Why Apple’s new cell phone isn’t really revolutionary.

Steve Jobs with the Apple iPhone

When the word iPhone appears in Apple press releases, the word revolutionary is rarely far behind. But what counts as revolutionary? In Apple’s case, the bar is high. Since the 1970s, the firm has changed both the personal computer and music industries. Will the iPhone fundamentally alter the structure of the wireless world as well?

Not yet. The iPhone’s style and user interface are pathbreaking, and (as the iPod proved) aesthetics do matter. But the iPhone is—so far—not a product that will turn any industry inside out. Seen as a phone, the iPhone is striking. Seen as a small computer, it’s limited, and compromised by the existing business models of the wireless industry. Saying the iPhone is a pointless gadget is a bit too strong. But it isn’t yet a revolutionary device.

It is in some ways astonishing that AT&T and Apple are partners at all. AT&T is the oldest of the old school—the most ancient major high-tech firm in the United States, founded in 1878. Unfazed by spending the last 23 years in suspended animation (after the great breakup of 1984), AT&T is back to its classic business model: own the largest networks and everything on them. Apple, meanwhile, is the original hippie computer company, a child of the 1970s, not the 1870s. At least in its origins, Apple is an ideological foe of IBM and AT&T. (Remember that 1984 ad?) Considering that these firms were born on the opposite sides of the tech Kulturkampf, the iPhone cannot help but be a little strange.

Most obviously, the iPhone is locked, as is de rigueur in the wireless world. It will work only with one carrier, AT&T. Judged by the standards of a personal computer or electronics, that’s odd: Imagine buying a Dell that worked only with Comcast Internet access or a VCR that worked only with NBC. Despite the fact that the iPhone costs $500 or so, it cannot yet be brought over to T-Mobile or Verizon or Sprint. AT&T sees this as a feature, not a bug, as every new iPhone customer must commit to a two-year, $1,400 to $2,400 contract.

If Apple wanted to be “revolutionary,” it would sell an unlocked version of the iPhone that, like a computer, you could bring to the carrier of your choice. An even more radical device would be the “X Phone”—a phone on permanent roam that chose whatever network was providing the best service. Imagine, for example, using your iPhone to talk on Sprint because it had the best voice coverage in Alaska, while at the same time using Verizon’s 3G network for Internet access. Of course, getting that phone to market would be difficult, and Apple hasn’t tried.           

The iPhone does have Wi-Fi access, which is a giant step forward. Wi-Fi has been kept off American cell phones for years, for reasons that have never passed the smell test (“for security reasons” or “to protect battery life”). The real reason the cell providers have kept Wi-Fi out? To keep consumers eating up minutes on the carriers’ networks and to prevent people from grabbing ringtones and other media from their computers, which the industry calls “revenue leakage.”

But while the iPhone has Wi-Fi, it doesn’t let you do one very obvious thing with its Wi-Fi connection: make phone calls. In an ideal world, you might want to use AT&T when on the road and have your phone switch automatically to Skype or Vonage when at home, since they’re much cheaper and can have better voice quality. But Apple hasn’t yet hinted at this possibility. AT&T, meanwhile, probably prefers to cheer on Verizon’s ongoing efforts to sue Vonage out of existence.

The iPhone’s Achilles’ heel is its Internet access when it’s not near a Wi-Fi hot spot. The fact that the iPhone can use only AT&T’s rather slow EDGE network is a weakness that affects the phone’s most exciting capabilities (such as application development, below). As the New York Times’ David Pogue writes, “You almost ache for a dial-up modem.” Oddly enough, you can’t even download music directly from iTunes. In a different world, you’d be able to use your iPhone to roam on Verizon’s much better 3G network, download media at will, and also use your iPhone as a modem for your PC. But don’t hold your breath.

The iPhone is also a closed platform. Unlike your Macintosh computer, which can run whatever software developers write for it, the iPhone will, in native mode, run only whatever Apple (and AT&T) approve of. While there are some technical and security reasons to do things this way, there’s an ideological point here, too. The closed iPhone stands in contrast to the open-platform design that has been the bedrock of both the personal computer and Internet revolutions. By design, the iPhone embodies the opposite of what made the Apple II so successful.

Sensitive to this point, Steve Jobs claims to have left someroom for developing iPhone applications. The iPhone, as we said already, is a miniature Mac, and comes with Apple’s Safari browser. Developers will be able to write Web-based applications that will work on the iPhone via the browser.

Whether this will mean much is hard to say. Doubtless, many will take a shot at trying to write a killer app for the iPhone, and some may be pretty good. But the problem is that you have to be online to use a Web application. Unless you’re in an open Wi-Fi zone, that means running right into the limits of AT&T’s slower-than-a-dialup-modem EDGE network. In addition, the phone won’t support Java or Flash, which are both important components of many powerful Web apps. Without access to the full power of the phone, the limits on developers will be severe.

We’re left to wonder, then, why the iPhone plays by the rules. Isn’t this Apple, the company of “Think Different“? You could argue that the iPhone proves that Apple is no longer a company interested in transforming industries. Once Big Brother’s foe, it’s now more like Little Brother, happy to sell cute little devices that are easy to use, make money, and spread false consciousness.

If you’re an optimist, the more intriguing possibility is that Apple’s iPhone is a Trojan Horse. The iPhone is fatally attractive to AT&T, since it gives the firm a chance to steal tens of thousands of new customers from rivals like Verizon. But Apple may be betting that, once it has its customers, they’ll be more loyal to Apple than AT&T. With its foothold in the wireless world, Apple may be planning to slowly but inexorably demand more room. If iPhone 2.0 is a 3G phone that works with any carrier and supports third-party apps, then industry power will begin to move away from the carrier oligopoly and toward Apple and other Silicon Valley firms. Now, that would be a revolution.