Thursday, October 07, 2010, 09:45 am

Verizon, Apple quarreled over iPhone retail options, digital content

By Sam Oliver

Major sticking points in negotiations between Verizon and Apple have reportedly been the wireless carrier's interest in allowing retail partners to sell the iPhone, and Verizon's promotion of its V Cast digital video-on-demand store.

Overnight, The Wall Street Journal filled in some of the holes in its story filed Wednesday afternoon, adding new details of a purported Verizon-compatible CDMA iPhone. Among other changes, the story added specifically that the phone would be coming to Verizon, the largest wireless carrier in the U.S.

The previous report said only that Apple would make a phone that was compatible with Verizon's network. It did not go as far as to say Apple had struck a deal with Verizon -- but that detail was, in fact, later added.

The report also shed some light on previous negotiations between the two companies, alleging that Apple and Verizon butted heads over a number of issues, including the wireless carrier's V Cast digital video store.

"Verizon, in those earlier discussions, balked at Apple's requirement that Verizon not allow its retail partners to sell the phone, people familiar with the discussion said at the time," the report said. "Verizon also declined to give up its ability to sell content like music and videos through its proprietary service, these people said."

The expanded report from Yukari Iwatani Kane and Ting-I Tsai also added that Apple will not create a dual-mode GSM and CDMA phone for Verizon's network. Instead, the new Verizon-compatible phone will operate only on CDMA networks, based on a chip provided by Qualcomm.

The report also alleged that Verizon has been preparing its network for the arrival of the iPhone, expected to happen in early 2011.

"Verizon Wireless has been meeting with Apple, adding capacity and testing its networks to prepare for the heavy data load by iPhone users, according to one person familiar with the matter," the report said. "The carrier is seeking to avoid the kind of public-relations hit that AT&T took when the boom in data-hungry iPhones overtaxed its network, especially in New York and San Francisco."

Responding to the Journal's reports on Wednesday, Verizon President and COO Lowell McAdam said that any indication of a Verizon iPhone would need to come from Apple. Lowell told the press he could not provide them "any insights."