There is no doubt that Apple are serious about the phone biz and are planning on being a game-changing player, and who can say that they don't have a chance - at the very least, all the competitors will pay a lot more attention to the interfaces, software and media management on their products as a result of the iPhone. And this is Apple's FIRST phone product. They can only get better and will more than likely introduce a whole product line, such as small Nano iPhones, iPhones that stream to your TV, 100GB Video phones and so on.

But a couple of things were interesting about the announcement - No 3G in the iPhone and no mention of iChat.

The phone has WiFi and EDGE data - so why no iChat Instant Messaging (IM)? There are a ton of IM apps out these days - I use agile messenger for my Nokia e61, O2 have launched Windows Live Messenger for their iMode phones - it's not exactly bleeding edge to have IM on your phone. So why didn't Apple mention it. It must come down to a carrier compromise. Cingular must not want to encourage people to use iChat over WiFi instead of text messaging. However, this may only a short term thing. Apple could be following a familiar strategy - make their new partners feel safe and happy, in order to achieve something initially and then slowly but surely, just as they are beginning to get traction, assert their own agenda over that of their partners ( like they did with Music Labels and the iPod, Motorola with the ROKR phone and Windows on the Intel Mac). Apple could be just steering away from the obvious to keep Cingular happy for now, but behind the scenes, planning for the next phase.

Some hints are already apparent - the SMS app on the iPhone looks exactly like the "conversation driven" style of Instant Messaging (IM) and specifically iChat, where you can see the history of the conversation. This style tends not to work well with traditional SMS, as the time tends to lag between messages, but makes a lot of senses if SMS eventually drifts to fixed rate or free rate IM. And this I think is Apple's plan - slowly enable the iChat features over time, first with IM, then Voice and then Video Conferencing. These features will initially use Wifi and then Apple will convince the carriers to enable all these features via unlimited "Apple Bundles" on the network - e.g. 5.99 for unlimited Apple iChat - which will also create further momentum for the iPhones.

The other intriguing thing is that the iPhone has no 3G. This is amazing. The iPhone is more than likely made up of third party chips and integrated circuits (like the iPod ) - licensed and manufactured by the dominant players in this space in Taiwan and Korea. Surely these days, because of industry trends, if a manufacturer buys a "phone" circuit for their device, they will be offered one which includes all the capabilities integrated ( 2.5g, 3G ). So, Apple, which is probably looking at 2008 or 2009 before this phone gains noticeable market share, would be CRAZY to design a 2.5G multi-media phone. So I am assuming that the phone already has a "radio chip or IC" capable of UTMS-3G, which can be switched on via software or a firmware upgrade. So, why not just switch it on now?

Well, the answer could lie in "over-air" downloads.

2.5G is just slow enough to not really allow any meaningful Video or MP3 Music downloads or streams, so this means that Cingular's Video and Music Store services are not available on the iPhone. If the phone was 3G - Cingular would have to include these standard 3G services - thus directly competing with iTunes Video and Music downloads and Mr. Jobs would NOT be happy about that. So, the 2.5G thing could be a temporary compromise, which is REALLY about who does content distribution to the end user. By the way, the same applies in Europe, carriers like Vodafone and 3 have substantial video and music stores which have been up and running for a long time and would be very aware of Apple trying to muscle into their space. So, what will happen when 3G eventually finds its way into the iPhone? How will Apple deal with this potential CONTENT conflict?

My view is that Apple would like to take over the carriers' own content services and replace it with iTunes, for the iPhone range at the very least. Let's face it, they would probably do a better job of it and ultimately sell more content and thus make more money for the operator, who will always get a cut for allowing the network usage. It remains to be seen whether this would just be for iPhones or would eventually spread to "iTunes clients" on Motorola, Nokia and Samsung phones. Motorola already has an iTunes client, so the idea is not that far-fetched - but would still be resisted strongly by the existing hegemony. This fact will obviously affect Apple's decision as to which carrier(s) they select outside of the USA. My view is that each carrier will be assessed in relation to their potential "openness" to the iTunes strategy and that will strongly affect their chances of getting to carry the iPhone.

As always, it looks like Steve Jobs has a few more tricks up his sleeve and the iPhone will drive headlines for a while to come. 4:01:32 PM  comment []