The rumor mill is now in full swing. Following USA Today’s report yesterday that Verizon Wireless (NYSE: VZ) was in discussions with Apple (NSDQ: AAPL) to start distributing an iPhone as early as next year, now BusinessWeek is reporting that it may not be for the iPhone, but rather an “iPhone lite,” or a “media pad” that would let users listen to music, view photos and watch videos.

The first device is smaller and less expensive, but is considered a “calling device,” while the other one sounds like an enlarged iPod Touch, which could make calls over Wi-Fi. The sources tell BusinessWeek that a device could be launched as early as this summer. BusinessWeek reported that “the media pad category might go to Verizon,” according to a person who has seen the device.