New Gear from Apple and Verizon Wireless?
The companies are in talks to develop two iPhone-like handhelds that could be unveiled as soon as this year — Verizon Wireless is warming to the idea of an Apple (AAPL) partnership. Verizon Wireless is in talks with Apple to distribute …
Context & Ripple Effects
The arc here is Verizon's reversal. In October 2007 the carrier answered the iPhone by unveiling its own iPhone rival; eighteen months later, per this Business Week report, it is reportedly in talks with Apple itself to develop and distribute two iPhone-like handhelds — including what MacRumors' pickup describes as a 'media pad' and an 'iPhone Lite'. The relationship is explicitly rumored, so nothing is settled, but the direction of travel — from competing with the iPhone to carrying it — is the story.
Timing matters: Apple has just posted its best March quarter ever ($8.16 billion revenue, $1.21 billion profit for fiscal Q2 ended March 28, 2009), so it negotiates from strength, while Verizon would be buying relevance against the one device it cannot match in-house.
First-order effects
- If the talks produce a deal, Verizon gains two Apple-branded handsets and ends its position of fielding only lookalike competitors, while AT&T's US iPhone exclusivity — the linchpin of its smartphone franchise since 2007 — comes under direct threat.
- Apple widens its US distribution beyond a single carrier for the first time, converting Verizon's subscriber base from a blocked market into addressable demand.
Second-order effects
- AT&T would be forced to defend its exclusive-era advantages — pricing, subsidies, or deeper bundling — rather than relying on possession of the iPhone alone.
- Other handset makers supplying Verizon's lineup would suddenly compete against Apple hardware on their host network, compressing their shelf space and negotiating leverage.
Third-order effects
- If the pattern holds, US flagship smartphones stop being single-carrier weapons and become multi-network products, shifting power from carriers who controlled distribution toward manufacturers who can auction exclusivity — a restructuring of how handsets reach American buyers.
The trend: US wireless is moving from carrier-exclusive flagship phones toward multi-carrier distribution, with Apple's carrier negotiations setting the template.