Chicago (IL) - Verizon? The iPhone on the Verizon's EVDO/CDMA cellular network? While
some call it Utopian dreaming -- citing AT&T's exclusive multi-year
iPhone distribution deal -- others are convinced Apple is on the
verge of announcing a Verizon deal sooner rather than later. If true, the deal
with Verizon might alter balance of power in the U.S. cellphone
industry while giving Apple the kind of distribution footprint enjoyed
by the big boys. Even if the rumor turns out to be false, it still begs the valid
question of what happens next for Apple's iPhone once the company's
exclusive partnership with AT&T expires?

Is
Timothy Cook, Apple's interim CEO covering for Jobs
during his six months sick leave, exercising his responsibilities
to push deals that might never have happened if his boss had been
around? Some think that's exactly what's at play here regarding rumors of
Apple's ongoing discussions with Verizon Wireless in a possible iPhone deal. After all, Verizon once turned down Steve
Jobs, fearing his legendary "control freakiness" (to coin a phrase).

According to an IT Examiner report citing months old speculative, but otherwise convincing, reports ran by the Mac site dubbed 9 to 5 Mac,
Apple could announce deal with Verizon Wireless "soon." If true, it
would put an end to AT&T's exclusive iPhone distribution in the
U.S. that has been the subject of both criticism and praise (depending
on your point of view). The IT Examiner cited several iPhone-related job
vacancies Apple posted a few moths ago which called for EVDO and CDMA
engineers. To date, these postings serve as the most solid piece of evidence that throws weight behind possible claims of a Verizon-compatible iPhone.

With AT&T's LTE technology scheduled for 2010 at the earliest, one
could assume that Apple might be growing really impatient to broaden
its carrier footprint. In fact, many watchful readers won't be
surprised if this deal sees the light of the day anytime soon as they point their
fingers to the fact that Verizon has always been the #1 choice for the
iPhone, the choice cherry-picked by the highest authority -- by Steve Jobs
himself.

Verizon wouldn't bend to Apple...

When Apple announced its iPhone in January 2007, Steve Jobs reportedly
toured the biggest carriers in the U.S. to negotiate an exclusive
distribution deal for his company's handset. Verizon Wireless was allegedly Jobs'
first stop as the CEO preferred its speedy network and innovative
services running on top of it. However, the possible deal never came to
fruition as Verizon reportedly didn't want to bend to Apple's demands
that included revenue sharing of monthly service contracts that iPhone
subscribers would pay to Verizon Wireless. The break-down in talks
brought Jobs to the arms of AT&T, the nation's biggest provider with
its sluggish EDGE network (by comparison) and poor coverage at the time.

When iPhone finally hit the market, rumors of possible Verizon network support
would emerge every now and then. However, none of them proved true so
far. On top of that, analysts warned that Apple and AT&T signed a
multi-year exclusive deal that binds the iPhone to AT&T's network
until at least 2010, and possibly 2012, at which time the agreement is set to expire (though nobody knows for sure). If this
2010 timeframe is true, it could mean Apple is free to bring other carriers
to the table as early as July of next year -- because all contracts signed from that point forward would be outside the exclusivity period between the Apple / AT&T deal.

...But Apple has bent to AT&T, right?

When the first iPhone came out, Apple has been harshly criticized for
its distribution deal with the AT&T that rewrote the rules of the game.
Not only did Apple get its cut from consumer's monthly service bills (estimated at around 20 percent), but the company has subsequently
tweaked the rules by dropping revenue sharing in favor of a more common sales
model that saw AT&T subsidizing each iPhone 3G unit with up to an
estimated $400 in return for an obligatory two-year service contract.
While the new deal made the hardware price drop below the psychologically important $199 barrier, an analysis revealed the average
selling price of iPhone 3G to be even higher than with the
first-generation model, just more spread out over time.

While customers got the cheaper hardware upfront, the obligatory
two-year service contract gradually amasses total cost of ownership
over the course of the contract to nearly $2000. While AT&T has to
eat up most of the iPhone 3G price upfront, the expenditure that even
impacts the carriers' bottom line, it slowly recovers its investment
over contract life. The analysis also revealed AT&T now earns more
on iPhone 3G than with the first-gen model. AT&T doesn't
get to share service revenue with Apple anymore, but it also charges a $10
premium for unlimited 3G data than was the case with the entry-level
service plans available for the first iPhone.

Conclusion:  If you can't beat 'em, join 'em

Everyone wins. Both Apple and AT&T cash in more on the
new phone, while customers get the cheaper hardware (although they end
up paying way more for the two-year service). Some industry watchers
think that such deal is beneficiary only to AT&T, which gets to
exclusively carry the hottest handset on the market, the gadget with
a proven ability to switch subscribers from rival networks over to AT&T,
while Apple got its hands tied for the next five years. Most analysts
call for iPhone deployment across other cellular networks once Apple's
deal with AT&T expires, arguing that this would greatly increase the
distribution footprint and, as a result, all-around sales figures.

If Apple pulls up a Verizon deal and manages to secure
Sprint backing, the trio of AT&T, Sprint and Verizon would provide
Apple's handset with roughly the same coverage as BlackBerry, Symbian
and Android handsets. We wouldn't dismiss the Verizon rumor, especially
now that Apple has in a way softened exclusiveness of the AT&T deal
with recent distribution agreements that put the iPhone onto store
shelves of both Best buy and Wal-Mart. Even if Verizon was reluctant to
cut a deal with Apple when Jobs was around, they may be more than
willing to re-negotiate now with Apple's operations chief Timothy Cook
who is reportedly more realistic and approachable negotiator than his
boss Jobs.

And last, but not the least, folks at Verizon running their spreadsheets
must have concluded by now that certain percentage of their subscribers
switched to AT&T network just to get the iPhone. Although Verizon
would be quick to portray the churn-rate as "insignificant," in a
crowded and mature market like this -- and especially in this economy --
every consumer and every service contract counts. In other words,
Verizon may be forced into following the "If you can't beat them, join them"
proverb by all of this.

UPDATED:  February 23, 2009 - 5:42pm CST
Clarifed some wording related to the possible termination of the Apple / AT&T exclusivity contract timeframe, and included the USA Today link.