iPhone: One year later

Apple's splash into the mobile phone market proved consumers will pay for hip devices. Now the race is on to one-up the iPhone.

"There's no doubt that the innovative interface of the iPhone caught most industry stalwarts flat-footed and most are now aggressively trying to catch up to Apple," notes Jack Gold, an analyst at J.Gold Associates.

For example, Sprint Nextel and Samsung announced the new iPhone-like Instinct wireless device on April 1. Due to ship this month, it is designed to improve on the iPhone touch screen with the use of haptics, a technology that lets users feel a "buzz" when an icon or keypad is touched. (Some iPhone users complain that they can't "feel" a button push.) The Instinct uses a different technology from the iPhone accelerometer, but it still allows a user to maneuver the device to navigate on a Web page. The Instinct also adds voice commands for making Web searches, and it natively supports GPS for mapping and location-related searches.

Some iPhone imitators are also trying to woo customers on price, offering devices for US$349 or even less, compared with iPhone's US$399 (if buyers can find one). That strategy might not pay off, however, if Apple lowers pricing on its new iPhone models. Predictions vary, but Dulaney and independent analyst Jeff Kagan claim that the current iPhone line will drop in price this summer, with newer devices on a 3G network selling at the current price.

Reports surfaced in April saying that AT&T might even subsidize that cost and offer a next-generation iPhone for an amazing US$199. Still, iPhone imitators might also bargain with buyers by offering more flexible network voice and data pricing than Apple and AT&T do.

The biggest improvements that iPhone users want, based on message boards, blogs and other sources, are native GPS capability, increased storage capacity, more memory, longer battery life, support for Adobe Flash to run multimedia applications and, foremost, a faster cellular network. During an April press conference at CTIA Wireless 2008, AT&T Mobility President and CEO Ralph de la Vega reiterated that 3G support for the iPhone and other devices is coming this US summer.

What that probably means is that next-generation iPhone users will get HSDPA/UMTS 3G connectivity, which has already been deployed by AT&T in major metropolitan areas, with download speeds of more than 600Kbit/sec. -- well above the existing EDGE speeds of 70Kbit/sec. to 135Kbit/sec. While Flash doesn't seem to be coming anytime soon, mobile device consultant Glenn Edens and other analysts say third-party developers will have a plethora of applications for the iPhone in coming months.

Gold expects a "running battle for features" and "user interface improvements" from Samsung, Motorola, RIM, LG Electronics and Nokia, among others, for the next several years. However, Edens believes that the iPhone, and its future iterations, could actually relegate many competing devices to the gadget graveyard.

"As the innovation leader, the iPhone is currently facing fierce competition from look-alike and feature-alike products. Apple cannot let up on innovation, because its competitors certainly will not," says Gloria Barczak, professor of marketing at Northeastern University's College of Business Administration.

And while many gadget fanatics love the iPhone, they can be fairly blunt about what they perceive as its faults. Some users love the iPhone's touch screen; others knock it. "It's a real pain in the you-know-what to type on and gets all greasy on a hot day," says Cat Schwartz, eBay's gadget director, who notes that she prefers a real keyboard. (And analysts say there are probably many third-party applications in the works to provide support for a keyboard via Bluetooth wireless.)

Numerous critics assert that device competitors will have a hard time matching the iPhone's hype, if not its features, in their initial product releases. Schwartz recalls that one eBay bid for an iPhone reached US$12,000 at the time of last year's launch, prompting some in the media to escalate the hype further. "The iPhone was revolutionary, extraordinary, groundbreaking -- not because it was the greatest invention in the world, but because of how overhyped it was," Schwartz adds.

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