The Cheaper, Faster iPhone

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The new 3G Apple iPhone.

Steve Jobs did something never before seen in the history of Apple: he unveiled a cutting-edge product that's relatively cheap.

The iPhone 3G handles data at nearly three times the speed of its predecessor and has built-in global positioning via satellite, and it costs $199 — $400 less than the original iPhone, unveiled almost a year ago. The phone will be available in the U.S. and 21 other countries on July 11; within a few months of that, the phone will be available in a total of 70 countries, including Japan and the burgeoning markets of Brazil and India.

The 3G phone is "one of the most amazing products I've ever had the privilege to be associated with," Jobs told a capacity crowd of 5,000 software developers and reporters. Wearing his trademark black mock turtleneck and jeans, Jobs demonstrated the new phone's speed, which he says rivals the performance of home wi-fi networks. With the old iPhone (which ran on AT&T's Edge network) on one side and the new one (which runs on AT&T's 3G network) on the other, Jobs loaded a photo-heavy Web page at It took 21 sec. on the 3G phone, versus 59 sec. on its predecessor. (While 21 sec. may be slow compared with the near instantaneous access on a high-speed wired desktop computer, the AT&T Edge network is the state-of-the-art wireless system in the U.S.)

While techies have fretted that the 3G phone would consume too much juice, Jobs claimed that the new phone can get 300 hours of standby time, five hours of talk time on a 3G network, five to six hours of high-speed Web browsing, seven hours of video and 24 hours of audio.

Jobs said the new iPhone has already sold 6 million units, and analysts expect Apple to blow through the company's estimate of 10 million units sold worldwide by the end of 2008. Already bullish about Apple before the announcements were made, analysts were thrilled by what they heard from Jobs about the availability of the new iPhone. They were particularly excited by the prices for the new models. In the U.S., the 8-gigabyte version, which sold for $399 previously, is only $199 in its new incarnation; the 16GB model will sell for $299. (The first-generation iPhone models have been discontinued.)

That said, Apple's stock price dropped over 2% because AT&T will no longer pay a subsidy to Apple to sell iPhones, as it did for the 1.0 versions. Jobs is clearly expecting to make up that shortfall by selling even more handsets, in the U.S. and abroad, much faster than anyone imagined. Purchasers will still need to sign a two-year contract with AT&T to use the phone. And the price for a basic plan increases by $10 for 3G usage (that is, $30 a month for unlimited data, with voice plans starting at $39.99 a month). Unlimited 3G data plans for business users will be available for $45 a month.

Apple also unveiled MobileMe, which allows home users to do the kinds of things that were formerly the domain of business users. E-mail, calendars, contacts and photos can now be automatically wirelessly synched among a user's iPhone and computers. The service, which comes with 20GB of storage, costs $99 a year.

Users of iPhone 1.0 will be able to download new software via the iPhone App Store, which will launch with the new phone. But those pioneers won't get the faster speeds or true global positioning due to hardware reasons. The older phone triangulates a user's position via cell-phone towers. The new one has a GPS receiver that can track a user in real time. Jobs showed off the GPS capabilities with a recording that showed a 3G user driving down San Francisco's winding Lombard Street. As a tiny dot appeared on a Google map and slowly wended its way down the street, the crowd roared its approval.

A number of developers showed off applications that will be ready for the iPhone in the coming weeks and months. Sega, for instance, demoed an arcade game, Super Monkey Ball, whose fluid 3-D quality was on par with what one would find on, say, a Sony PSP. On the iPhone, users navigate by tilting the motion-sensitive device. Another application, which takes advantage of the phone's GPS, is a location-aware social network; fire up the app and you can see whether any friends or people in your contact list are nearby. "We make serendipity happen," said Loopt founder Sam Altman. For the first time, one could be walking down a street in New York City and realize, for instance, that a college roommate is nearby. The Loopt application will be free at the iPhone App Store; Monkey Ball will cost $9.99. Phil Schiller, who heads Apple's marketing department, said in an interview later that he had no idea how many apps would be available when the store launched, but "I think many applications, if not most, will be available for free."