What's Behind the Apple-Verizon Rumor?

CIO — The latest Apple rumor has Verizon peddling new iPhones, but industry watchers figure it's pure fantasy—at least anytime soon.

USA Today reported last week that anonymous sources said Apple and Verizon were thick in talks to create a new version of the iPhone that would run on Verizon's CDMA cellular network. The potential launch would happen after Apple's exclusivity agreement with AT&T expires after 2010.

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This rumor came about amidst a number of significant and related going-ons. For instance, Apple and AT&T are currently discussing their exclusivity contract. Verizon is reportedly considering a deal with Microsoft about "Pink," a supposed Microsoft Zune-phone to be sold by Verizon. Lastly, a new iPhone-like device with a 10-inch touchscreen is indeed in the works.

Needless to say, this Apple rumor may have more to do with posturing than truth. "I don't think it's real," says Gartner analyst Ken Dulaney. "Apple has said publicly that they don't care for CDMA because it's not a WW standard. Thus, the first time Apple could show up on Verizon is when they move to LTE, which is about 2012."

Dulaney is referring to comments made by Apple Chief Operating Officer Tim Cook during Apple's rosy quarterly earnings call last month. When asked about Apple continuing its exclusive deal with AT&T, Cook said, "We view AT&T as a very good partner. We have no plans to change it ... Verizon is on CDMA, and we wanted one phone for the whole world."

The knock on CDMA has to do with its global reach, or lack thereof. "CDMA is a technology with a limited future," says Forrester analyst Charles Golvin. "There is not a commensurate increase in global market opportunity."

It's a better bet that the rumor has been started to give Apple some leverage in its exclusivity discussions with AT&T. An Apple-Verizon deal would indeed expand iPhone's coverage and give Verizon some bragging rights in its heavy-weight bout with AT&T. "Verizon desperately needs the kind of excitement that Apple brings with the App Store," Dulaney says.

Such a move would also help Apple reduce the role of carriers, which Golvin believes is in Apple's long-term interests. Apple would probably prefer to sell directly to consumers with little to no carrier involvement. "However, I don't think the timing is optimal for Apple to push this issue," he says, "and hence I think the Apple-AT&T exclusive deal will persist for another year."