(NewsFactor.com) - As Apple and AT&T continue talks about extending their iPhone relationship, rumors are flying about new iPhone devices and a possible deal with Verizon Wireless. According to a story in Monday's Business Week and elsewhere, Apple is discussing with Verizon the possibility of distributing two new iPhone descendants. One is being described as an "iPhone lite," and the other as a media pad for listening to music, watching high-definition video, looking at photos, and making phone calls over Wi-Fi. AT&T currently is the exclusive carrier for the iPhone in the U.S.

The magazine said the media-pad device would be smaller than Amazon's Kindle, but with a larger screen. The publication said its information comes from two anonymous sources "familiar with the matter." AT&T has acknowledged that it's talking to Apple about continuing its exclusive U.S. deal for the iPhone, and Verizon Wireless CEO Lowell McAdam has similarly confirmed that he has been talking with Apple CEO and cofounder Steve Jobs, who is on medical leave. Verizon didn't give any indication whether the discussion was about handling the current iPhone 3G or if it involved new devices.

The iPhone is currently designed for a GSM network like AT&T's, not for Verizon's CDMA technology. But Verizon is moving aggressively toward a 4G/Long Term Evolution technology, which is growing worldwide. Each of the carriers has strong arguments in favor of coming to terms with Apple, for the iPhone or for newer devices. While Current Analysis analyst Avi Greengart noted that he doesn't comment on rumors, he pointed out that these reasons are central to understanding why this story has gotten the play it has.

"The iPhone has been absolutely critical to AT&T," he said, noting that the carrier's deal with Apple has resulted in 1.6 million high-value subscribers in the last quarter alone. "Verizon Wireless is growing without the iPhone," he said, "and AT&T is growing because of it." Other fuel for this rumor wildfire, he said, has been that both companies have acknowledged their discussions, and there have been long-standing rumors "going back at least five years" about Apple building a tablet computer. There have also been persistent rumors that Apple has been on the verge of releasing a smaller iPhone, dubbed the iPhone Nano by some observers.

Greengart pointed out that there has been a lot of discussion by industry observers about ways in which Apple could broaden its product line, especially given the growth of the netbook category and Apple's leading position in wireless devices because of the iPhone. And, he said, there's one additional factor. "There are a lot of Verizon Wireless customers who are unwilling to leave the carrier," he said, "but who want an iPhone." Anecdotally, he noted a number of people have asked him, "When will Verizon Wireless get the iPhone?"


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