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The buzz in the market over the past few days has been about whether or not Verizon will eat AT&T's (NYSE: T) lunch in regard to the iPhone.
Apple (Nasdaq: AAPL) is reported to be talking to Verizon about allowing it to carry an Apple-made phone in the U.S. That could spell the end of AT&T's exclusive dibs on the iPhone when its Apple deal 
expires, possibly next year.
Verizon could be in a strong negotiating position. More iPhone competitors will hit the market next year, and Apple could mute their buzz and even grow its business if it were to expand to a second U.S. carrier. However, whether Apple can strike a deal remains to be seen.
Verizon and Apple in Talks?
Even assuming that reports of Apple sitting down with Verizon are true, speculation varies as to what's being offered. One theory: Apple will develop a new version of the iPhone that will run on Verizon's network and be made available sometime next year. This supposed "iPhone Lite" would be smaller, thinner and cheaper than the current iPhone because it would rely on a system on a chip, or SOC.
SOCs integrate all components of a computer or other electronic system into a single chip. They may contain analog, digital and communications functions all together.
Other reports have Apple creating an iPod touch-like device to be offered by Verizon that will have high-definition video as well as telephone capabilities in addition to the music, games and photo capabilities of the standard iPod touch. Could this be the long-talked-about but never-seen Apple tablet?
The View From AT&T's Offices
Should Apple open the iPhone to Verizon, the development would hit AT&T very hard.
AT&T activated more than 1.6 million iPhones during the first quarter, and it appears the telecom means to hang on to its exclusivity with both hands: Earlier this month, AT&T was reported to be in talks with Apple over extending its exclusive contract to provide wireless service to iPhone users in the U.S. beyond the reported 2010 expiration date.
AT&T spokesperson Mark Siegel declined to comment. "We have never commented on discussions with Apple on anything," he told MacNewsWorld.
"We've never said what the [expiration] date on our agreement is, and we've both agreed that we don't comment on specifics of the partnership except that it's multiyear."
Apple did not respond to requests for comment.
The Benefits of a Verizon Deal
Financially, Verizon is relatively strong. In its first-quarter earnings report, released Monday, it said revenue and earnings continued to grow. It claimed 86.6 million wireless customers in all, up 28.8 percent quarter over quarter, and added 1.3 million wireless customers in Q1, almost all retail . Revenue increased nearly 30 percent.
Snagging Verizon as a partner would help Apple grow the iPhone's user base.
"Apple is barred from about two thirds of the U.S. market through its choice of AT&T," Rob Enderle, principal analyst at the Enderle Group, told MacNewsWorld. "If there's one vendor to pick, it would be Verizon."
Strengthening Verizon's Hand
However, striking a deal with Verizon won't be easy for a variety of reasons.
For one, Verizon is not likely to agree to Apple's terms, Enderle said.
"They turned down Apple when it approached them before going to AT&T, because they didn't like the terms and conditions," he pointed out, "and they're not going to change now."
Also, Verizon -- like all other carriers -- has relationships to maintain with Apple's competition. In fact, Microsoft (Nasdaq: MSFT) is reportedly in talks with Verizon Wireless, looking to launch a touchscreen multimedia cell phone that would compete with the iPhone.
That's not all. "By mid-2010, when the AT&T contract expires, the second-generation Android phones will come out, and Verizon will get a piece of that," Enderle said. "And Sprint's (NYSE: S) Pre deal may expire in a year, and Verizon may get a piece of that too. It's not a one-horse race anymore."
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