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Monday, January 29, 2007, 05:00 am PT (08:00 am ET)

Verizon passed on exclusive 5-year iPhone deal

Verizon Wireless 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, according to a published report.

The USA Today on Monday cited Jim Gerace, a Verizon Wireless vice president, as saying the iPod maker and No. 2 U.S. wireless carrier just could not come to terms on a variety of issues.

Among them, Apple reportedly wanted a percentage of the monthly cellphone fees, a say over how and where iPhones could be sold, and control of the relationship with iPhone customers.

"We said no. We have nothing bad to say about the Apple iPhone," Gerace told the paper. "We just couldn't reach a deal that was mutually beneficial."

A mandate by Apple chief executive Steve Jobs that he have 'hard control' over the iPhone distribution may have meant leaving out Wal-Mart, Best Buy and other Verizon distributors. "That would have put our own distribution partners at a disadvantage" to Apple and Verizon stores, Gerace said.

Yet another point of contention was customer care, according to the USA Today, which said Apple wanted sole discretion over whether to replace or repair faulty phones.

"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 added.

While Cingular, the carrier which ultimately inked the iPhone deal, won't discuss the financial terms or say how long its exclusivity lasts, the USA Today cited two people with direct knowledge of the deal as saying "it's a five-year contract."

The exclusive is USA-only, leaving Apple free to market its iPhone globally, the paper said.