360 Degrees on iPhone

The second messaging product that is important for mobile operators is mobile instant messaging. Service providers have spent a lot on marketing the concept of hooking up to popular IM systems over the mobile handset. The absence of mobile IM in the iPhone is another insult to mobile operators.

Wi-Fi: That's Why

Apple has shown a curiously strong focus on "full Internet" in its NYTimes.com ads, which show the iPhone user caressing the New York Times front page. Titillating pans across the page seem to promise intoxicatingly intimate access to information, but the ad does not show what happens if you click a link.

The iPhone testers seem to confirm that iPhone's Edge access speed is just as weak as you'd expect. This technology not only tops out at 200 kbps (which most users do not reach in real-world conditions) but also has serious latency problems. A 20- to 30-second wait per relatively graphics-light Web-page download using Edge might turn out to be a pretty zippy performance for the iPhone.

So why is Apple highlighting Web-browsing so prominently? Why the disdain for MMS and mobile IM? Probably because the company intends to drive consumers into Wi-Fi usage. With a decent broadband connection, browsing and video-streaming on the iPhone could be a dreamy experience.

Of course, the number of U.S. consumers now using Wi-Fi on their mobile phones is very small. Most people have easy Wi-Fi access only at home and the office. In these places, using a laptop or PC for Internet access is a natural option. Getting Wi-Fi access on the fly is neither easy nor cheap.

Operators such as AT&T and Verizon have been diligently crippling high-end phones for years, stripping away features such as Wi-Fi-enabled VoIP in order to protect their mobile voice and data revenue. This has left consumers largely alien to the idea of Wi-Fi phones. Several recent pieces on iPhone have touted it as a device that is coming at precisely the right moment.

How does that compute? The iPhone is debuting using mobile data technology from 2003 (Edge) while trying to usher in an era of Wi-Fi usage -- just as U.S. consumers show no signs of wide acceptance of Wi-Fi phones. I don't see how the timing is magical.

Apple has seduced AT&T into making a full U-turn in its product philosophy. AT&T is not only willing to give iPhone buyers relatively extensive Wi-Fi freedom but also is heavily marketing a device that directly undercuts its MMS and mobile IM campaigns. Flipping the biggest operator in America is a pretty dazzling feat for Apple.

If the plan to transform the upper 5% of the U.S. mobile subscribers into Wi-Fi fiends works, it might have a real impact on "average revenue per user" levels for Verizon and Sprint (S Quote) by 2008. Operators are highly dependent on that top sliver of heaviest users of voice and data services.