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iPhone 3G’s Poison Pill

Originally written on: June 16, 2008 at 7:58 pm

Last Updated: June 16, 2008 at 7:58 pm


The new iPhone 3G has been announced, and will be available on July 11th. The big hardware change is the fast 3G UMTS/HSDPA radio along with a GPS radio (as I confirmed with Andy Ihnatko) for all your stalking needs. The case itself is mildly different, now having a black (or white) plastic back, no doubt to allow radio signals to send and receive more easily than through aluminium. Oh, and one more thing, the price. The new iPhone 3G will ship at $199 USD for the 8GB version, and $299 USD for the 16GB version.

With the iPhone 3G, we’re also dealing with a new software platform. The iPhone 2.0 SDK allows 3rd party developers to create their own native applications for the hand-held device. This news is huge, although it comes with a surprise, both for users, and for developers.

It’s been rumoured for some time that Apple would have pretty tight control over the applications on the iPhone, but now it’s official. Every iPhone application must go through the App Store. Not only that, but all applications are wrapped in a DRM layer, yes, even the free applications. There is an exception, which is to distribute your own application, but that is limited to 100 iPhones. This limitation knocks out any custom application a large company may want to deploy to their mobile users. It also prevents software developers who want to distribute their own apps. This pervasive DRM scheme is disturbing, as it gets users to accept DRM in their basic application purchases. Extend this to the desktop, and you have a very user-unfriendly environment.

If Apple limited application distribution just to make sure all applications “played nice” on the iPhone, that would be understandable, however, they’ve already done that through their SDK. If you create an application using XCode and the iPhone SDK, you can only create an application that plays by the rules.

So if quality control isn’t the reason, what is? It’s the revenue! While it is true you can put an application on the App Store for free, Apple has strongly encouraged developers to charge for them by creating a “lite” version of an app downloadable for free, and a “full” version for a price. Giving developers money for their wares isn’t a bad thing, but if you sell an application in the App Store, Apple takes a 30% cut. To me, that seems like quite a lot, considering it’s not that difficult to set up a website and a paypal account. On the other hand, the App Store is available in one click on every iPhone.

Apple’s deal with AT&T has changed, and with apologies to Darth Vader, pray it doesn’t change again. So you think the new iPhone 3G is cheaper? Let’s do the math, shall we? The new low-end iPhone is now $199. AT&T has now changed their rate plan. The cheapest plan to get you what you were getting for a previous iPhone data account is now $15 more a month ($10 for the 3G data, and an extra $5 for the SMS plan they gimped). Over a 2 year contract, that’s an extra $360 over the original baseline iPhone plan. Of course, everyone I know needs more than 450 minutes of talk time per month, so you’ll probably need to add some additional time on that as well.

To make sure you pay the piper, those in the US will be forced to sign an AT&T contract when they purchase the iPhone 3G. What this means for online sales, I am not sure. Will the iPhone no longer be available through online channels? That may hurt sales in the US. How many AT&T reps will be available in Apple retail stores to sign up customers? The answer is “not enough”. With the first generation iPhone, you purchased it from anywhere, and plugged it into your computer. iTunes would launch, and you were asked to sign up with AT&T. No long queues, no annoying sales drone, and no waiting. Boom. It was done. Now, you have to go through the inelegant process we ditched when the iPhone first arrived. They took one of the most elegant things about the iPhone buying experience and threw it in the toilet.

It’s not even out, and it’s the best phone on the planet, not because it has more features than other phones, but the features it does have provide a better experience for the user.




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