AT&T Inc. is about to lose its lock on the iPhone.

Apple Inc. is making a version of its iPhone that Verizon Wireless will sell early next year, according to people familiar with the matter, ending an exclusive deal with AT&T and sharpening the competition with Google Inc. -based phones.

While Apple is on track to sell 40 million iPhones across the globe this year, the touchscreen handset is facing pressure in the U.S. from phones running Google's Android software, which have been heavily promoted by Verizon Wireless, the biggest U.S. carrier by subscribers.

Apple plans to begin mass producing the new iPhone by the end of the year, and it would be released in the first quarter of 2011, these people said. The phone would resemble the iPhone 4 currently sold by AT&T, but would be based on an alternative wireless technology used by Verizon, these people said.

The new iPhone spells the end of the exclusive arrangement that AT&T has had since 2007, when Apple Chief Executive Steve Jobs introduced the original iPhone. Since then, the iPhone fueled much of the AT&T's growth.