may be offered by Verizon Wireless, according to sources quoted in stories from BusinessWeek and USA Today.

In the United States, Apple’s hugely successful iPhone, launched in 2007, has only been available through AT&T, which has exclusive rights to distribute the phone through the end of next year.

Representatives from Verizon Wireless, AT&T’s main rival, have had talks with Apple about two iPhone-like devices, according to BusinessWeek. USA Today also reported that the companies have had "high-level" discussions.

“Benefits to Verizon Wireless would be a hot phone, and Verizon Wireless is currently the most favored of the networks,” said technology analyst Rob Enderle. “For Apple, it would nearly double their available U.S. market.”

AT&T has about 78.2 million mobile customers, and Verizon Wireless, which recently acquired Alltel Wireless, has 86.6 million subscribers. Representatives from both carriers, as well as Apple, have declined to comment on the iPhone-related negotiations.

“Apple is certainly interested in expanding the distribution of its mobile products in its home region (the United States), where it has always had its best success,” said Kevin Burden, ABI Research’s practice director, mobile devices.

“The addition of the country’s largest mobile operator as an additional channel for Apple would handle that nicely. However, there are a lot of obstacles and ‘what ifs’ in the way.

“The iPhone brand could not be a part of the deal, and Apple and Verizon would need to be cautious in how a voice/data terminal (such as a media pad) is positioned so that it doesn’t violate the AT&T exclusivity deal.”

A smaller, thinner iPhone “lite” and a “media pad” that could be used to make calls over Wi-Fi connection are in the works, according to a source who has seen the devices’ prototypes, BusinessWeek reported.

The media pad, akin to Apple’s existing iPod touch, also would “let users listen to music, view photos and watch high-definition videos,” BusinessWeek said.

Verizon Wireless CEO Lowell McAdam told the magazine that he had spoken with Apple CEO Steve Jobs and other company executives in the last six months.

Meanwhile, Microsoft and Verizon Wireless are in talks about a touchscreen phone that could be out next year, according to a report in The Wall Street Journal. (Msnbc.com is a joint venture of Microsoft and NBC Universal.)

Microsoft’s Windows Mobile operating system runs on a variety of phones, but a Microsoft phone itself would be new to the company’s product lineup.

Currently, Verizon Wireless’ flagship touchscreen phone and iPhone competitor is the BlackBerry Storm. The phone, Research in Motion’s first all-touchscreen device, has been a strong seller but has resulted in customer frustration with its touchscreen keyboards.

While both AT&T and Verizon Wireless have 3G, or third-generation, wireless networks, Verizon Wireless is further ahead than its competitor with the development of a 4G, or fourth-generation network that could bring even faster e-mail, Web browsing and downloading capabilities.

Those features have been a key draw of the iPhone. And while both AT&T and Apple have said each is happy with the other, some customers who would like the iPhone have resisted switching to AT&T because its network is not considered as reliable as that of Verizon Wireless.

"AT&T's recent results show that the iPhone has been one of the most important reasons they have continued with their subscriber growth, taking customers not only from weaker carriers like Sprint but also dinging Verizon Wireless," said David Chamberlain of In-Stat Research recently.

Apple said last week it sold 3.8 million iPhones in its second quarter, more than twice as many as a year ago. Currently there are two versions of the iPhone, an 8-gigabyte model that costs $199 and a 16GB model for $299.

The company may also be working on a $99 version of the iPhone that would run on AT&T's slower 2.5G network. A new version of the iPhone is expected to be released within the next few months.

Analysts caution that Verizon Wireless/Apple reports may be spin, in part, by Apple to cement an improved contract with AT&T.

“This could end up being an elaborate negotiation tactic,” said Burden.

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