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The iPhone: a Naomi Campbell of a product

Pretty enough to look at, but you wouldn't want to do business with it

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Several readers have been in touch to ask if I've revised my opinions of the iPhone, now we've seen prototypes and heard the spiel, but the basic premise remains the same: the iPhone needs to appeal to operators, not customers, to be successful.

It certainly does appeal to consumers, and I will probably get one myself to put beside my Apple Newton, my ICL One Per Desk and my NetStation. But just because I buy one doesn't guarantee a product's success in the market, I'm an easy mark.

Being an exclusive Cingular product is the best way for Apple to get a decent subsidy: Cingular will be hoping that customers will switch networks just to get the handset, and once they've done so they'll be tied to Cingular for 2 years. Steve is planning on shifting 10m devices in the next 12 months, which is going to mean making deals with more operators unless one in five Cingular customers is going to make the switch.

Doing the same deal in Europe will be much more difficult: European operators have invested heavily in 3G (W-CDMA) networks, and MMS, so to sign an exclusive deal for a non-3G handset which doesn't support MMS would be political suicide; effectively saying that 3G and MMS weren't worth having. If they manage a 3G version of the iPhone then that problem could disappear (and an MMS client shouldn't be a serious problem), but if it drives up the cost then the problem doesn't go away.

We've seen the price quoted as $499 for the 4GB model, $599 for 8GB; discount if you sign up to a 2-year Cingular contract. We can't tell what subsidy Cingular are contributing to get that price, but it's likely to be substantial and they'll be wanting to make their investment back on the network tariff. The details of that tariff won't be announced until June, so we'll have to wait to see what the real cost of the iPhone is.

The iPhone is a good-looking piece of kit: it does nothing my Nokia N93 can't do already, but it looks a great deal prettier and looks will sell.

But if tying customers into one network and forcing them to stay there for a couple of years is the only way Apple could get the price remotely sensible then it might be a step too far for many. ®

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