I am sticking to my story — the iPhone is fantastic. There are issues but Apple seems to be addressing them and has transformed the iPhone from a cool device to a major platform is just two years. The primary change in their strategy is that Apple came to realize that the iPhone is much more than a "cell phone" — it is a developer platform where thousands of applications can be created that are fun to use and that drive demand for the iPhone. The six basic elements of the platform are the iPhone itself, the network (AT&T in the United States), iTunes, the "App Store", MobileMe and, most importantly, the applications.
With the announcement of more than 1,000 API’s (application programming interfaces — these are commands that programmers can use to cause the iPhone to do something; sense a GPS location, sense that the iPhone was shaken, etc., it is a certainty that there will be many thousands more applications for the iPhone. To get an app you go to the app store. To get the app on your iPhone you have to have iTunes. You are tied to Apple. It is what the industry calls a "lock in". It used to be that when you needed a new cell phone you would go to the store of one of the operators and pick from a multitude of brands and phones. Now that you are hooked on various applications and the data in them you need to have a phone that can work with iTunes which is where your apps and your data are stored. Guess how many brands work with iTunes? Just one.
Apple’s new OS 3.0 offers 100 new features including a search capability across the entire phone contents, cut-copy-paste, multimedia email, and landscape mode for all the apps. The most stunning and useful for me is the ability to do gmail in a landscape view. The difference in productivity is huge. There will be a lot of smartphone competition from Palm, HTC, Dell, Nokia, Acer, and many others. The phones will all have great hardware features but it is the app store that ties things together. The other guys are building their own app stores but chances are that they won’t do it as well as Apple. Apple knows how to make things easy and people seem willing to pay a premium for the ease of use and they don’t seem to mind being locked in.
Crowds waited in line to get one of the new iPhones this week but I practiced what I preach and ordered mine online. I was on the road quite a bit as previously reported but when I got home on Friday afternoon, the little brown box from UPS with an iPhone 3GS in it was waiting for me. Every aspect of the iPhone is quite impressive. The packaging is discreet. No indication that it is a high value item from Apple. After opening the box and turning it on the iPhone showed an animated diagram that made it clear that the next thing to do was to plug the iPhone into a computer that was running iTunes. After doing that a dialogue appeared showing my mobile phone number and asking me for my zip code and last four of the social security number. After entering that information the dialogue said that it was contacting AT&T for activation. Then it said that contact had been made and that activation was underway. I looked over at the iPhone and it said it was activating. After a few seconds it said that activation was complete. I took the iPhone out of the cradle and called my home phone. It rang. I then put the phone back in the cradle and iTunes asked if I wanted to sync my data — photos, music, email settings, home screen photo, dozens of applications, etc. It took an hour or so to restore all of these things from the latest backup of the iPhone 3G that was being replaced. After it completed, everything worked just fine including all the new goodies that come with the iPhone 3GS and OS 3.0. like voice dialing and platform wide search. It was a totally seamless experience. No technical expertise required. No dumb messages like we have been getting for years from Windoze. No phone calls to wait in a queue.
One of the few negative aspects of the new iPhone 3GS is the pricing. If you are a new customer you can get the 32 GB iPhone 3GS for $299 plus the normal (onerous) AT&T fees. If you are a long term loyal iPhone-AT&T customer (as I have been since the first iPhone two years ago) then you have to pay $499 instead of $299. How can this be? It is irritating millions of customers — including me. The price gouging of more than 100% is being questioned as to whether it is ethical, sensible, reasonable or even legal. The FCC may be launching an inquiry as to the fairness of the "lock in".
The logic for the premium is that the iPhone 3G S does not really cost $200. The $200 is just a down payment and you pay the rest through the remaining months of your contract with AT&T. I have had an iPhone since day one and have paid the price of being an early adopter. But the arrangement between Apple and AT&T requires that i pay even more. If you haven’t paid for enough months then you have to pay a premium to get the newest iPhone early. Most iPhone fans (including me) consider it gouging.
The next step was to sell the iPhone 3G on eBay. What to ask for it? A logical view would be to ask roughly $100 for it but looking at eBay listings it seemed people were asking and getting more. I looked at it from the perspective of a rational buyer and concluded that $169 was the ceiling. For $199 you could get a new 32 GB iPhone 3GS so I started the auction on my 16 GB iPhone 3G at $10 and set a "Buy Now" price of $169. Within less than 10 minutes my phone was sold. All things considered I am very happy with how things came out and now I have the latest and greatest features of the iPhone 3GS. I hope the lady in Minnesota who bought my iPhone 3G enjoys it as much as I have.
At some point Apple will be considered the "evil empire" — they already are by some people. It goes in cycles. In the late seventies many thought IBM was taking over the world. Then in the eighties it was Microsoft. Then Google. Apple may be next and then probably someone we are not thinking about yet. For right now, Apple is on a major roll with a market capitalization of around $125 billion, just a tad less than GE. For me personally I have greatly enjoyed the many smart phones I have had over the years but at this point I can not imagine giving up my iPhone.