The price of the iPhone and its feature set place it outside the realm of the typical music phone and more toward the higher end of the smart phone market. Jobs pointed out in his keynote that the price is about the same as the prices of a BlackBerry and an iPod combined. The big question will be whether a broad section of the market opts for a single device -- and a larger price tag -- or for different devices that can be bought at different times. The limited amount of storage available in an iPhone, which is significantly lower than, say, the 30GB or 80GB available in an iPod, is another issue buyers will likely ponder.
Placing the iPhone beyond the entry-level market for music phones may not be a bad thing. As Jaimee Minney, an analyst at market research firm M:Metrics, puts it: "The decision to design the iPhone with a smart phone orientation was a very wise yet unexpected move that puts Apple squarely against Microsoft and the Nokia N-series. Whereas the expected profusion of music-centric devices would dilute the value of an iPod-like phone, the demand for smart phones is steadily growing, and now Mac enthusiasts can finally get their hands on the seminal Apple mobile device."
Even if the iPhone doesn't secure a dominance in the marketplace, it could still be a big seller for Apple. As independent telecommunications industry analyst Jeff Kagan put it: "There are about 230 million cell phones in the marketplace. Several million iPhones will be great news for Apple, but I don't think at this point it will make a big difference to the industry competitors."
Placing the iPhone in a higher price range also offers another advantage: It separates the iPod and iPhone markets. If Apple had released a more basic iPod and mobile phone device as expected, sales of it likely would have come at the expense of the other iPods. By making the iPhone much more than an iPod/iPhone, Apple is providing a high-end smart phone device while leaving a market for people who would rather spend $199 on an iPod Nano and settle for an entry-level phone for free when signing a service agreement with a provider.
All in all, today's announcements go a long way toward explaining why the company no longer has "computer" in its corporate name. And we haven't even gotten into the ramifications of the release next month of the AppleTV.
Ryan Faas is a freelance writer and IT consultant specializing in Mac and multiplatform network design and troubleshooting. He is the co-author of Essential Mac OS X Panther Server Administration and the author of Troubleshooting, Maintaining, and Repairing Macs. For more information, visit RyanFaas.com.