Facing intense competition from phone makers wedded to Google's Android software, Steven P Jobs, Apple's chief executive, finally plans to make the iPhone available on Verizon Wireless, the largest wireless carrier in the United States.
After more than three years of using only AT&T cellphone networks, Apple is now making a version of the iPhone 4 for Verizon's network, according to a person who is in direct contact with Apple. Apple and Verizon will begin selling the phone early next year, said the person, who agreed to speak on condition of anonymity because the plans were supposed to be confidential and he did not want to alienate his contacts at Apple.
Apple and Verizon Wireless declined to comment.
The arrival of the iPhone on Verizon, which has long been expected and frequently rumored, could sharply alter the dynamics of the smartphone market in the United States. The iPhone remains the best-selling smartphone. But around the world, many carriers, especially those that do not have access to the iPhone, have been promoting an array of handset models running on Google's Android software. Collectively, those phones now outsell the iPhone.
This week, Nielsen reported that Android accounted for 32 percent of the new smartphones sold in the United States in last six months. By comparison, the iPhone accounted for 25 percent. The numbers confirm those of other research organizations.
The Android's rapid ascent threatens to blunt Apple's lead in the market for high-end smartphones. No other Apple product brings as much revenue for the company as the iPhone, and analysts say that seeing that lucrative market imperiled may have finally pushed Apple into ending its exclusivity with AT&T.
"Android has tremendous momentum," said AM Sacconaghi Jr, an analyst with the research firm Sanford C Bernstein & Company. Mr Sacconaghi said that the growth of Android was in large part because the iPhone was not available on Verizon and some major carriers overseas. "Apple moving to sign up these carriers is very important to help mitigate Android momentum," he said.
A Verizon iPhone could quickly tilt the marketplace back in Apple's favor. For all its success, the iPhone on AT&T has been plagued by complaints of poor network coverage, especially in some major cities like New York and San Francisco. Many potential customers have chosen to buy Android handsets from other carriers to avoid problems with dropped calls and dead zones.
But many surveys show that many owners of Android handsets would buy an iPhone, if it were available on Verizon. At the same time, AT&T iPhone customers may switch to Verizon as their contracts expire, even though they would have to buy a new phone to do so. Apple's AT&T phone, which uses GSM networking technology, would not work on Verizon's network, which uses a different networking technology called CDMA.
"It is going to have a fairly disruptive impact when it lands," said Charles Wolf, an analyst with Needham & Company.
Another factor that could be pushing Apple to end its AT&T exclusivity is the impending arrival of phones running Microsoft's new Windows Phone 7 software. The two companies are making a joint announcement about its phones Monday. Early reviews of the devices have been positive, and Microsoft, which has faltered repeatedly in the phone business, plans to spend heavily to market the new handsets.
"Windows phones should not be dismissed," Mr Wolf said. "They will be a major player in the market."
While the arrival of the iPhone on Verizon had long been expected, some industry insiders doubted that Apple would bring the iPhone to Verizon before the carrier deployed its next-generation network, known as LTE, or Long-Term Evolution.
But in an interview this week, Tony Melone, the chief technology officer of Verizon Wireless, suggested that those doubters could be wrong. Mr Melone did not comment on the iPhone, but he said that while Verizon would begin introducing its new network in 38 American cities by the end of the year, the company's older 3G network would continue to grow for several years. He also said that Verizon would continue "selling 3G devices well into the decade, possibly through the end of the decade."
However, while LTE phones will be backward-compatible so they can run on Verizon's older 3G network, those 3G phones won't run on the new, faster LTE network.
The arrival of the iPhone to Verizon could further increase Apple's bottom line, with some analysts predicting the company could sell an additional 10 million devices per year. But analysts say that investors have long expected Apple and Verizon to come to terms eventually, and Apple's stock price already reflects that.
Indeed, over the last year, a flurry of reports have predicted a Verizon iPhone was imminent. On Wednesday, The Wall Street Journal reported that the iPhone would be available on Verizon early next year.