Verizon rejected Apple iPhone deal
Updated 1/29/2007 9:50 AM ET



By Leslie Cauley, USA TODAY
NEW YORK - Verizon Wireless, the No. 2 U.S. cellphone carrier, passed
on the chance to be the exclusive distributor of the iPhone almost two years
ago, balking at Apple's rich financial terms and other demands.
Among other things, Apple wanted a percentage of the monthly cellphone
fees, say over how and where iPhones could be sold and control of the
relationship with iPhone customers, said Jim Gerace, a Verizon Wireless vice
president. "We said no. We have nothing bad to say about the Apple iPhone.
We just couldn't reach a deal that was mutually beneficial."

Verizon's decision to pull the plug on talks sent Apple into the
waiting arms of Cingular, which will be the exclusive U.S. carrier for the
iPhone. The multifunction device is expected to ship in June and cost about
$500.

Apple and Cingular (which now is solely owned by AT&T and adopting
that brand name) have declined to discuss terms of their alliance. But the
Apple-Verizon talks offer a peek into the computer giant's thinking.

According to Verizon, Apple CEO Steve Jobs insisted that he have hard
control over iPhone distribution.

The problem? While Apple and Verizon stores would have it, Wal-Mart,
Best Buy and other Verizon distributors could have been left out. "That
would have put our own distribution partners at a disadvantage" to Apple and
Verizon stores, Gerace said.

Customer care was another hitch: If an iPhone went haywire, Apple
wanted sole discretion over whether to replace or repair the phone. "They
would have been stepping in between us and our customers to the point where
we would have almost had to take a back seat . on hardware and service
support," Gerace says.

Cingular won't talk about the financial terms or say how long its
iPhone exclusivity lasts, but two people with direct knowledge of the deal
say it's a five-year contract. The exclusive is USA-only, leaving Apple free
to market its iPhone globally.

Natalie Kerris, an Apple spokeswoman, declined to comment on any
aspect of this story.

Mark Siegel, a Cingular spokesman, said, "We think this is a win for
Apple, and it is a win for Cingular."

Siegel declined to comment on customer care plans but said Cingular
would field calls related to the wireless service. "I don't want to leave
the impression that these (iPhone) customers are not ours. They are."

Siegel would not say whether Cingular distributors, which include
Wal-Mart and RadioShack, would get the iPhone. The deal announcement
referred only to Cingular and Apple stores and their websites.