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What's Different About iPhone 3G?

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What's Different About iPhone 3G?

What's Different About iPhone 3G?

News Analysis. Nearly 36 hours later, the iPhone 3G realities are setting in.

Apple CEO Steve Jobs has a magic aura often described as the "reality distortion field." The man has an amazing knack for emphasizing a product's benefits, while making deficiencies seem insignificant. Yesterday's World Wide Developer Conference keynote was classic Steve, as he touted the new iPhone's 3G and GPS capabilities.

These new features, in tandem with the iPhone App Store, iPhone 2.0 software and MobileMe service, made the new device look like a big advancement. The big changes are mostly in the software and supporting services. Most of the hardware features are the same.

But as reality sets in and more facts are revealed, some of the iPhone 3G glow diminishes.

From a software and services perspective, iPhone 3G embodies a term often used by, of all people, Microsoft Chairman Bill Gates—"the magic of software." With iPhone, the software seemingly does magic, by how the device responds to the user.

Together, the iPhone SDK and 2.0 software are foundation for a mobile platform. Apple's MobileMe service and iPhone App Store extend the platform to real world usage. Complimenting them, for businesses, is iPhone's forthcoming Microsoft Exchange support.

"You have to look at the iPhone as a combination of device, software and services," said Gartner analyst Ken Dulaney. "In the past, phones were devices and services and software came from elsewhere. This is what makes the iPhone so compelling. RIM has somewhat gone down this path, but Apple takes it to a whole new level and has strong expertise in the consumer segment where the big volumes are."

Ken makes the right observation. That said, reality has a way of destabilizing the distortion field. That Exchange support won't come cheap. AT&T will charge business users $45 a month for unlimited data to access those cool Exchange Server features. Missing software support is glaring: Instant messaging for one and Flash as the bigger other. 3G is great, but mountains of Web content is inaccessible because it's in Flash.

Also: Apple is wrapping FairPlay DRM around software sold through the iPhone App Store.

Hardware is surprisingly unchanged. Display size, storage capacity and video playback features are the same as iPhone 1.0. WiFi is still "g"; not "n". Steve masterfully downplayed this deficiency. After comparing 3G to EDGE, he remarked: "It's even more remarkable when you take a look at this next to WiFi. You can see that the 3G speeds are actually approaching WiFi." Download time for the sample page was 21 seconds for 3G and 17 seconds for WiFi. Maybe for "g", but what about "n"?

Bluetooth is still 2.0, instead of 2.1. Really bothersome: 2 megapixel digital camera and no video support. People love to take videos with their phones. Who wouldn't want better pictures from their phone? While Apple has improved battery life, the battery remains fixed and non-removable.

Evolution, rather than revolution, is common for mobile hardware. Nokia's N95 is now v4. N95-4 is a US 3G version of the 8GB the European 3G phone. Changes between versions are subtle. So, from that perspective, Apple isn't deviating too far from practices by major manufacturers like Nokia, and also HTC and Sony Ericsson.

The iPhone 3G's biggest hardware changes aren't as big as something else. "The 3G and GPS are new to Apple but not new to the industry, so the real differentiator is the price, which is very aggressive," said Gartner analyst Van Baker.

The price: $199 for the 8GB iPhone 3G and $299 for the 16GB model. Surely such pricing would open up the floodgates of sales, as Steve Jobs insinuated in his reality distorting pricing announcement. "The big news is $399 to $199," he said.

But that price comes with attached strings. Carriers are now subsidizing iPhones rather than revenue sharing with Apple. For AT&T subscribers that means big changes. For starters, AT&T is raising data plans from $20 a month to $30 and the aforementioned $45 for businesses. Over two years, the increased data plan cost would be $40 more than the device's $200 price drop.

I had expected the subsidies, also predicting tiered pricing for subsidized locked and unsubsidized unlocked phones. It's yet unclear if AT&T will offer some phones unlocked for higher price.

Right now, there are conflicting reports about iPhone activation, some indicating it must occur at time of sale, while others not. For iPhone 1.0, iPhones purchased directly from Apple could be activated via iTunes. Mobiles purchased from AT&T had to be activated in the store. The iTunes activation process allowed Apple to quickly process the long lines of people waiting to buy iPhones last June. Lines will move lots slower this year, if activation is in-store.

Posted by Joe Wilcox on June 11, 2008 12:10 AM
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