iThings to iPeople

In the 17th Century, poet John Donne implored us not to ask for whom the bell tolls. But nearly everyone who hasn't been living in a cave is wondering whether the iPhone's ringtone will toll for them.

Those who have been living in a cave, on the other hand, probably have pretty spotty cellular service anyway.

The iPhone is often described as a smart phone, one that integrates the functions of other devices. But its novel "multitouch" input method and finger-based method at the expense of a keyboard aren't the only things that set it apart from other such devices.

It adds an advanced operating system previously reserved for PCs, complete with rich animation effects, to the media consumption tasks often associated with thin (in profile but also in capabilities) feature phones. For example, RIM's BlackBerry 8800 includes a GPS receiver for navigating, but it lacks a camera. The iPhone has a relatively high-resolution two-megapixel camera, but no GPS receiver.

Unlike with other Apple products, buying into the iPhone entails a two-year commitment with AT&T.

The iPhone Impact

Looking at the iPhone's features compared to products that have similar features can help determine where it is likely to have the most impact. Apple is aiming the iPhone at three areas -- voice calling, digital media and Internet access.

The iPhone will be one of the slimmest smart phones on the market. In 2006, a wave of slim Windows Mobile devices were released from Motorola, Samsung and HTC, and the unit share of such smart phones in the first quarter of 2007 was more than double what it was in the same time period a year ago.

Unlike the iPhone, though, these products have been available for less than $150 or even less than $100 with a new contract -- a far cry from the iPhone's low-end $500. In fact, phones over $300 accounted for less than one-half percent of the handsets sold in the United States during the first quarter of 2007.

But for that price, one gets a mobile media experience that Apple describes as the best iPod it has ever created. Consumers are warming to such integrated devices. In the first quarter of this year, 38 percent of phones were music-enabled compared to just 15 percent in the first quarter of 2006.

At the same time, sales growth of stand-alone music players has slowed a bit. From January through May, mp3 players grew 15 percent over the same time period in 2006, a decrease from last year's 40 percent year-over-year growth. Still, for music players that use flash memory, like the iPhone, the average selling price was just $122.

Finally, the iPhone promises a great Web experience using the Safari browser long on the Mac (and now coming to Windows). There haven't been many devices that have used a large screen for Web surfing. One of the few has been the Nokia N800, a $399 device that is not a mobile phone, but can take advantage of high-speed wireless connections using Bluetooth.

Other mobile Web devices include the $349 Sony Mylo, which has a smaller screen, and Palm's Foleo, which takes more of a notebook form and will retail for $499. All three include Wi-Fi capability for higher speed access in wireless hot spots such as coffee shops and college campuses.

Then there are the intangibles. Few mp3 players come with a camera, and while the iPhones won't replace a DSLR (or even capture video), its photo management has strong visual appeal. The iPhone blends the old, the new and the unknown. Consumers will justify its premium if they believe that it is more than the sum of its parts.

Ross Rubin is director of industry analysis for consumer technology at The NPD Group.

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